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): September 20, 1999
Eagle Pacific Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-18050 41-1642846
(Commission File Number) (I.R.S. Employer Identification Number)
2430 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 371-9650
(Registrant's Telephone Number, Including Area Code)
--------------------------
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On September 20, 1999, Eagle Pacific Industries, Inc. (the "Registrant")
completed its acquisition of Pacific Western Extruded Plastics Company
("PWPipe") from Mitsubishi Chemical America, Inc. and Mitsubishi Plastics, Inc.
(the Sellers"). The Registrant purchased all the outstanding capital stock of
PWPipe pursuant to a Stock Purchase Agreement dated September 16, 1999 by and
among the Registrant, Mitsubishi Chemical America, Inc. and Mitsubishi Plastics,
Inc. None of Sellers had any affiliation with the Registrant prior to the
acquisition. The total consideration the Registrant paid to the Sellers at
closing for the PWPipe common stock was approximately $80.5 million, which is
subject to certain balance sheet adjustments to be determined within the next 90
days. Immediately following the Registrant's acquisition of all the outstanding
shares of PWPipe, the Registrant merged PWPipe into the Registrant pursuant to a
Plan of Merger.
The PWPipe operation is based in Eugene, Oregon. PWPipe produces plastic pipe
primarily for four distinct markets in the Western United States: waterworks,
irrigation, plumbing and electrical. Within these markets, PWPipe's PVC pipe and
related PVC products are used in a diverse range of applications, including
municipal water distribution, sewers, agriculture and turf irrigation, plumbing,
and electrical conduit. PWPipe's products range from 1/2 inch to 24 inch in
diameter and are sold under the PWPipe brand name or under one of PWPipe's
specialized product lines: PWRIB, COExcel, TwinSeal or Steamline. PWPipe markets
its products through salaried sales representatives and independent
representatives. Its customers include more than 500 pipe distributors in the
U.S., Canada and Mexico. PWPipe has six manufacturing facilities that consume
approximately 400 million pounds of PVC resin annually. PWPipe facilities are
located in Eugene, Oregon; Sunnyside, Washington; Tacoma, Washington; Visalia,
California; Cameron Park, California; and Perris, California. Registrant plans
to continue to operate PWPipe's business in the same manner as it was prior to
the acquisition, except that the Registrant plans to implement an integration
strategy to achieve operating efficiencies and cost savings.
The Registrant will maintain its corporate headquarters in Minneapolis,
Minnesota, but will relocate its operating office from Hastings, Nebraska to
Eugene, Oregon. The Registrant also appointed new officers. The Registrant's
Board of Directors appointed James Rash as President, Larry Fleming as Senior
Vice President of Sales and Marketing, Jack Cobb as Senior Vice President of
Operations, Roger Robb as Chief Financial Officer, Keith Steinbruck as Vice
President-Technical Director and Neil Chinn as Vice President of Human
Resources. Harry Spell, Bruce Richard and William Spell will continue to serve
as Chairman, Vice-Chairman and Chief Executive Officer, respectively.
The Registrant's acquisition of PWPipe was consummated in connection with the
Registrant's recapitialization. Pursuant to the Registrant's recapitialization,
the Registrant entered into a Second Amended and Restated Loan and Security
Agreement dated September 20, 1999 by and among Fleet Capital Corporation, as
Agent, the Registrant and certain Lenders to secure a $100.0 million Senior
Credit Facility ("Senior Credit Facility"). The Senior Credit Facility is
secured by all the assets of the Registrant. The Senior Credit Facility consists
of: (i) two term loans in the aggregate principal amount of $50.0 million and
(ii) a $50.0 million revolving credit facility. The Senior Credit Facility
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terminates September 20, 2004. In addition, the Registrant entered into a
Securities Purchase Agreement dated September 20, 1999 between the Registrant,
CB Capital Investors, L.P, an affiliate of Chase Capital Partners, and the
Massachusetts Mutual Life Insurance Company and its affiliates (former 8%
Convertible Preferred Stockholders), whereby the Company issued units,
consisting of $32.5 million of Senior Subordinated Notes with detachable
Warrants to purchase an aggregate of 1,940,542 shares of the Registrant's Common
Stock.
In connection with the issuance of the units, the Registrant redeemed all $10.0
million of its outstanding 8% Convertible Preferred Stock held by Massachusetts
Mutual Life Insurance Company and affiliates, which was convertible into
2,347,418 share of common stock, in exchange for a $10.0 million Senior
Subordinated Note and detachable Warrants to purchase 597,090 shares of Common
Stock. As a result, no shares of 8% Convertible Preferred Stock are outstanding.
The Senior Credit Facility consists of a: (i) Term Note A in the aggregate
principal amount of $35.0 million ("Term Note A"); (ii) Term Note B in the
aggregate principal amount of $15.0 million ("Term Note B")("the Term Note A and
Term Note B are referred to as the Term Notes") and (ii) $50.0 million revolving
credit facility ("Revolving Facility"). Term Note A bears interest at a rate
equal to LIBOR plus 2.75%, which is currently 8.15%. Term Note B bears interest
at a rate equal to LIBOR plus 3.25%, which is currently 8.65%. Principal on the
Term Notes is due and payable quarterly in $1.25 million amounts beginning on
December 31, 1999 and continuing on the last day of each March, June, September
and December thereafter until paid in full. Outstanding notes issued pursuant to
the Revolving Facility bear interest at a rate equal to LIBOR plus 2.50%, which
is currently 7.9%.
Interest on the Senior Subordinated Notes is payable at a fixed rate per annum
equal to 14% beginning on December 20, 1999 and on the 20th day of each March,
June, September and December thereafter until the entire principal and interest
is paid in full on September 20, 2007. Principal is paid in three equal
installments on each September 20th of 2005, 2006 and 2007.
The detachable Warrants, issued together with the Senior Subordinated Notes,
were issued pursuant to a Warrant Agreement dated September 20, 1999 by and
among the Registrant and CB Capital Investors, L.P and the Massachusetts Mutual
Life Insurance Company and its affiliates. The Warrants are exercisable to
purchase the Registrant's Common Stock and Class B Common Stock at $0.01 per
share and are exercisable for ten years. The number of shares issuable upon
exercise and the Warrant exercise price are adjustable in the event the
Registrant pays a dividend in Common Stock, subdivides or combines its Common
Stock, or sells capital stock or options to purchase capital stock at a price
less than the market price of its capital stock on the date of issuance, or
completes a capital reorganization or reclassification of its capital stock. The
Registrant has granted the Warrant holders a right of first refusal. The
Registrant cannot sell or issue any of its Common Stock, options or convertible
securities unless the Registrant has first offered to sell to each Holder its
proportionate share. William H. Spell, Harry W. Spell, Bruce A. Richard and
Richard W. Perkins (collectively the "Spell Group") granted Warrant holders
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tag-along rights that give the Warrant holders the right to join any member of
the Spell Group in the sale of any Spell Group member shares. In addition, the
Registrant granted the Warrant holders a put right, whereby in the event of a
change of control of the Registrant, the Warrant holders have the right to
require the Registrant to purchase all or any part of the Warrants or shares
issuable upon exercise of the Warrants.
The Registrant entered into a Registration Rights Agreement dated September 20,
1999 by and among the Registrant and CB Capital Investors, L.P and the
Massachusetts Mutual Life Insurance Company and its affiliates. The Warrant
holders have registration rights, including demand and piggy-back rights, to
require the Registrant to register the resale of the shares of Common Stock
issuable upon exercise of the Warrants.
On September 20, 1999, the Registrant borrowed $35.0 million under Term Note A,
$15.0 million under Term Note B and $24.3 million under the Revolving Facility.
Proceeds from these borrowings, along with proceeds from the issuance of the
$32.5 million Senior Subordinated Notes, were used to pay the cash purchase
price for the PWPipe outstanding capital stock, fees and expenses incurred in
connection with the Registrant's acquisition and refinancing of outstanding
indebtedness. As of September 20, 1999, the Registrant had up to $14.0 million
available for additional borrowings under its Revolving Facility
In connection with the Registrant's acquisition of PWPipe, the Registrant
entered into employment agreements with its officers, Neil Chinn, Jack Cobb,
Larry Fleming, Roger Robb and Keith Steinbruck, as well as William Spell. The
term of each of the new officers' Employment Agreement begins on September 16,
1999 and continues until December 31, 2002. All Employment Agreements are
automatically renewed at the expiration of the initial term and may be
terminated by either party by giving prior written notice to the other party no
later than six months prior to the expiration of the initial term. Under his
Employment Agreement, Mr. Spell will receive an annual base salary of $200,000,
a $600 per month car allowance, and may participate in the Registrant's Key
Employee Bonus Plan. Mr. Spell also received a transaction bonus equal to
$175,000 for consummation of the Registrant's acquisition of PWPipe. The
Registrant's other officers will receive base salaries according to their
respective Employment Agreements as follows: Mr. Chinn, $116,000; Mr. Cobb,
$170,000; Mr. Fleming, $197,500; Mr. Robb, $160,000; and Mr. Steinbruck,
$136,000. In addition, each of the officers, other than Mr. Spell, will receive
a bonus for calendar year 1999 equal to that amount they would have received
under PWPipe's bonus plan, and for subsequent calendar years during the term of
the Employment Agreements, they will be entitled to participate in the
Registrant's Key Employee Bonus Plan. All of the Employment Agreements have
confidentiality provisions, a one-year non-competition clause, and provide for
severance payments in the event of the employee's termination other than for
cause.
In connection with the Registrant's recapitialization and acquisition of PWPipe,
the Registrant sold shares of Common Stock, issued Restricted Common Stock and
granted options to purchase Common Stock to officers and directors of the
Registrant in order to align the interests of the Registrant's new officers with
those of its shareholders, induce the new officers to enter into employment
arrangements with the Registrant and reward certain officers and directors for
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their efforts in completing the acquisition and recapitialization. The
Registrant sold an aggregate of 289,500 shares of Common Stock at fair market
value per share on the date of issuance to the Registrant's officers and
directors, and issued an aggregate of 128,000 shares of Restricted Stock and
granted incentive stock options to purchase an aggregate of 272,500 shares of
Common Stock to the Registrant's officers.
In connection with the sale of Common Stock to the Registrant's directors and
officers, the Registrant accepted Promissory Notes as partial payment for shares
of the Registrant's Common Stock purchased. Each note required the maker to
pledge to the Registrant the shares purchase with the note. All of the
Promissory Notes are dated September 16, 1999, and require that the maker pay
the principal balance of the note in full by November 20, 2004. The principal
balances of all of the Promissory Notes were calculated at 70% of the purchase
price for the shares of Common Stock purchased. The number of shares purchased
by the officers are as follows: William Spell-30,000; Mr. Chinn-21,000 shares;
Mr. Cobb-37,500 shares; Mr. Fleming-42,500 shares; Mr. Robb-34,500; and Mr.
Seinbruck-24,000 shares. The number of shares purchased by the Registrant's
corporate secretary and directors are as follows: Dobson West-20,000; George R.
Long-20,000 shares; Richard W. Perkins-20,000 shares; Bruce A. Richard-20,000
shares; and Harry W. Spell-20,000 shares.
The Registrant has also entered into Restricted Stock Agreements with its
officers. Effective September 16, 1999, the agreements entitled the respective
officers to receive an award of Restricted Common Stock, pursuant to which the
officer is entitled to vote the shares of Restricted Common Stock but has no
other rights as a shareholder with respect to such shares. The Registrant
granted the following Restricted Common Stock awards: Mr. Chinn-14,000 shares;
Mr. Cobb-25,000 shares; Mr. Fleming-30,000 shares; Mr. Robb-23,000 shares; Mr.
Spell-20,000 shares; and Mr. Steinbruck-16,000 shares. For all of the Restricted
Common Stock awards, 20% of the aggregate number of shares granted under the
agreement vests in three years, another 30% will vest in four years, and
additional 50% vests on the fifth anniversary of the agreement.
Item 7. Financial Statement and Exhibits
A. Financial statements of businesses acquired.
At the time this Report on Form 8-K was filed with the Securities and
Exchange Commission, it was impracticable to provide the required financial
statements for the business the Registrant acquired or pro forma financial
information. Pursuant to Item 7(a)(4) of Form 8-K, the required financial
statements will be filed by amendment by December13, 1999, or sooner if such
information is available.
B. Pro forma financial information.
See response to A. above.
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C. Exhibits.
The following is filed herewith. The exhibit number corresponds with
Item 601(b) of Regulation S-K.
Exhibit
No. Description
2.1 Stock Purchase Agreement dated September 16, 1999 by and among the
Registrant, Mitsubishi Chemical America, Inc. and Mitsubishi Plastics,
Inc.
2.2 Plan of Merger between the Registrant and Pacific Western Extruded
Plastics Company dated September 20, 1999.
10.1 Second Amended and Restated Loan and Security Agreement dated September
20, 1999 by and among the Registrant, Fleet Capital Corporation, as
Agent, and certain Lenders.
10.2 Securities Purchase Agreement dated as of September 20, 1999 by and
among the Registrant and certain investors listed therein.
10.3 Registration Rights Agreement dated as of September 20, 1999 among the
Registrant and certain investors listed in the Securities Purchase
Agreement.
10.4 Warrant Agreement dated as of September 20, 1999 among the Registrant
and certain investors listed in the Securities Purchase Agreement.
10.5 Form of Restricted Stock Agreement between the Registrant and certain
officers of the Registrant.
10.6 Form of Promissory Note between the Registrant and certain officers and
directors of the Registrant.
10.7 Employment Agreement dated September 16, 1999 between the Registrant
and William H. Spell.
10.8 Employment Agreement dated September 16, 1999 between the Registrant
and Roger Robb.
10.9 Employment Agreement dated September 16, 1999 between the Registrant
and Keith Steinbruck.
10.10 Employment Agreement dated September 16, 1999 between the Registrant
and Larry Fleming.
10.11 Employment Agreement dated September 16, 1999 between the Registrant
and Jack Cobb.
10.12 Employment Agreement dated September 16, 1999 between the Registrant
and Neil Chinn.
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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.
Eagle Pacific Industries, Inc.
Date: October 4, 1999 By /s/ Roger Robb
Roger Robb, Chief Financial Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBIT INDEX
to
FORM 8-K
Eagle Pacific Industries, Inc.
Exhibit
No. Description
2.1 Stock Purchase Agreement dated September 16, 1999 by and among the
Registrant, Mitsubishi Chemical America, Inc. and Mitsubishi Plastics,
Inc.
2.2 Plan of Merger between the Registrant and Pacific Western Extruded
Plastics Company dated September 20, 1999.
10.1 Second Amended and Restated Loan and Security Agreement dated September
20, 1999 by and among the Registrant, Fleet Capital Corporation, as
Agent, and certain Lenders.
10.2 Securities Purchase Agreement dated as of September 20, 1999 by and
among the Registrant and certain investors listed therein.
10.3 Registration Rights Agreement dated as of September 20, 1999 among the
Registrant and certain investors listed in the Securities Purchase
Agreement.
10.4 Warrant Agreement dated as of September 20, 1999 among the Registrant
and certain investors listed in the Securities Purchase Agreement.
10.5 Form of Restricted Stock Agreement between the Registrant and certain
officers of the Registrant.
10.6 Form of Promissory Note between the Registrant and certain officers and
directors of the Registrant.
10.7 Employment Agreement dated September 16, 1999 between the Registrant
and William H. Spell.
10.8 Employment Agreement dated September 16, 1999 between the Registrant
and Roger Robb.
10.9 Employment Agreement dated September 16, 1999 between the Registrant
and Keith Steinbruck.
10.10 Employment Agreement dated September 16, 1999 between the Registrant
and Larry Fleming.
10.11 Employment Agreement dated September 16, 1999 between the Registrant
and Jack Cobb.
10.12 Employment Agreement dated September 16, 1999 between the Registrant
and Neil Chinn.
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of September 16, 1999 between Eagle Pacific
Industries, Inc., a Minnesota corporation with offices at 2430 Metropolitan
Center, 333 South Seventh Street, Minneapolis, Minnesota 55402 ("Buyer"),
Mitsubishi Chemical America, Inc., a Delaware corporation with offices at One
North Lexington Avenue, White Plains, New York 10601 ("MCA") and Mitsubishi
Plastics, Inc., a Japanese corporation, with offices at 5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo, Japan 100-0005 ("MPI").
WITNESSETH:
WHEREAS, Pacific Western Extruded Plastics Company (formerly named MCA
Acquiring Company), a Delaware corporation (the "Company"), is a manufacturer of
polyvinyl chloride ("PVC") pipe and fittings in the United States, operating six
manufacturing facilities located in Tacoma and Sunnyside, WA, Eugene, OR and
Cameron Park, Perris and Visalia, CA, respectively, with headquarters in Eugene,
Oregon;
WHEREAS, MCA is the record and beneficial owner of 900 of the Shares
and MPI is the record and beneficial owner of 100 of the Shares; and
WHEREAS, Sellers desire to sell the Shares to Buyer, and Buyer desires
to purchase the Shares from Sellers, upon the terms and subject to the
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions.
(a) The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that the Company shall not be considered an Affiliate of
Sellers.
"Applicable Laws" means applicable laws, statutes, orders, rules,
regulations and requirements promulgated by governmental or other authorities
relating to the Company, the Real Properties, the Leased Premises or the
Business.
"Balance Sheet" means the balance sheet of the Company as of the
Balance Sheet Date.
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"Balance Sheet Date" means August 29, 1999.
"Business" means the Company's operation of six PVC pipe and fittings
manufacturing facilities located in Tacoma and Sunnyside, WA, Eugene, OR and
Cameron Park, Perris and Visalia, CA, respectively.
"Cameron Park Facility" means the Company's PVC pipe manufacturing
plant, property and equipment located at 3500 Robin Lane, Cameron Park,
California, on the real property that is owned by the Company and legally
described in Schedule 1.1.1 hereto.
"Closing Date" means the date of the Closing.
"Common Stock" means the common stock, par value $1.00 per share, of
the Company.
"Controlled Group" means each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code) with Seller, each trade or business (whether or not incorporated) which is
under common control (as defined in Section 414(c) of the Code) with Seller,
each member of an affiliated service group (within the meaning of Section 414(m)
of the Code) which includes Seller and each other entity required to be
aggregated with Seller under Section 414(o) of the Code.
"Employee Benefit Plan" means any pension, retirement, disability,
medical, dental, or other health insurance plan, life insurance or other death
benefit plan, profit sharing, deferred compensation, stock option, bonus or
other incentive plan, vacation benefit plan, severance plan, or other employee
benefit plan or arrangement including, without limitation, any "pension plan" as
defined in Section 3(2) of ERISA, and any "welfare plan" as defined in Section
3(1) of ERISA, whether or not any of the foregoing is funded, (i) to which the
Company is a party or by which the Company is bound, or (ii) with respect to
which the Company has made any payments or contributions since September 29,
1995, or may otherwise have any liability (including any such plan or other
arrangement formerly maintained by the Company).
"Environment" means ambient air, surface water, ground water, sediment,
land surface or land subsurface strata or drinking water supply.
"Environmental Claims" means all notices of violation, liens, claims,
demands, suits, and causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values) or lost use of property arising
out of any Environmental Law.
"Environmental Law" means any Applicable Law that relates to the
pollution, protection or clean-up of the Environment, including, without
limitation, laws, statutes, regulations, judgments, orders or binding
interpretations that relate to (i) emissions, discharges, spills, releases or
threatened releases of Hazardous Substances into the Environment or (ii) the
use, treatment, storage, disposal, handling, manufacturing, transportation or
shipment of Hazardous Substances. Environmental Laws shall include, without
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limitation, common law, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended,
the Occupational Safety and Health Act, as amended ("OSHA"), and all state
counterparts to those laws.
"Environmental Liability" means any fine, penalty, liability or expense
that is based on or related to (i) an Environmental Law or Environmental Permit,
(ii) any Release, or (iii) any Remedial Action, in each case to the extent
arising from or relating to events that occur, on or prior to the Closing, on or
from the Real Properties or at the Pipe Facilities.
"Environmental Permit" means any federal, state or local governmental
permit, certificate, approval, registration or other authorization related to
the pollution or protection of the Environment.
"Environmental Reports" means any and all written analyses, summaries
or explanations in the possession or control of the Company, as set forth on
Appendix A attached hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Eugene Corporate Headquarters" means the Company's corporate
headquarters building, property and equipment located at 1550 Valley River
Drive, Eugene, Oregon, on the real property that is owned by the Company and
legally described in Schedule 1.1.2 hereto.
"Eugene Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 2220 Nugget Way, Eugene, Oregon, on the real
property that is leased by the Company and legally described in Schedule 1.1.3
hereto.
"Hazardous Substance" means a hazardous substance as defined in Section
101(14) of CERCLA, plus oil, petroleum and petroleum products, asbestos, PCBs
and any substance similarly classified or regulated as a "hazardous substance,"
"hazardous material," "toxic substance" or "hazardous waste" under any
Environmental Law (excluding OSHA), including, without limitation, the Federal
Insecticide, Fungicide, Rodenticide Act, 7 U.S.C.
ss. 136 et seq., as amended.
"Leased Premises" means (i) the real property that is located at the
Eugene Facility and legally described in Schedule 1.1.3 hereto and (ii) the real
property that is located on a portion of the Tacoma Facility and legally
described in Schedule 1.1.4 hereto.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
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"Material Adverse Effect" and "material" mean a material adverse effect
on, or material and adverse to, as the case may be, the financial condition of
the Company, it being understood none of the following shall be deemed by itself
or by themselves, either individually or in the aggregate, to constitute a
material event or a Material Adverse Effect: (a) a failure by the Company to
meet internal earnings, revenue or other projections or earnings, revenue or
other predictions of any analyst or (b) any event, circumstance or market
condition occurring as a result of general economic or financial conditions or
other developments which are not unique to the Company but also affect other
Persons who participate or are engaged in the lines of business in which the
Company participates or is engaged.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which MCA has made or has accrued any obligation to make
contributions within the preceding six years.
"Patents" means all domestic and foreign letters patents and patent
applications used by the Company.
"Perris Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 23711 Rider Street, Perris, California, on the
real property that is owned by the Company and legally described in Schedule
1.1.5 hereto.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Pipe Facilities" means the Cameron Park Facility, Eugene Corporate
Headquarters, Eugene Facility, Perris Facility, Sunnyside Facility, Tacoma
Facility and Visalia Facility.
"Plan" means, at any time, an employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either: (i) maintained by MCA or any member of
the Controlled Group for employees of MCA, or by MCA for any other members of
such Controlled Group; or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which MCA or any member of the Controlled Group is then
making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Real Properties" means the real properties at all of the Pipe
Facilities other than the Leased Premises.
"Release" means any spill, leak, pumping, pouring, emission, discharge,
injection, escape, leaching, disposal, or other release into the Environment of
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any Hazardous Substance at, in, on, under, by, from or related to Real
Properties and Leased Premises included in the Pipe Facilities or any activities
or operations thereon.
"Remedial Action" means any action required pursuant to any
Environmental Law to cleanup or contain or otherwise ameliorate or remedy any
Release.
"Scheduled Environmental Liability" means any Environmental Liability
based upon information related to the Environment disclosed in any Disclosure
Schedule.
"Sellers" means the collective reference to MCA and MPI, and "Seller"
means either of MCA or MPI, as the context dictates.
"Sellers' Knowledge" means the best actual knowledge after due inquiry
of the Company's current directors, President, Senior Vice President -
Operations, Senior Vice President - Sales & Marketing, Vice President -
Controller, Vice President - Human Resources, Vice President - Technical
Director and each of the Company's Plant Managers.
"Shares" means 1,000 shares of Common Stock.
"Sunnyside Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 1820 Midvale Road, Sunnyside, Washington, on
the real property that is owned by the Company and legally described in Schedule
1.1.6 hereto.
"Systems" means all computer hardware and/or software applications used
by the Company as well as embedded microcontrollers in manufacturing equipment
used by the Company.
"Tacoma Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 2330 Port of Tacoma Road, Tacoma, Washington,
on the real property that is owned by the Company and legally described in
Schedule 1.1.7 hereto and the real property located at 2150 Port of Tacoma Road,
Tacoma, Washington that is leased by the Company and legally described in
Schedule 1.1.4 hereto.
"Technology" means all technology, trade secrets, manufacturing
processes, formulae, drawings, designs and computer software programs used in
the Business.
"Trademark" means all tradenames, trademarks or service mark
registrations and applications, common law trademarks, copyrights and copyright
registrations and applications used by the Company.
"Unscheduled Environmental Liabilities" means Environmental Liabilities
that are not Scheduled Environmental Liabilities.
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"Visalia Facility" means the Company's PVC pipe manufacturing plant,
property and equipment located at 8875 Avenue 304, Visalia, California on the
real property that is owned by the Company and legally described in Schedule
1.1.8 hereto.
"Year 2000 Problem" means the risk that Systems may be unable to
recognize and perform properly date-sensitive functions involving any date after
December 31, 1999.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Audited Financial Statements....................................3.7
Closing.........................................................2.2
Closing Balance Sheet .......................................2.3(b)
Closing Financial Statements.................................2.3(b)
Code ...........................................................7.1
Company Securities ..........................................3.5(b)
Damages .....................................................8.1(a)
Disclosure Schedules .............................................3
Federal Tax ....................................................7.1
Final Purchase Price.........................................2.3(h)
Indemnified Party ...........................................8.3(a)
Indemnifying Party ..........................................8.3(a)
Intercompany Debt............................................2.3(d)
IRS.........................................................3.21(a)
Net Working Capital .........................................2.3(c)
Pre-Closing Tax Period .........................................7.1
Preliminary Purchase Price...................................2.3(a)
Purchase Price...............................................2.3(e)
Returns......................................................7.2(a)
Section 338 Forms............................................7.3(d)
Section 338(h)(10) Election..................................7.3(d)
Tax ..........................................................7.1
Taxing Authority ...............................................7.1
Total Current Assets.........................................2.3(c)
Total Current Liabilities....................................2.3(c)
Transfer Taxes...............................................7.5(a)
Unaudited Financial Statements..................................3.7
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, Sellers hereby sell to Buyer, and Buyer hereby
purchases from Sellers, the Shares. The Purchase Price shall be as determined in
Section 2.3.
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SECTION 2.2. Closing. The closing of the purchase and sale of the
Shares hereunder (the "Closing") took place at the offices of Fredrikson &
Byron, P.A., 1100 International Centre, 900 Second Avenue South, Minneapolis,
Minnesota 55402, on September 16, 1999 at 7:00 a.m. Pacific Daylight Time. At
the Closing:
(a) Buyer shall deliver fifty-five million three hundred
thousand dollars ($55,300,000) in immediately
available funds to Sellers by wire transfer to
Sellers' respective accounts, as designated by each
Seller, respectively, by notice to Buyer;
(b) Buyer shall cause the Company to deliver eighteen
million one hundred thousand dollars ($18,100,000) in
repayment of intercompany debt in immediately
available funds to MCA by wire transfer to MCA's
account, as designated by MCA by notice to Buyer; and
(c) Sellers shall deliver to Buyer certificates
representing the Shares duly endorsed or accompanied
by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
SECTION 2.3. Calculation of Purchase Price.
(a) The Preliminary Purchase Price will be fifty-five million three
hundred thousand dollars ($55,300,000).
(b) Within sixty (60) days after the Closing, Sellers shall deliver to
Buyer a final balance sheet of the Company as of the Closing (the "Closing
Balance Sheet") with the related statement of operations, shareholders' equity
and statement of cash flows for the period from December 28, 1998 to the
Closing, audited by Ernst & Young LLP in accordance with the books and records
of the Company and in accordance with generally accepted accounting principles
and procedures applied on a consistent basis and which present fairly the
financial position of the Company as of the Closing and the results of its
operations and its cash flows for the period from December 28, 1998 to the
Closing (collectively, the "Closing Financial Statements"). The Sellers shall
prepare the Closing Financial Statements using the same method used in the
preparation of the Unaudited Financial Statements and the Closing Balance Sheet
shall not reflect any entries, transactions or activities which occurred as a
result of, or after, the Closing. Buyer will cause the Company to afford
promptly to Sellers and their respective agents, including, but not limited to,
Ernst & Young LLP, reasonable access to the Real Properties and the Company's
books and records relating to the Business prior to the Closing, for purposes of
preparing the Closing Balance Sheet and Closing Financial Statements in
accordance with this Section 2.3(b); provided that in connection with such
access Sellers will at all times comply with Buyer's normal visitor safety and
security procedures and requirements.
(c) Concurrent with the delivery of the Closing Financial Statements,
Sellers shall deliver to Buyer a calculation of the Net Working Capital of the
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Company as of the Closing based on the Closing Balance Sheet. The "Net Working
Capital" shall be the amount determined by subtracting the Total Current
Liabilities set forth on the Closing Balance Sheet from the Total Current Assets
set forth on the Closing Balance Sheet. The Sellers shall calculate Net Working
Capital in the Closing Financial Statements using the same method used in the
calculation of Net Working Capital in the Unaudited Financial Statements. The
"Total Current Liabilities" and the "Total Current Assets" shall mean the total
current liabilities and total current assets of the Company determined in the
same manner as those items were determined for the purposes of the Audited
Financial Statements.
(d) Concurrent with the delivery of the Closing Financial Statements,
Sellers shall deliver to Buyer a calculation of the Intercompany Debt based on
the Closing Balance Sheet. The "Intercompany Debt" shall mean the total of all
amounts owed to MCA by the Company set forth on the Closing Balance Sheet.
(e) The Purchase Price will be the amount determined by subtracting the
total of all liabilities of the Company set forth on the Closing Balance Sheet
other than (i) those used to calculate Net Working Capital and (ii) deferred tax
liability as reflected on the Closing Balance Sheet from eighty million dollars
($80,000,000), and then either (i) adding the amount by which the Net Working
Capital exceeds twenty-eight million five hundred thousand dollars ($28,500,000)
or (ii) subtracting the amount by which twenty-eight million five hundred
thousand dollars ($28,500,000) exceeds the Net Working Capital.
(f) If the Purchase Price exceeds the Preliminary Purchase Price, Buyer
shall within ten (10) business days of the final determination of the Purchase
Price pay to Sellers an amount equal to the amount by which the Purchase Price
exceeds the Preliminary Purchase Price plus interest on such amount from the
Closing Date to the payment date at the rate of eight percent (8%) per annum. If
the Preliminary Purchase Price exceeds the Purchase Price, Sellers shall within
ten (10) business days of the final determination of the Purchase Price pay to
Buyer an amount equal to the amount by which the Preliminary Purchase Price
exceeds the Purchase Price plus interest on such amount from the Closing Date to
the payment date at the rate of eight percent (8%) per annum. The Purchase Price
shall be deemed to be finally determined on the earlier of (A) notice by Buyer
to Sellers that it agrees with the Closing Balance Sheet, Closing Financial
Statements and calculations done by Sellers pursuant to Sections 2.3(b), (c) and
(d), (B) the thirty-first (31st) day after receipt by Buyer of the Closing
Balance Sheet, Closing Financial Statements and the calculations done by Sellers
pursuant to Sections 2.3(b), (c) and (d), if Buyer has not given Sellers notice
of a disagreement pursuant to Section 2.3(g) or (C) the delivery to Buyer and
Sellers of the independent auditors' report establishing the Net Working Capital
pursuant to Section 2.3(h).
(g) If Buyer disagrees with the Closing Balance Sheet, Closing
Financial Statements or any of the calculations done by Sellers pursuant to
Sections 2.3(b), (c) or (d), Buyer may within thirty (30) days of receipt of the
Closing Balance Sheet, Closing Financial Statements and the calculations done by
Sellers pursuant to Sections 2.3(b), (c) and (d) deliver a notice to Sellers
disagreeing with the Closing Balance Sheet, Closing Financial Statements and
such calculations setting forth Buyer's version of the Closing Balance Sheet,
Closing Financial Statements and other such calculations.
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(h) If a notice of disagreement shall be delivered pursuant to Section
2.3(g), Buyer and Sellers shall, during the thirty (30) days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to agree on the Closing Balance Sheet, Closing Financial
Statements and the calculations based on them for the calculation of the
Purchase Price. If, at the end of such period, Buyer and Sellers are unable to
reach such an agreement, they shall promptly jointly retain independent auditors
of nationally recognized standing reasonably satisfactory to Buyer and Sellers
(who shall not have any material relationship with Buyer or Sellers at the time
or at any time during the preceding twelve months) promptly to review this
Agreement and the disputed items or amounts for the purpose of calculating the
Purchase Price. Such independent auditors shall deliver to Buyer and Sellers, as
promptly as practicable, a report setting forth their analysis and calculation
of the Purchase Price (the "Final Purchase Price") and the Closing Balance Sheet
and Closing Financial Statements. The cost of the independent auditors analysis
and calculation shall be borne (i) by Buyer if the difference between Final
Purchase Price and the Purchase Price determined by using Buyer's calculations
delivered pursuant to Section 2.3(g) is greater than the difference between
Final Purchase Price and the Purchase Price determined by using Sellers'
calculations delivered pursuant to Section 2.3(b), (c) and (d), or (ii) by
Sellers if the first such difference is less than the second such difference and
(iii) otherwise equally by Buyer and Sellers.
(i) Buyer and Sellers agree that they will, and agree to cause their
respective independent auditors and the Company to, cooperate and assist in the
preparation of the Closing Balance Sheets, Closing Financial Statements and the
calculations required to determine the Purchase Price and in the conduct of the
reviews referred to in this Section 2.3, including without limitation, the
making available to the extent reasonably necessary of books, records, work
papers and personnel.
(j) In the event that the Closing Balance Sheet as finally determined
pursuant to the foregoing provisions of this Section 2.3 indicates that the
Intercompany Debt was greater than eighteen million one hundred thousand dollars
($18,100,000), Buyer shall within five (5) business days of the final
determination of the Purchase Price cause the Company to pay to MCA an amount
equal to the amount by which the Intercompany Debt exceeds eighteen million one
hundred thousand dollars ($18,100,000) plus interest on such amount from the
Closing Date to the payment date at the rate of eight percent (8%) per annum. In
the event that the Closing Balance Sheet as finally determined pursuant to the
foregoing provisions of this Section 2.3 indicates that the Intercompany Debt
was less than eighteen million one hundred thousand dollars ($18,100,000), MCA
shall within five (5) business days of the final determination of the Purchase
Price pay to the Company an amount equal to the amount by which eighteen million
one hundred thousand dollars ($18,100,000) exceeds the Intercompany Debt plus
interest on such amount from the Closing Date to the payment date at the rate of
eight percent (8%) per annum.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth on the schedules attached to this Agreement (the
"Disclosure Schedules"), Sellers, jointly and severally, represent and warrant
to Buyer as of the date hereof that:
SECTION 3.1. Corporate Existence and Power. The Sellers are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on their respective businesses. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
the Business, except for those licenses, authorizations, permits, consents and
approvals the absence of which would not, individually or in the aggregate, have
a Material Adverse Effect. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. Sellers have heretofore delivered to Buyer true and complete
copies of the certificate of incorporation and bylaws of the Company. Schedule
3.1 lists the jurisdictions in which the Company is qualified as a foreign
corporation.
SECTION 3.2. Corporate Authorization. The execution, delivery and
performance by Sellers of this Agreement are within Sellers' corporate powers
and have been duly authorized by all necessary corporate action on the part of
Sellers. This Agreement has been executed and delivered by each of the Sellers
and constitutes a valid and binding agreement of Sellers, enforceable against
Sellers in all material respects so that Buyer receives substantially all of the
benefits of the bargain. No other corporate action or proceeding by or in
respect of Sellers is or was necessary to authorize this Agreement or the
transactions contemplated herein.
SECTION 3.3. Governmental Authorization. Except as otherwise provided
in Section 3.16, the execution, delivery and performance by Sellers of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency, or official.
SECTION 3.4. Non-Contravention. The execution, delivery and performance
by Sellers of this Agreement do not and will not (i) violate the certificate of
incorporation or bylaws of Sellers or the Company, (ii) assuming compliance with
the matters referred to in Section 3.3, materially violate any Applicable Law,
(iii) require any consent other than the consent of MCA's parent company,
Mitsubishi Chemical Corporation, or other action by any Person under, constitute
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of the Company to a loss of any benefit
to which the Company is entitled under, any agreement or other instrument
binding upon the Company or any license, franchise, permit or other similar
authorization held by the Company except where there would not, individually or
in the aggregate, be a Material Adverse Effect, or (iv) result in the creation
or imposition of any Lien on any asset of the Company or on the Shares.
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SECTION 3.5. Capitalization.
(a) The authorized capital stock of the Company consists of one
thousand (1,000) shares of Common Stock. There are outstanding one thousand
(1,000) shares of Common Stock.
(b) All outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. Except as set forth in
this Section 3.5, there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company, or
(iii) except as contemplated by this Agreement, subscriptions, options,
warrants, puts, calls, agreements, understandings or other rights to acquire
from the Company or from Sellers, or either of them, or other obligations of the
Company, or of Sellers, or either of them, to cause the Company, to issue any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company (the items in clauses
3.5(b)(i), 3.5(b)(ii) and 3.5(b)(iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities.
SECTION 3.6. Ownership of Shares. Collectively, Sellers are the record
and beneficial owners of all of the Shares, free and clear of any Lien and any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of the Shares), and will transfer and deliver to Buyer
at the Closing valid title to the Shares free and clear of any Lien and any such
limitation or restriction.
SECTION 3.7. Financial Statements. Sellers have provided to Buyer true
and correct copies of the audited balance sheets of the Company as of December
29, 1996, December 28, 1997 and December 27, 1998, and the related consolidated
statements of income and cash flows for each of the years ended December 29,
1996, December 28, 1997 and December 27, 1998, together with the report of Ernst
& Young LLP, independent certified public accountants (collectively, the
"Audited Financial Statements") and the unaudited balance sheet of the Company
as of the Balance Sheet Date and the related consolidated statements of income
and cash flows for the period ended on the Balance Sheet Date (collectively the
"Unaudited Financial Statements"). The Audited Financial Statements and the
Unaudited Financial Statements present fairly, in all material respects, the
financial position of the Company as of the dates thereof and the results of
operations and changes in consolidated financial position for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis; provided, however, that the Unaudited Financial Statements
shall be subject to normal year-end adjustments consistent with those set forth
in the Audited Financial Statements.
SECTION 3.8. Absence of Certain Changes. To Sellers' Knowledge, since
the Balance Sheet Date, the Business has been conducted in the ordinary course
of business consistent with past practices and there has not been:
(a) any event or occurrence, which constitutes a Material
Adverse Effect;
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(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership
interests in, the Company;
(c) any amendment of any material term of any outstanding
security of the Company;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money, other than in the
ordinary course of business consistent with past practices;
(e) any creation or assumption by the Company of any Lien on
any material asset other than in the ordinary course of
business consistent with past practices;
(f) any sale, lease or other disposition of, or any agreement
to sell, lease or otherwise dispose of, any of the Real
Properties, the Leased Premises or assets of the Company,
other than in the ordinary course of business consistent with
past practices.
(g) any making of any loan, advance or capital contributions
to or investment in any Person, other than in the ordinary
course of business consistent with past practices;
(h) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or the assets
of the Company which, individually or in the aggregate,
constitutes a Material Adverse Effect;
(i) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets
or the Business (including the acquisition or disposition of
any assets) or any relinquishment by the Company of any
contract or other right, in either case, material to the
Company other than transactions and commitments in the
ordinary course of business consistent with past practices and
those contemplated by this Agreement;
(j) any change in any method of accounting or accounting
practice by the Company;
(k) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any
director or officer of the Company (or any amendment to any
such existing agreement), (ii) grant of any severance or
termination pay to any director or officer of the Company, or
(iii) change in compensation or other benefits payable to any
director, officer or employee of the Company pursuant to any
severance or retirement plans or policies thereof; or
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(l) any purchase of real property.
SECTION 3.9. No Undisclosed Material Liabilities. To Sellers'
Knowledge, on the Balance Sheet Date, there were no, and on the Closing Date
there shall not be, material liabilities of the Company other than:
(a) liabilities provided for on the Balance Sheet or the
Closing Balance Sheet or disclosed in the notes thereto;
(b) liabilities disclosed on the Disclosure Schedules or in
the Environmental Reports or this Agreement;
(c) undisclosed liabilities which, individually or in the
aggregate, are not material to the Company; and
(d) undisclosed liabilities not required under generally
accepted accounting principles to be shown on the Balance
Sheet or the Closing Balance Sheet.
SECTION 3.10. Intercompany Accounts. Since the Balance Sheet Date,
there has not been any accrual of liability by the Company to Sellers or any of
their Affiliates or any other transaction between the Company, on the one hand,
and Sellers and any of their Affiliates, on the other hand, except in the
ordinary course of business consistent with past practice.
SECTION 3.11. Material Contracts.
(a) To Sellers' Knowledge, the Company is not bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of one hundred thousand dollars ($100,000)
or more;
(ii) any sales, distribution or other similar agreement
providing for the sale by the Company of materials, supplies,
goods, services, equipment or other assets of one hundred
thousand dollars ($100,000) or more or which extend beyond one
year or both;
(iii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that provides for
annual payments by the Company of one hundred thousand dollars
($100,000) or more or which extend beyond one year or both;
(iv) any partnership, joint venture or other similar agreement
or arrangement;
(v) any agreement relating to the acquisition or disposition
of all or any part of the Business (whether by merger, sale of
stock, sale of assets or otherwise), other than for sales of
product in the ordinary course of business;
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(vi) any agreement that limits the freedom of the Company to
compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Company after
the Closing Date;
(vii) any agreement with any present director or officer of
the Company or any immediate family member of such person
other than as set forth in the Company's certificate of
incorporation or bylaws;
(viii) loans, credits, financing agreements, promissory notes
or other evidences of indebtedness, including all agreements
for any commitments for future loans, credit, or financing,
other than in the ordinary course of business;
(ix) guarantees, other than in the ordinary course of
business;
(x) any written employment agreement other than the employment
agreements listed on Schedule 3.11; or
(xi) any agreements entered into with the intention that the
performance of such agreements would result in a loss to the
Company.
(b) Each agreement, commitment, arrangement or plan disclosed in any
Disclosure Schedule or required to be disclosed pursuant to this Section is a
valid and binding agreement of the Company and is in full force and effect, and,
to Sellers' Knowledge, neither the Company nor any other party thereto is in
default or breach in any material respect under the terms of any such agreement,
commitment, arrangement or plan.
(c) Sellers have delivered to Buyer true and correct copies of each of
the agreements listed on Schedule 3.11.
(d) The Asset Purchase Agreement dated as of September 29, 1995 between
Pacific Western Extruded Plastics Company, a Washington corporation, Simpson
Investment Company, a Washington company, the Company f/k/a MCA Acquiring
Company and MCA (the "Acquisition Agreement") is the only agreement between MCA
and the Company on the one hand and Simpson Investment Company, on the other
hand, relating to the subject matter of Article 7 thereof. The Acquisition
Agreement has not been amended, altered, repealed or superceded.
SECTION 3.12. Litigation. To Sellers' Knowledge, there is no action,
suit, investigation or proceeding pending against, or threatened against, the
Company or any of its officers, in their capacities as officers of the Company,
before any court or arbitrator or any governmental body, agency or official
which, individually or in the aggregate, is likely to have a Material Adverse
Effect. To Sellers' Knowledge, there is no action, suit, investigation or
proceeding pending against, or threatened against, Sellers or the Company before
any court or arbitrator or any governmental body, agency or official, which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
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transactions contemplated by this Agreement. To Sellers' Knowledge, neither the
Company nor any of its officers, in their capacities as officers of the Company,
are subject to any judgment, order or decree.
SECTION 3.13. Properties.
(a) To Sellers' Knowledge, the Company has good title to, or in the
case of leased property has valid leasehold interests in, all personal property
and assets (whether tangible or intangible) reflected on the Balance Sheet or
acquired after the Balance Sheet Date, except for property and assets sold, or
otherwise disposed of, since the Balance Sheet Date in the ordinary course of
business consistent with past practices.
(b) To Sellers' Knowledge, the Company has indefeasible, fee simple
title to, or in the case of leased real property has valid leasehold interests
in, all real property reflected on the Balance Sheet or acquired after the
Balance Sheet Date, except for any such real property sold since the Balance
Sheet Date in the ordinary course of business consistent with past practices.
None of such property or assets (whether real or personal) is subject to any
Liens, except:
(i) Liens for taxes not yet due and payable;
(ii) Liens for taxes being contested in good faith (and for
which adequate accruals or reserves have been established on
the Balance Sheet);
(iii) Liens and other exceptions set forth in the title
insurance policies listed in Schedule 3.13; and
(iv) Liens, easements, reservations, restrictions, covenants,
conditions, and other exceptions that do not materially
detract from the value or materially interfere with any
present use of such property.
(c) To Sellers' Knowledge, all leases of real property by the Company
are valid and binding and, to Sellers' Knowledge, there does not exist under any
such lease any default or any event which with notice or lapse of time or both
would constitute a default.
(d) The property and assets owned or leased by the Company or which the
Company otherwise has the right to use, constitute all of the property and
assets held for use or used in connection with the Business.
(e) Sellers, without inquiry of others, have not intentionally or
knowingly failed to disclose the existence of any encroachments, overlaps or
boundary disputes affecting the Real Properties or the Leased Properties.
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SECTION 3.14. Intellectual Property.
(a) To Sellers' Knowledge, Schedule 3.14 contains a list of all assumed
names under which the Company does business and all U.S. and foreign Trademarks
used or owned by the Company, specifying as to each the country or countries in
which it has been issued or registered or in which an application for such
issuance or registration has been filed, including the respective registration
or application numbers.
(b) To Sellers' Knowledge, the Company has good title to, and the full
and unrestricted right to use, the Trademarks free and clear of all Liens,
charges, encumbrances, or third party claims or interests of any kind
whatsoever. To Sellers' Knowledge, the use of such Trademarks does not infringe
on any rights of any other person or entity; such Trademarks are not licensed to
or licensed from any other person or entity; and there are no outstanding claims
of any infringement regarding the Company's use of such Trademarks.
(c) The Company does not own or license any Patents.
(d) To Sellers' Knowledge, the Company has good title to the
Technology, and the full and unrestricted right to use the same, and such rights
are free and clear of all liens, charges, encumbrances or third party claims,
except rights related to licensed computer software. To Sellers' Knowledge, the
practice by the Company of the Technology does not infringe on any intellectual
property rights of any other person or entity and there have been no claims by
any person or entity of such infringement. None of such Technology is licensed
to or licensed from any other person or entity, other than licenses related to
computer software.
SECTION 3.15. Insurance Coverage. To Sellers' Knowledge, Schedule 3.15
contains a list of all insurance policies and fidelity bonds obtained or
maintained by the Company. To Sellers' Knowledge, such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since September 29, 1995 and remain in full force
and effect up to Closing and no notice of cancellation or termination has been
received by the Company with respect thereto.
SECTION 3.16. Licenses and Permits. To Sellers' Knowledge, except for
Environmental Permits disclosed in Schedule 3.22.1, Schedule 3.16 correctly
describes each material license, franchise, permit or other similar
authorization in effect and affecting, or relating in any way to, the assets or
Business (the "Permits") together with the name of the government agency or
entity issuing such Permit. To Sellers' Knowledge, the Company has obtained and
maintains in full force and effect all licenses and permits necessary for the
ownership and operation of the Business.
SECTION 3.17. Inventories. The inventories set forth in the Balance
Sheet were, and those set forth in the Closing Balance Sheet shall be, properly
stated therein at the lesser of cost or fair market value determined in
accordance with generally accepted accounting principles consistently applied.
Since the Balance Sheet Date, the inventories of the Company have been
maintained in the ordinary course of business. All such inventory is owned free
and clear of all Liens, except liens for taxes not yet due and payable. To
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Sellers' Knowledge, all of the inventory recorded on the Balance Sheet consists
of, and all inventory of the Company on the Closing Date will consist of items
of a quality and in quantities consistent with past practice.
SECTION 3.18. Receivables. All accounts, notes receivable and other
receivables (other than receivables collected since the Balance Sheet Date)
reflected on the Balance Sheet are, and all accounts and notes receivable
reflected on the Closing Balance Sheet will be, valid, genuine and, to Sellers'
Knowledge, collectible in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded on
the Balance Sheet and Closing Balance Sheet, as appropriate. Accounts, notes
receivable and other receivables arising out of or relating to the Business as
of the Balance Sheet Date have been included in the Balance Sheet in accordance
with generally accepted accounting principles applied on a consistent basis.
Accounts, notes receivable and other receivables arising out of or relating to
the Business as of the Closing Date shall be included in the Closing Balance
Sheet in accordance with generally accepted accounting principles applied on a
consistent basis.
SECTION 3.19. Finders' Fees. Except for Donaldson, Lufkin & Jenrette
Securities Corporation, whose fees relating to the sale of the Company will be
paid by Sellers, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Sellers or the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.20. Labor Matters. To Sellers' Knowledge, the Company is in
compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice, failure to comply with which or engagement
in which, as the case may be, would reasonably be expected to have a Material
Adverse Effect. There is no unfair labor practice complaint pending or, to
Sellers' Knowledge, threatened against the Company before the National Labor
Relations Board. The Company is not a party to any collective bargaining
agreement. During the last three (3) years, the Company has experienced no work
stoppages, walkouts, strikes or requests by a union for recognition for the
purposes of negotiating terms and conditions of employment. To Sellers'
Knowledge, there is no labor strike, dispute, slowdown or stoppage threatened or
any request by a union for recognition for the purposes of negotiating terms and
conditions of employment pending against the Company. No labor grievance has
been served upon the Company.
SECTION 3.21. Employee Benefit Plans.
(a) Except as disclosed in Schedule 3.21, the Company has no Employee
Benefit Plan, including without limitation any Multiemployer Plan, and the
Company is not a participating employer in any Employee Benefit Plan in which
more than one employer makes contributions as described in Sections 4063 and
4064 of ERISA. Except as disclosed on Schedule 3.21, the Company has no
contingent liability with respect to any post-retirement benefit under any
employee welfare benefit plan (as defined in Section 3(1) of ERISA), other than
liability for health plan continuation coverage described in Code Section 4980B
and Part 6 of Title I of ERISA, which, together with any disclosed liability on
Schedule 3.21, will not have a Material Adverse Effect. Sellers have given to
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Buyer true and complete copies of all the following: each Employee Benefit Plan
and related trust agreement (including all amendments and commitments with
respect to such Employee Benefit plan or trust) which the Company maintains or
is committed to contribute to as of the date hereof, if applicable, and the most
recent summary plan description, actuarial report, determination letter issued
by the Internal Revenue Service ("IRS") and Form 5500 filed in respect of each
such Employee Benefit Plan.
(b) The Company has never participated in a Multiemployer Plan.
(c) Each Employee Benefit Plan complies, in both form and operation, in
all material respects, with its terms, and, to the extent applicable, with ERISA
and the Code including, without limitation, Code Section 4980B and Part 6 of
Title I of ERISA. The Company has not incurred any liability to the Pension
Benefit Guaranty Corporation. The Company has not engaged in any transaction
which could subject it to liability under Section 4069 or Section 4212(c) of
ERISA. Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so qualified, and each
trust related to such Plan has been determined to be exempt under Section 501(a)
of the Code. No Employee Benefit Plan is being audited or investigated by any
government agency or subject to any pending or threatened claim or suit.
(d) Each Plan currently meets and always has met the minimum funding
standard of Section 302 of ERISA and Section 412 of the Code (without regard to
any funding waiver). All contributions or payments due and owing as required by
Section 302 of ERISA, Section 412 of the Code or the terms of any Plan have been
made by the due date for such contributions or payments. The Company is not
required to provide security to a Plan pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code.
(e) Neither the Company nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under Section 406 of ERISA or Section
4975 of the Code or engaged in an action which would constitute a breach of
fiduciary duty that would have a Material Adverse Effect. The execution,
delivery and carrying out of the terms of any agreements that are related to
this transaction will not constitute a prohibited transaction under the
aforementioned sections.
(f) There are no agreements which will provide payments to any officer,
employee, shareholder or highly compensated individual which will be "parachute
payments" under Section 280G of the Code that are nondeductible to the Company
or Sellers and which will be subject to the tax under Section 4999 of the Code
for which Sellers would have a material withholding liability.
SECTION 3.22. Environmental Matters. Except as otherwise provided
herein or disclosed to Buyer in the Environmental Reports:
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3.22.1. Environmental Permits. Schedule 3.22.1 includes a complete list
of all Environmental Permits that the Company has obtained and maintains in full
force and effect. To Sellers' Knowledge, the Environmental Permits listed on
Schedule 3.22.1 are all of the Environmental Permits necessary for the ownership
and operation of the Business as conducted by the Company.
3.22.2. Environmental Permit Compliance. To Sellers' Knowledge, the
Company is, and the Business is operated or conducted by the Company, in
material compliance with all Environmental Permits, and all prior instances of
noncompliance with Environmental Permits have been fully and finally resolved.
3.22.3. Environmental Law Compliance. To Sellers' Knowledge, the
Company is, and the Business is operated or conducted by the Company, in
material compliance with all Environmental Laws, which, if violated, would have
a Material Adverse Effect on the ownership or operation of any of the Pipe
Facilities or the conduct of the Business as conducted by the Company, and all
prior instances of noncompliance have been fully and finally resolved.
3.22.4. Environmental Liabilities. To Sellers' Knowledge: (i) there are
no Environmental Claims pending or threatened against the Company, (ii) there
are no writs, injunctions, decrees, orders or judgments outstanding or
threatened relating to compliance with or liability under any Environmental Law,
and (iii) the Company has no material liability under any Environmental Law.
3.22.5. Certain Environmental Matters. To Sellers' Knowledge, there are
no asbestos-containing materials, PCB-contaminated electrical equipment or PCB
transformers (as defined in 40 C.F.R., Section 761.3), or underground storage
tanks at the Pipe Facilities, and there has been no unpermitted Release which
presently requires Remedial Action at any of the Pipe Facilities.
3.22.6. Hazardous Substances. To Sellers' Knowledge, Schedule 3.22.6
lists (i) all storage, manufacture or processing of Hazardous Substances at any
of the Pipe Facilities, except where such storage, manufacture or processing was
necessary to the conduct of the Business and in material compliance with all
applicable Environmental Laws, and (ii) the sites where all Hazardous Substances
and other solid waste materials from the Pipe Facilities were disposed, released
or threatened to be released over the last ten (10) years.
3.22.7. Liens, Restrictive Covenants. To Sellers' Knowledge, there are
no liens, restrictive covenants or other land use restrictions under
Environmental Laws on any of the Real Properties or the Leased Premises, and no
government actions have been taken or are threatened that could subject any of
the Real Properties or Leased Premises to such liens, restrictive covenants or
other land use restrictions, and the Company is not required to place any notice
or restriction relating to Hazardous Substances in any deed to such property.
3.22.8. Waiver. To Sellers' Knowledge, the Company has not expressly
released any Person nor waived any rights or defenses with respect to any
Environmental Claim.
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3.22.9. Disclosure. To Sellers' Knowledge, the Company has delivered or
made available all Environmental Reports to Buyer.
SECTION 3.23. Predominant Customers. To Sellers' Knowledge, Schedule
3.23 contains a true and complete list of customers of the Company which
accounted for more than nine hundred thousand dollars ($900,000) of the
Company's sales during the 1998 fiscal year.
SECTION 3.24. Predominant Suppliers. To Sellers' Knowledge, Schedule
3.24 contains a true and complete list of suppliers of the Company which
accounted for more than one million dollars ($1,000,000) of the Company's
purchases during the 1998 fiscal year.
SECTION 3.25. Absence of Certain Payments. To Sellers' Knowledge,
neither of the Sellers, nor the Company, nor any director, officer, agent,
employee or other person associated with or acting on their behalf, has used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, or made any direct or indirect
unlawful payments to government officials or employees from corporate funds, or
established or maintained any unlawful funds.
SECTION 3.26. Compliance with Laws. To Sellers' Knowledge, neither the
Company nor Sellers have received any notice of any sort of alleged violation by
the Company of any Applicable Law that has not been resolved.
SECTION 3.27. Accuracy of Disclosures. To Sellers' Knowledge, none of
the representations or warranties made by Sellers in this Agreement or the
Disclosure Schedules, and no written statement, certificate or schedule
furnished or to be furnished by or on behalf of Sellers to Buyer or its agents
pursuant hereto, or in connection with the transactions contemplated by this
Agreement, contains any untrue statement of a material fact.
SECTION 3.28. Year 2000. To Sellers' Knowledge, the Company is taking
steps to address the Year 2000 Problem and expects that the Systems will be
ready to conduct business prior to, during, and after January 1, 2000.
SECTION 3.29. Company Books and Records. To Sellers' Knowledge, the
Company's books of account and records either provided to Buyer or made
available to Buyer for review by Sellers or PW Pipe Management to date are true
and correct in all material respects.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Disclosure Schedules, Buyer represents and
warrants to Sellers as of the date hereof that:
SECTION 4.1. Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Minnesota
and has all corporate powers and all material governmental licenses,
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authorizations, permits, consents and approvals required to carry on its
business as now conducted.
SECTION 4.2. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement are within Buyer's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been executed and delivered by Buyer and constitutes a
valid and binding agreement of Buyer, enforceable against Buyer in all material
respects so that Sellers receive substantially all of the benefits of the
bargain. No other corporate action or proceeding by or in respect of Buyer is or
was necessary to authorize this Agreement or the transactions contemplated
herein.
SECTION 4.3. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement require no material action by or in
respect of, or material filing with, any governmental body, agency or official.
SECTION 4.4. Non-contravention. The execution, delivery and performance
by Buyer of this Agreement do not and will not (i) violate the articles of
incorporation or bylaws of Buyer or (ii) assuming compliance with the matters
referred to in Section 4.3, violate any Applicable Law, or (iii) require any
consent or other action by any Person under, constitute a default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of the Buyer to a loss of any benefit to which the Buyer is entitled
under, any agreement or other instrument binding upon the Buyer.
SECTION 4.5. Purchase for Investment. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
SECTION 4.6. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 4.7. Finders' Fees. Except for Donaldson, Lufkin & Jenrette
Securities Corporation, whose fees for assisting Buyer in arranging financing
for the transaction contemplated by this Agreement will be paid by Buyer, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Buyer who might be entitled to
any fee or commission from Sellers or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
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ARTICLE 5
COVENANTS OF SELLERS
SECTION 5.1. Covenant Not to Compete.
(a) Sellers hereby covenant and agree that for a period of four (4)
years after the Closing Date they will not engage in the manufacture or sale of
PVC pipe or fittings in North America. This covenant of noncompetition shall be
interpreted to prohibit, without limiting the generality of the foregoing,
Sellers from serving as shareholders, agents of or independent contractors to,
any person or entity which directly or indirectly competes with the Company in
the PVC pipe business in North America.
(b) Buyer and Sellers hereby stipulate and agree that the remedy at law
for breach of this covenant not to compete would be inadequate and that Buyer
shall be entitled to injunctive relief to enforce this clause. Buyer and Sellers
further stipulate and agree that the prohibitions contained herein are
reasonable as to time and area, and they specifically waive any objection to the
reasonableness of said prohibitions.
(c) Buyer shall have a right to bring an action for breach of this
Section 5.1 until the fifth (5th) anniversary of the Closing Date.
SECTION 5.2. Confidentiality.
(a) For four (4) years from the date hereof, Sellers and their
Affiliates will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold all information concerning the Company and the operations of its
Business in confidence, except to the extent that such information (i) can be
shown to have been in the public domain through no fault of Sellers; (ii) can be
shown to have been known to Sellers or their Affiliates from a source other than
the Company; (iii) does not constitute a trade secret; or (iv) is requested by
judicial or administrative process or by other requirements of law, provided
that Sellers may disclose such information to their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement so long as such
Persons are informed by Sellers of the confidential nature of such information
and are directed by Sellers to treat such information confidentially.
(b) Buyer shall have a right to bring an action for breach of this
Section 5.2 until the fifth (5th) anniversary of the Closing Date.
SECTION 5.3. Auditor Consents. For three (3) years from the date
hereof, Sellers will use all reasonable efforts to cause Ernst & Young LLP to
consent to the use of the Audited Financial Statements by Buyer in connection
with filings that Buyer is required to make with the Securities and Exchange
Commission and any exchange on which Buyer's securities are traded.
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SECTION 5.4. Resignations. Sellers will deliver to Buyer the
resignations of all directors of the Company, effective upon Closing.
ARTICLE 6
COVENANTS OF BUYER AND SELLERS
Buyer and Sellers agree that:
SECTION 6.1. Best Efforts. Subject to the terms and conditions of this
Agreement, Buyer and Sellers will use their best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Laws to consummate the transactions contemplated by
this Agreement. Buyer agrees to cause the Company to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
SECTION 6.2. Documents Delivered at Closing.
(a) Buyer shall deliver the following documents to Sellers:
(i) Resolutions adopted by the Board of Directors of
Buyer approving this Agreement, certified by the
corporate secretary.
(ii) Opinion of Fredrikson & Byron, counsel to Buyer,
dated the Closing Date, to the effect specified in
Sections 4.1, 4.2, 4.3, and 4.4. In rendering such
opinion, such counsel may rely upon certificates of
public officers and, as to matters of fact, upon
certificates of officers of Buyer.
(b) Sellers shall deliver the following documents to Buyer:
(i) Resolutions adopted by the Board of Directors of MCA
approving this Agreement, certified by the corporate
secretary.
(ii) Certificate of Resolution adopted by the Board of
Directors of Mitsubishi Chemical Corporation,
certified by the Chairman of the Board.
(iii) Certificate of Approval of MPI approving this
Agreement, certified by the President of MPI.
(iv) Copy of the Certificate of Incorporation of the
Company certified by the Secretary of State of the
State of Delaware to be a true and complete copy
thereof, which certification by said Secretary of
State shall be dated within twenty (20) days of the
Closing Date.
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(v) Good Standing Certificates from the states in which
the Company is qualified to do business.
(vi) Such instruments as are in form and substance
sufficient to transfer to Buyer all of Sellers'
rights, title and interest in and to the Company.
(vii) Opinion of Donna Costa, General Counsel to MCA, dated
the Closing Date, to the effect specified in Sections
3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 with respect to MCA
and the Company. In rendering such opinion, such
counsel may rely upon certificates of public officers
and, as to matters of fact, upon certificates of
officers of MCA and the Company.
ARTICLE 7
TAX MATTERS
SECTION 7.1. Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax (a "Taxing Authority"), (ii) any liability of the Company for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group, or being a
party to any agreement or arrangement whereby liability of the Company for
payment of such amounts was determined or taken into account with reference to
the liability of any other person for any Pre-Closing Tax Period, and (iii)
liability of the Company for the payment of any amounts of the type described in
(i) or (ii) as a result of any express or implied obligation to indemnify any
other Person (including the tax sharing provisions of this Agreement relating to
the period from December 29, 1998 to the Closing Date as set forth in Section
7.4 below).
SECTION 7.2. Tax Representations. Except as set forth on Schedule 7.2,
Sellers, jointly and severally, represent and warrant to Buyer as of the date
hereof that:
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(a) (i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
the Company (or including the Company) (collectively, the "Returns") have, to
the extent required to be filed on or before the Closing Date, been or will be
filed when due in accordance with all Applicable Laws; (ii) all Taxes shown as
due and payable on the Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority; (iii) the charges,
accruals and reserves for Taxes with respect to the Company for any Pre-Closing
Tax Period (including any Pre-Closing Tax Period for which no Return has yet
been filed) reflected on the books of the Company (excluding any provision for
deferred income taxes) are adequate to cover such Taxes; (iv) the Company is not
delinquent in the payment of any Tax or has requested any extension of time
within which to file any Return and, has not yet filed such return; (v) there
are no requests for rulings or determinations in respect of any Tax pending
between the Company and any Taxing Authority.
(b) Schedule 7.2 contains a list of all jurisdictions (whether foreign
or domestic) to which any Tax was properly payable by the Company at any time
after June 1, 1997.
(c) The Company is a member of an affiliated group filing consolidated
Federal Income Tax Returns pursuant to Sections 1501 through 1504 of the Code
(the "Affiliated Group") in which MCA is the common parent as described in
Section 1504 of the Code. The Company has been a member of the Affiliated Group
since August 18, 1995.
SECTION 7.3. Covenants.
(a) Without the prior written consent of Buyer, none of MCA, the
Company or any Affiliate of MCA shall, to the extent it may affect or relate to
the Company, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended Return,
enter into any closing agreement, settle any Tax claim or assessment, surrender
any right to claim a Tax refund or take or omit to take any other action, if any
such action or omission would have the effect of increasing the Tax liability of
the Company.
(b) Except as otherwise provided in this Article 7, for any Pre-Closing
Tax Period, Sellers shall prepare and file, and Buyer shall cooperate in the
preparation of, all Returns not required to be filed on or before the Closing
Date which Returns will be filed when due in accordance with all Applicable
Laws.
(c) MCA shall include the Company in its consolidated Federal Tax
Return through the close of business on the Closing Date.
(d) Sellers and Buyer shall join in making a timely, effective and
irrevocable election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local or foreign tax law) (collectively a "Section
338(h)(10) Election") with respect to the purchase and sale of the Shares.
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Sellers and Buyer shall jointly prepare the Section 338 Forms (as hereinafter
defined) to the extent such preparation has not been completed prior to the
Closing, and shall timely make any required filings and take any and all other
actions necessary to effect the Section 338(h)(10) Election. MCA shall include
in its federal income tax return for its taxable period which includes the
Closing Date and Buyer shall include in its federal income tax return for its
first taxable period ending on or after the Closing Date any Section 338 Forms
that are required to be so included on account of the Section 338(h)(10)
Election. Sellers and Buyer shall cooperate fully and in good faith with each
other in making the Section 338(h)(10) Election. The Purchase Price shall be
allocated among the Company's assets in accordance with Section 338 of the Code,
as Buyer and MCA shall in good faith agree in writing within sixty (60) days
after Closing. Sellers and Buyer agree that such allocation shall be
accomplished by a good faith determination of the fair market value of the
respective assets, and Sellers and Buyer shall report, act and file in all
respects and for all purposes consistent with such determination. "Section 338
Forms" shall include, without limitation, any "statement of section 338
election" and IRS Form 8023 (or any successor form, together with any Disclosure
Schedules or attachments thereto) that are required pursuant to Treas. Reg.
Section 1.338-1 or Treas. Reg. Section 1.338(h)(10)-1.
SECTION 7.4. Tax Sharing Agreements. Any and all existing Tax sharing
agreements to which the Company is a party shall be terminated as of the date
hereof. After the date hereof, the Company shall not have any further rights or
liabilities thereunder. This Agreement shall be the sole Tax sharing agreement
relating to the Company for all Pre-Closing Tax Periods. Seller shall compensate
Buyer for and hold the Company harmless against any Tax imposed by a Taxing
Authority as a result of such termination and, if any such termination is not
binding on any Taxing Authority, any adverse effect which would have been
avoided if such termination had been given effect by such Taxing Authority.
SECTION 7.5. Other Tax Matters.
(a) All excise, transfer, documentary, filing, sales, use, stamp,
registration, value added and other such Taxes, levies, fees and charges
(including any penalties and interest but expressly excluding income taxes)
incurred in connection with the purchase of the Shares from Sellers pursuant to
this Agreement ("Transfer Taxes") shall be borne and paid by Buyer when due,
irrespective of which party has the tax obligations under Applicable Law or
practice; provided, however, that if such tax obligations fall upon Sellers, the
parties shall, to the extent possible, calculate the full amount of Sellers' tax
obligations, and Buyer shall pay said amount to Sellers on the Closing Date. If
required by Applicable Law, Buyer will join in the execution of any tax returns
and other documentation relating to such Transfer Taxes.
(b) In the event that it is determined subsequent to the Closing that
additional Transfer Taxes are required to be paid in connection with the
transaction described in this Agreement, Buyer agrees to pay such additional
Transfer Taxes.
(c) Sellers agree to pay or cause payment to be made to Buyer of the
amount of any refund, rebate or similar payment that Sellers receive for any
Transfer Taxes paid by Buyer in connection with this Agreement.
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SECTION 7.6. Cooperation on Tax Matters.
(a) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the preparation and
filing of any Tax return, statement, report or form (including any report
required pursuant to Section 6043 of the Code and all Treasury Regulations
promulgated thereunder), and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Company and
Sellers agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company relating to any Pre-Closing Tax Period, and to abide by
all record retention agreements entered into with any Taxing Authority and (ii)
to give the other party reasonable written notice prior to destroying or
discarding any such books and records and, if the other party so requests, the
Company or Sellers, as the case may be, shall allow the other party to take
possession of such books and records. For a period of ten (10) years following
the Closing, Buyer will cause the Company to afford promptly to Sellers and
their respective agents reasonable access to the Real Properties and the
Company's books and records relating to the Business prior to the Closing, for
purposes of preparing tax returns, prosecution and defense of litigation of any
kind; provided that in connection with such access Sellers will at all times
comply with Buyer's normal visitor safety and security procedures and
requirements. If within such ten (10) year period destruction of any records,
files, documents or correspondence of the Company is desired (other than
records, files, documents or correspondence which would not normally be retained
in the records because of the Company's record retention policies existing on
the date hereof), Buyer shall not destroy or permit the destruction of such
items without giving thirty (30) days prior written notice to Sellers, upon
which notice Sellers shall have the right to take possession of such records,
files, documents and correspondence.
(b) Buyer and Sellers further agree, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or customer of the Company or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
ARTICLE 8
INDEMNIFICATION
SECTION 8.1. Indemnification. Except as provided in Section 8.2
(governing Environmental Indemnification):
(a) Sellers hereby agree to indemnify Buyer against and agree to hold
Buyer harmless from any and all damage, loss, liability and reasonable expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
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proceeding) ("Damages") incurred or suffered by Buyer or the Company arising out
of any misrepresentation or breach of warranty made by Sellers pursuant to this
Agreement as follows:
(i) for any claim for indemnity based on a breach of
Sections 3.1, 3.2, 3.5 and 3.6; and
(ii) for any claim for indemnity arising out of any other
misrepresentation or any breach of warranty, provided
that Sellers shall not be required to provide any
indemnity under this sub-Section 8.1(a)(ii) for such
claim after the first anniversary of Closing.
(b) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any Damages incurred or suffered by Buyer or the Company arising
out of or relating to any non-environmental liability or obligation of the
Company that arose out of the operations of the Company on or prior to Closing
and was not provided for on the Closing Balance Sheet or disclosed in the notes
thereto. The percentage of Damages indemnified hereunder shall be: (i)
determined pursuant to the table set forth in Section 8.2(a) if the liability
was within Sellers' Knowledge; or (ii) 50% if the liability was not within
Sellers' Knowledge. Sellers shall not be required to provide any indemnity under
this sub-Section 8.1(b) for claims for indemnity made after the third
anniversary of Closing.
(c) Buyer hereby agrees to indemnify Sellers against and agrees to hold
them harmless from any and all Damages incurred or suffered by Sellers arising
out of or relating to: (i) any misrepresentation or breach of warranty or
covenant made by Buyer pursuant to this Agreement, or (ii) any operations of the
Company after the Closing.
(d) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of a breach of covenant made by Sellers pursuant to this Agreement,
provided that a claim for indemnity is made to Sellers within one year after the
covenant expires.
(e) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of Sellers' intentional and knowing failure to disclose to Buyer
facts or circumstances that Sellers had reason to believe would have a Material
Adverse Effect on the Business or the Company.
SECTION 8.2. Environmental Indemnification. Notwithstanding anything to
the contrary in this Agreement, the rights and obligations of the parties, as
between each other, with respect to Environmental Liabilities, shall be governed
entirely by this Section 8.2.
(a) Sellers agree to indemnify Buyer against and agree to hold Buyer or
the Company harmless from a percentage of any Scheduled Environmental
Liabilities pursuant to the following table:
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When Claim Made to Seller: Sellers' Percentage:
------------------------- -------------------
On or before second anniversary of Closing 80%
After second anniversary but on or before third 60%
After third anniversary but on or before fourth 40%
After fourth but on or before fifth 20%
For any claim for indemnity for a Scheduled Environmental Liability that is not
disclosed to Sellers on or before the fifth anniversary of Closing, Sellers
shall have no responsibility to Buyer.
(b) Sellers hereby agree to indemnify Buyer against and agree to hold
Buyer harmless from any and all Damages incurred or suffered by Buyer or the
Company arising out of or relating to any breach of, or claim under, Section
3.22 pursuant to the formula set forth in Section 8.2(a), provided, however,
that Sellers shall not be required to provide any indemnity under this
sub-Section 8.2(b) for claims for indemnity made to Sellers after the third
anniversary of Closing.
(c) Sellers agree to indemnify Buyer against and agree to hold Buyer or
the Company harmless from fifty percent (50%) of any Unscheduled Environmental
Liability, provided that Sellers shall not be required to provide any indemnity
under this sub-Section 8.2(c) for claims for indemnity made to Sellers after the
third anniversary of Closing.
(d) Sellers agree to indemnify Buyer against and agree to hold Buyer
harmless from any and all Damages incurred or suffered by Buyer or the Company
arising out of Sellers' intentional and knowing failure to disclose to Buyer
facts or circumstances that Sellers had reason to believe would have a Material
Adverse Effect on the Business or the Company.
SECTION 8.3. Procedures.
(a) In the event that any person shall incur or suffer any Damages in
respect of which indemnification may be sought under Section 8.1 or 8.2, such
person (the "Indemnified Party") may assert a claim for indemnification by
written notice (the "Notice") to the party from whom indemnification is being
sought (the "Indemnifying Party"), stating the amount of Damages, if known, and
the nature of and basis for such claim. In the case of Damages arising or which
may arise by reason of any third-party claim, promptly after receipt by an
Indemnified Party of written notice of the assertion or the commencement of any
action with respect to any matter in respect of which indemnification may be
sought hereunder, the Indemnified Party shall give notice to the Indemnifying
Party and shall thereafter keep the Indemnifying Party reasonably informed with
respect thereto, provided that failure of the Indemnified Party to give the
Indemnifying Party prompt notice as provided herein shall not relieve the
Indemnifying Party of any of its obligations hereunder, except to the extent
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that the Indemnifying Party is materially prejudiced by such failure. In case
any such action is brought against any Indemnified Party, the Indemnifying Party
shall be entitled to assume the defense thereof, by written notice of its
intention to do so to the Indemnified Party within thirty (30) days after
receipt of the notice. If the Indemnifying Party shall assume the defense of
such action, such assumption of defense shall constitute an acceptance of its
obligation to indemnify, provided that such acceptance shall not in any way bar
the Indemnifying Party from enforcing the limitations of liability afforded to
it under this Article or otherwise provided by law. If the Indemnifying Party
shall assume the defense of such action, it shall not (x) permit to exist any
lien, encumbrance or other adverse charge upon any asset of the Indemnified
Party or (y) settle such action without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, an Indemnified Party shall not be required to
consent to any settlement that (i) does not include as an unconditional term
thereof the giving by the claimant or the plaintiff of a release of the
Indemnified Party from all liability with respect to such action, or (ii)
involves the imposition of equitable remedies or the imposition of any material
obligations on such Indemnified Party other than financial obligations for which
such Indemnified Party will be indemnified hereunder. As long as the
Indemnifying Party is contesting any such action in good faith and on a timely
basis, the Indemnified Party shall not pay or settle any claims brought under
such action. Notwithstanding the assumption by the Indemnifying Party of the
defense of any action as provided in this Section, the Indemnified Party shall
be permitted to participate in the defense of such action and to employ counsel
at its own expense, provided that if the defendants in any action shall include
both an Indemnifying Party and an Indemnified Party and such Indemnified Party
shall have reasonably concluded that counsel selected by Indemnifying Party has
a conflict of interest because of the availability of different or additional
defenses to such Indemnified Party, such Indemnified Party shall have the right
to select separate counsel to participate in the defense of such action on its
behalf, at the expense of the Indemnifying Party.
(b) If the Indemnifying Party shall fail to notify the Indemnified
Party of its desire to assume the defense of any such action within the
prescribed period of time, or shall notify the Indemnified Party that it will
not assume the defense of any such action, then the Indemnified Party may assume
the defense of any such action, in which event it may do so acting in good faith
in such a manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determination made in such action, provided that the Indemnified
Party shall not be permitted to settle such action without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. No such
determination or settlement shall affect the right of the Indemnifying Party to
dispute the Indemnified Party's claim for indemnification. In the event the
Indemnified Party has assumed the defense of an action and the Indemnifying
Party later desires to take over the defense, it may do so, provided that doing
so shall constitute an acceptance of its obligation to indemnify.
Notwithstanding the foregoing, the Indemnifying Party shall be permitted to join
in the defense of any action and to employ counsel at its own expense.
(c) In the event of any dispute between the parties regarding the
applicability of the indemnification provisions of this Agreement, the
prevailing party shall be entitled to recover all Damages incurred by such party
arising out of, resulting from or relating to such dispute.
(d) The Indemnified Party shall use its best efforts to recover Damages
under its insurance policies and/or from third parties before seeking Damages
30
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from the Indemnifying Party, and thereafter the Indemnifying Party's liability
shall be net any amounts recovered by the Indemnified Party under such insurance
policies and/or from such third parties, provided that the Indemnified Party
does not have to wait to resolve insurance coverage or third-party liability
before seeking Damages from the Indemnifying Party. In the event the Indemnified
Party recovers Damages under an insurance policy and/or from a third party after
receiving payment from the Indemnifying Party, the Indemnified Party shall
immediately reimburse to the Indemnifying Party an amount equal to the amount so
recovered.
SECTION 8.4. Threshold. Notwithstanding anything herein to the
contrary, Buyer shall not have a right to any indemnity from Sellers for any
breach of, or claim under, this Agreement including, without limitation,
Sections 8.1 and 8.2 unless Damages suffered or incurred as a result of or
arising out of such claim or breach exceed fifty thousand dollars ($50,000),
provided, however, that this threshold shall not apply to (a) any Damages based
upon claims under Section 8.1 credited toward the basket provided for in Section
8.5 or (b) any claim under Sections 8.1(a)(i), 8.1(e), or 8.2(d).
SECTION 8.5. Basket. Notwithstanding anything herein to the contrary,
the Sellers shall not be required to provide any indemnity under this Agreement
including, without limitation, Sections 8.1 and 8.2, unless and until the
aggregate and cumulative amount of all Damages exceeds two million dollars
($2,000,000), and then only on amounts of Damages in excess of two million
dollars ($2,000,000), provided, however, that this basket shall not apply to any
claim under Sections 8.1(a)(i), 8.1(e), 8.2(c), or 8.2(d).
SECTION 8.6. Sellers' Cap. Notwithstanding anything herein to the
contrary, Sellers' obligation to make indemnification payments pursuant to this
Agreement, including, without limitation, Sections 8.1 and 8.2 is subject to an
aggregate cumulative cap of fifteen million dollars ($15,000,000), provided
however, that the aggregate cumulative cap on Sellers' obligation shall be
eighty million dollars ($80,000,000) for indemnification payments made pursuant
to Sections 8.1(a)(i), 8.1(e) and 8.2(d).
SECTION 8.7. General Limitation of Liability. Notwithstanding anything
herein to the contrary, no party obligated to provide indemnity under this
Agreement shall be liable to provide indemnity for indirect, incidental,
consequential or punitive damages.
SECTION 8.8. Rights and Obligations. All of Sellers' obligations under
this Article shall be joint and several. All of Buyer's rights under this
Article shall extend to the Company and any successors to all or substantially
all of the Business.
ARTICLE 9
SURVIVAL
Except as otherwise expressly provided in this Agreement, the
representations, warranties and covenants, and obligations connected therewith,
and the parties' indemnity obligations contained in Article 8 for
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misrepresentations and breach of warranty or covenant, shall survive the Closing
until 5:00 p.m. Eastern Daylight Time on the first annual anniversary of the
Closing Date, notwithstanding any investigation heretofore made or omitted by
the parties, and shall expire and be of no further effect after such time. The
representations and warranties and covenants contained in Sections 3.1, 3.2,
3.5, 3.6, 4.1, 4.2, and 10.3 shall survive indefinitely. Except as otherwise
expressly provided in Article 8, the covenants, agreements, representations,
warranties and obligations contained in Article 8 shall expire upon the fifth
anniversary of the Closing Date. The covenants, agreements, representations and
warranties contained in Section 3.21 shall survive until expiration of the
statute of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof). Notwithstanding the foregoing,
any claim brought within the terms of this Agreement shall survive and be
preserved until its resolution.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
Eagle Pacific Industries, Inc.
2430 Metropolitan Center
333 South Seventh Street
Minneapolis, Minnesota 55402
Attention: William H. Spell
Fax: 612-371-9651
if to MCA, to:
Mitsubishi Chemical America, Inc.
Legal Department
One North Lexington Avenue
White Plains, NY 10601
Attention: General Counsel
Fax: 914-761-0108
if to MPI, to:
Mitsubishi Plastics, Inc.
5-2, Marunouchi 2-chome, Chiyoda-ku
Tokyo 100-0005, Japan
Attention: Hiroshi Iihashi, General Manager, Pipe Division
Fax: 81-3-3216-2805
32
<PAGE>
All notices, consents, requests and approvals, any notice of change in address
for the purpose of this Article, and other communications provided for or
required herein, shall be deemed validly given, made or served, if in writing,
and delivered to the parties as specified above (a) on the day given if served
personally, (b) one day following if sent by (i) telecopy with a confirmatory
notice or (ii) delivery to a nationally-recognized express delivery service with
instructions and payment for overnight delivery, or (c) three days following if
sent by U.S. Certified Mail, postage prepaid.
SECTION 10.2. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.3. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 10.4. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party.
SECTION 10.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 10.6. Jurisdiction. Except as otherwise expressly provided in
this Agreement, any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in the United States
District Court for the Southern District of New York or any other New York State
court sitting in New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
33
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without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 10.1
shall be deemed effective service of process on such party.
SECTION 10.7. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.8. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 10.9. Third Party Beneficiaries. Buyer and Sellers agree and
acknowledge that with respect to the provisions of Article 8 the Company is a
third party beneficiary to this Agreement; otherwise no provision of this
Agreement is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 10.10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto.
SECTION 10.11. Severability. In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby so long as the remaining provisions do not fundamentally alter
the relations among the parties hereto.
SECTION 10.12. Headings. The section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EAGLE PACIFIC INDUSTRIES, INC.
By:______________________________
Name:
Title
(Signatures continue
on following page)
34
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MITSUBISHI PLASTICS, INC.
By:_______________________________
Name:
Title:
MITSUBISHI PLASTICS, INC.
By:_______________________________
Name:
Title
35
ARTICLES OF MERGER
OF
PACIFIC WESTERN EXTRUDED PLASTICS COMPANY
(a Delaware corporation)
INTO
EAGLE PACIFIC INDUSTRIES, INC.
(a Minnesota corporation)
Pursuant to the provisions of Section 302A.621 of the Minnesota
Business Corporation Act, the following Articles of Merger are executed on the
date hereinafter set forth:
FIRST: Attached hereto as Exhibit A is a copy of a Plan of Merger to
merge Pacific Western Extruded Plastics Company, a Delaware corporation (the
"Subsidiary"), into Eagle Pacific Industries, Inc., a Minnesota corporation and
the surviving corporation (the "Parent").
SECOND: The Plan of Merger has been approved by the Parent pursuant to
Section 302A.621 of the Minnesota Business Corporation Act.
THIRD: The Subsidiary has 1,000 outstanding shares, all of which are
owned by the Parent.
FOURTH: The Plan of Merger shall be effective as of the close of
business on September 16, 1999.
Dated: September 16, 1999
EAGLE PACIFIC INDUSTRIES, INC.
By:____________________________
William H. Spell, CEO
<PAGE>
Exhibit A
Plan of Merger with Pacific Western Extruded Plastics Company
RESOLVED, that the following Plan of Merger of Pacific Western Extruded Plastics
Company ("PW Pipe") into Eagle Pacific Industries, Inc. ("Eagle") be and it
hereby is adopted and approved:
Eagle, as the owner of all of the outstanding shares of PW Pipe, shall
merge PW Pipe into Eagle in accordance with the provisions of Section 253 of the
Delaware General Corporation Laws and Section 302A.621 of the Minnesota Business
Corporation Act.
In connection with such merger, Eagle, as the surviving corporation,
shall assume all of the obligations of PW Pipe outstanding at the effective time
of the merger.
The shares of PW Pipe shall not be converted into shares of Eagle but
shall, at the effective time of the merger, be surrendered and extinguished
without payment of any cash or the delivery of any other consideration.
Pursuant to Section 252(d) of Delaware General Corporation Law, Eagle
agrees that it may be served with process in the State of Delaware in any
proceeding for enforcement of any obligation of PW Pipe, as well as for
enforcement of any obligation of Eagle arising from the merger, including any
suit or other proceeding to enforce the right of any stockholders as determined
in appraisal proceedings pursuant to Section 262 of Delaware General Corporation
Law, and irrevocably appoints the Delaware Secretary of State as Eagle's agent
to accept service of process in any such suit or other proceedings, a copy of
such service may be mailed by the Delaware Secretary of State to Eagle at 2430
Andersen Consulting Tower, 333 South Seventh Street, Minneapolis, MN 55402.
FURTHER RESOLVED, that the President and Chief Executive Officer of Eagle be and
they hereby are authorized and directed to execute Articles of Merger embodying
the foregoing Plan and to cause the same to the filed for record in the manner
required by law.
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated: September 20, 1999
$100,000,000 Senior Credit Facility
by and among
THE LENDERS NAMED HEREIN,
as Lenders,
FLEET CAPITAL CORPORATION,
as Agent,
and
EAGLE PACIFIC INDUSTRIES, INC.,
as Borrower
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. CREDIT FACILITY................................................1
1.1 Revolving Credit Loans................................1
1.2 Term Loans............................................3
1.3 Letters of Credit; LC Guaranties......................4
SECTION 2. INTEREST, FEES AND CHARGES.....................................6
2.1 Interest..............................................6
2.2 Computation of Interest and Fees......................8
2.3 Letter of Credit and LC Guaranty Fees.................9
2.4 Unused Line Fee.......................................9
2.5 Collection Charges....................................9
2.6 Audit and Appraisal Expenses..........................9
2.7 Reimbursement of Expenses............................10
2.8 Bank Charges.........................................10
2.9 Capital Adequacy Charge..............................10
SECTION 3. LOAN ADMINISTRATION...........................................11
3.1 Manner of Borrowing Revolving Credit Loans...........11
3.2 Payments.............................................13
3.3 Mandatory Prepayments................................14
3.4 All Loans to Constitute One Obligation...............16
3.5 Loan Account.........................................16
3.6 Statements of Account................................16
SECTION 4. TERM AND TERMINATION..........................................17
4.1 Term of Agreement....................................17
4.2 Termination..........................................17
SECTION 5. SECURITY INTERESTS............................................18
5.1 Security Interest in Collateral......................18
5.2 Lien Perfection; Further Assurances..................19
5.3 Safekeeping of Collateral............................19
5.4 Lien on Realty.......................................19
SECTION 6. COLLATERAL ADMINISTRATION.....................................19
6.1 General..............................................19
6.2 Administration of Accounts...........................20
6.3 Administration of Inventory..........................22
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6.4 Administration of Equipment..........................22
6.5 Payment of Charges...................................23
SECTION 7. REPRESENTATIONS AND WARRANTIES................................23
7.1 General Representations and Warranties...............23
7.2 Continuous Nature of Representations and Warranties..30
7.3 Survival of Representations and Warranties...........30
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS...........................30
8.1 Affirmative Covenants................................30
8.2 Negative Covenants...................................33
8.3 Specific Financial Covenants.........................38
SECTION 9. CONDITIONS PRECEDENT..........................................38
9.1 Documentation........................................38
9.2 No Default...........................................39
9.3 Other Loan Documents.................................39
9.4 No Litigation........................................39
9.5 Acquisition..........................................39
9.6 Environmental Surveys................................39
9.7 Subordinated Notes and Cash Equity...................39
9.8 Transaction Fees.....................................39
9.9 Availability.........................................39
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT............40
10.1 Events of Default.....................................40
10.2 Acceleration of the Obligations.......................42
10.3 Other Remedies........................................42
10.4 Remedies Cumulative; No Waiver........................44
SECTION 11. AGENT........................................................44
11.1 Power of Attorney, Authorization and Action...........44
11.2 Agent's Reliance, Etc.................................44
11.3 FCC and Affiliates....................................45
11.4 Lender Credit Decision................................45
11.5 Indemnification.......................................45
11.6 Successor Agent.......................................46
SECTION 12. MISCELLANEOUS................................................46
12.1 Power of Attorney.....................................46
12.2 Indemnity.............................................47
12.3 Modification of Agreement; Sale of Interest...........47
12.4 Severability..........................................50
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12.5 Successors and Assigns................................51
12.6 Cumulative Effect; Conflict of Terms..................51
12.7 Execution in Counterparts.............................51
12.8 Notice................................................51
12.9 Agent and/or Required Lenders'Consent.................52
12.10 Credit Inquiries......................................52
12.11 Time of Essence.......................................52
12.12 Entire Agreement......................................52
12.13 Interpretation........................................53
12.14 GOVERNING LAW; CONSENT TO FORUM.......................53
12.15 WAIVERS BY BORROWER...................................54
12.16 Publicity.............................................54
iii
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made
this 20th day of September, 1999, by and among EAGLE PACIFIC INDUSTRIES, INC.
("Borrower"), a Minnesota corporation with its chief executive office and
principal place of business at 2430 Andersen Consulting Tower, 333 South Seventh
Street, Minneapolis, Minnesota 55402, the lenders who are signatories hereto
("Lenders") and FLEET CAPITAL CORPORATION ("FCC"), a Rhode Island corporation
having an office at 20800 Swenson Drive, Waukesha, Wisconsin 53186, as agent for
the Lenders hereunder (FCC, in such capacity, being "Agent"). Capitalized terms
used in this Agreement have the meanings assigned to them in Appendix A, General
Definitions. Accounting terms not otherwise specifically defined herein shall be
construed in accordance with GAAP consistently applied.
RECITALS
A. FCC and Borrower entered into a certain Amended and Restated Loan
and Security Agreement dated as of December 31, 1997. Said Amended and Restated
Loan and Security Agreement is hereinafter referred to as the "Amended and
Restated Loan Agreement"; and
B. Borrower, FCC as Agent and a Lender and the other lender signatories
hereto desire to amend and restate the Amended and Restated Loan Agreement
pursuant to the terms hereof to provide for, inter alia, the addition of other
Lenders and for the extension of additional credit facilities to Borrower.
C. Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto agree
as follows:
SECTION 1 CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to One Hundred
Million Dollars ($100,000,000) available upon Borrower's request therefor, as
follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. The aggregate amount of the Revolving
Credit Loans to be made by each Lender (such Lender's "Revolving Credit Loan
Commitment"), pursuant to the terms hereof, shall be the amount set below such
Lender's name on the signature pages hereof. The aggregate principal amount of
the Revolving Credit Loan Commitments is Fifty Million Dollars ($50,000,000).
The percentage equal to the quotient of (x) each Lender's Revolving Credit Loan
Commitment, divided by (y) the aggregate of all Revolving Credit Loan
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Commitments, is that Lender's "Revolving Credit Percentage". Subject to all of
the terms and conditions of this Agreement, each Lender agrees, for so long as
no Default or Event of Default exists, to make Revolving Credit Loans to
Borrower from time to time, as requested by Borrower in accordance with the
terms of Section 3.1 hereof, up to a maximum principal amount at any time
outstanding equal to the product of (A) the Borrowing Base at such time,
multiplied by (B) such Lender's Revolving Credit Percentage. It is expressly
understood and agreed that Agent and Lenders may use the Borrowing Base as a
maximum ceiling on Revolving Credit Loans outstanding to Borrower at any time.
If the unpaid balance of the Revolving Credit Loans should exceed the ceiling so
determined or any other limitation set forth in this Agreement, such Revolving
Credit Loans shall nevertheless constitute Obligations that are secured by the
Collateral and entitled to all the benefits thereof. In no event shall Lenders
be required to make a Revolving Credit Loan at any time that there exists a
Default or an Event of Default. Agent shall have the right to establish reserves
in such amounts, and with respect to such matters, as Agent shall deem necessary
or appropriate, against the amount of Revolving Credit Loans which Borrower may
otherwise request under this Section 1.1.1, including, without limitation, with
respect to (i) other sums chargeable against Borrower's Loan Account as
Revolving Credit Loans under any Section of this Agreement; (ii) amounts owing
by Borrower to any Person to the extent secured by a Lien on, or trust over, any
Property of Borrower and Borrower has not already established funded reserves
over which Agent, for its benefit and the ratable benefit of Lenders, has a
security interest; and (iii) such other matters, events, conditions or
contingencies as to which Agent, in its sole credit judgment, determines
reserves should be established from time to time hereunder.
(1) The Revolving Credit Loans shall be evidenced by promissory notes
to be executed and delivered by Borrower at the time of the initial Revolving
Credit Loan, the form of which is attached hereto and made a part hereof as
Exhibit A-1 (the "Revolving Credit Notes"). Each Revolving Credit Note shall be
payable to the order of a Lender and shall represent the obligation of Borrower
to pay the amount of such Lender's Revolving Credit Loan Commitment or, if less,
the aggregate unpaid principal amount of all Revolving Credit Loans made by such
Lender to Borrower with interest thereon as prescribed in Section 2.1.1.
(2) Insofar as Borrower may request and Lenders may be willing in their
sole and absolute discretion to make Revolving Credit Loans to Borrower at a
time when the unpaid balance of Revolving Credit Loans exceeds, or would exceed
with the making of any such Revolving Credit Loan, the Borrowing Base (any such
Loan or Loans being herein referred to individually as an "Overadvance" and
collectively as "Overadvances"), Agent shall enter such Overadvances as debits
in the Loan Account. All Overadvances shall be repaid on demand, shall be
secured by the Collateral and shall bear interest as provided in this Agreement
for Revolving Credit Loans generally. Any Overadvance to be made by Lenders
pursuant to the terms hereof shall be made by Lenders ratably in accordance with
their Revolving Credit Percentages. Overadvances in an aggregate amount of Five
Hundred Thousand Dollars ($500,000) or less may, prior to occurrence and
continuation of a Default or an Event of Default, be made in the sole and
absolute discretion of Agent. Overadvances in an aggregate amount of more than
2
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Five Hundred Thousand Dollars ($500,000) but less than One Million Dollars
($1,000,000) may, prior to the occurrence and continuation of a Default or an
Event of Default, be made in the sole and absolute discretion of Required
Lenders. Overadvances in an aggregate amount of One Million Dollars ($1,000,000)
or more and Overadvances to be made after the occurrence, and during the
continuation, of a Default or an Event of Default shall require the consent of
all Lenders. In no event shall any Lender be required to make Revolving Credit
Loans (including any Overadvances or Revolving Credit Loans in respect of
amounts paid by Agent or any Lender in connection with any Letter of Credit or
LC Guaranty) if, after giving effect thereto, the aggregate outstanding
principal amount of all Revolving Credit Loans made by such Lender would exceed
such Lender's Revolving Credit Loan Commitment. The forgoing notwithstanding, in
no event, unless otherwise consented to by all Lenders, (x) shall any
Overadvances be outstanding for more than sixty (60) consecutive days or (y)
after all outstanding Overadvances have been repaid, shall Agent or Lenders make
any additional Overadvances unless thirty (30) days or more have expired since
the last date on which any Overadvances were outstanding.
1.1.2 Swingline Loans. In order to reduce the frequency of
transfers from Lenders to Agent, Agent, in its sole discretion, may, from its
own funds, make Revolving Credit Loans on behalf of Lenders; provided that the
aggregate amount of any such Revolving Credit Loans so made by Agent shall not
at any time exceed Three Million Dollars ($3,000,000). Any such Revolving Credit
Loan made by Agent on behalf of Lenders is sometimes hereinafter referred to as
a "Swingline Loan." In such event, the Lenders on behalf of whom Agent made the
Revolving Credit Loan shall reimburse Agent for the amount of Revolving Credit
Loan so made on its behalf, on a weekly (or more frequent basis as determined by
Agent, in its sole discretion) basis and the entire amount of interest
attributable to such Revolving Credit Loan for the period from the date on which
said Revolving Credit Loan was made by Agent on such Lender's behalf until Agent
is reimbursed by such Lender, shall be paid to Agent. All Swingline Loans shall
be included in the Base Rate Revolving Portion of the Loans and shall bear
interest as provided in Section 2.1.1 (A) thereof.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used
solely for the payment of the purchase price payable pursuant to the Purchase
Documents and of transaction costs related to the Acquisition and for Borrower's
general operating and capital needs in a manner consistent with the provisions
of this Agreement and all applicable laws.
1.2 Term Loans.
1.2.1 Term Loan A. As set forth in Section 1.2.1 of the Amended
and Restated Loan Agreement, certain term loans to Borrower's
predecessors-in-interest were consolidated into one term loan (the "Amended and
Restated Term Loan"). As of the Closing Date the principal balance of the
Amended and Restated Term Loan is $10,666,000. On the Closing Date, each Lender
shall be deemed to have purchased from FCC an interest in the Amended and
Restated Term Loan equal to the amount set forth below such Lender's name on the
signature pages hereof (such Lender's "Amended and Restated Term Loan
Commitment"). On the Closing Date, subject to the fulfillment or waiver of all
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conditions precedent to the effectiveness of this Agreement, each Lender shall
make new term loans (collectively the "Second Amended and Restated Term Loan")
to Borrower in the principal amount set forth below such Lender's name on the
signature pages hereof (such Lender's "Second Amended and Restated Term Loan
Commitment"). The aggregate amount of each Lender's Amended and Restated Term
Loan Commitment and Second Amended and Restated Term Loan Commitment is
hereinafter referred to as such Lender's "Term Loan A Commitment". The
percentage equal to the quotient of (x) each Lender's Term Loan A Commitment,
divided by (y) the aggregate of all Term Loan A Commitments, is such Lender's
"Term A Loan Percentage." The aggregate amount of the Term Loan A Commitments is
Thirty-Five Million Dollars ($35,000,000). The Amended and Restated Term Loan
and the Second Amended and Restated Term Loan Commitments are sometimes
hereinafter referred to as "Term Loan A." Term Loan A shall be evidenced by
promissory notes to be executed and delivered by Borrower to Lenders on the
Closing Date, the form of which is attached hereto and made a part hereof as
Exhibit A-2 ("Term Note(s)A"), shall bear interest as specified in Section 2.1
and shall be repayable in accordance with the terms of Term Notes A. The
proceeds of Term Loan A shall be used by Borrower, solely for purposes for which
the proceeds of the Revolving Credit Loans are authorized to be used.
1.2.2 Term Loan B. On the Closing Date, subject to the fulfillment
or waiver of all conditions precedent to the effectiveness of this Agreement,
each Lender shall make a term loan B (collectively "Term Loan B") to Borrower in
the aggregate principal amount equal to the amount set forth below such Lender's
name on the signature pages hereof (such Lender's "Term Loan B Commitment"). The
percentage equal to the quotient of (x) each Lender's Term Loan B Commitment,
divided by (y) the aggregate of all Term Loan B Commitments, is that Lender's
"Term Loan B Percentage." The aggregate amount of the Term Loan B Commitments is
Fifteen Million Dollars ($15,000,000). Term Loan B shall be evidenced by
promissory notes to be executed and delivered by Borrower to Lenders on the
Closing Date, the form of which is attached hereto and made a part hereof as
Exhibit A-3 ("Term Note(s) B"), shall bear interest as specified in Section 2.1
and shall be repayable in accordance with the terms of Term Notes B. Term Loan B
shall be funded upon the effectiveness of this Agreement on the Closing Date.
The proceeds of Term Loan B shall be used by Borrower solely for purposes for
which the proceeds of the Revolving Credit Loans are authorized to be used.
1.3 Letters of Credit; LC Guaranties.
(1) Subject to all of the terms and conditions of this Agreement, if
requested to do so by Borrower, Agent shall, on behalf of Lenders, issue its, or
cause to be issued Bank's Letters of Credit for the account of Borrower or shall
execute LC Guaranties by which Lenders shall guaranty the payment or performance
by Borrower of its reimbursement obligation with respect to Letters of Credit
issued for Borrower's account by Bank or Agent; provided that the aggregate face
amount of all Letters of Credit and LC Guaranties outstanding at any time shall
not exceed One Million Dollars ($1,000,000) and no Letter of Credit may have an
expiration date that is after sixty days prior to the Commitment Termination
Date, unless Borrower provides, on or prior to the Commitment Termination Date,
Agent with cash collateral for said Letter of Credit or LC Guaranty, in a manner
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and amount reasonably acceptable to Agent. Further, the expiration date of any
Trade Letter of Credit shall be not more than 180 days after the issuance
thereof and the expiration date of any Standby Letter of Credit shall not be
more than one year after the date of issuance thereof (although any such Standby
Letter of Credit shall be renewable for an additional one-year period in
accordance with the terms hereof). Any amounts paid by Agent or any Lender under
any LC Guaranty or in connection with any Letter of Credit (i) shall become part
of the Obligations, (ii) unless paid by Borrower pursuant to Section 1.3(C)
below, shall be paid from the proceeds of a Revolving Credit Loan requested
pursuant to Section 3.1.1 below, to the extent Lenders are required to make
Revolving Credit Loans pursuant to the terms hereof and (iii) otherwise, shall
be payable on demand. In no event shall Agent, Bank or Lenders be required to
issue or cause to be issued Letters of Credit or LC Guaranties at any time there
exists and is continuing a Default or an Event of Default.
(2) Immediately upon the issuance of each Letter of Credit by Agent or
Bank or LC Guaranty by Agent hereunder, each Lender shall be deemed to have
automatically, irrevocably and unconditionally purchased from Agent an undivided
interest and participation in and to such Letter of Credit or LC Guaranty, the
obligations of Borrower in respect thereof and the liability of Agent thereunder
in an amount equal to the amount available for drawing under such Letter of
Credit or, in the case of a LC Guaranty, the amount guaranteed thereunder,
multiplied by such Lender's Revolving Credit Percentage. Agent will notify each
Lender promptly upon presentation to it of a draw under a Letter of Credit or a
demand for payment under a LC Guaranty. On a weekly basis, or more frequently if
requested by Agent, each Lender shall make payment to Agent in immediately
available funds, of an amount equal to such Lender's pro rata share of the
amount of any payment made by Agent in respect to any Letter of Credit or LC
Guaranty. The obligation of each Lender to reimburse Agent under this Section
1.3 shall be unconditional, continuing, irrevocable and absolute, except in
respect of indemnity claims arising out of Agent's wilful misconduct or gross
negligence. In the event that any Lender fails to make payment to Agent of any
amount due under this Section 1.3, Agent shall be entitled to receive, retain
and apply against such obligation the principal and interest otherwise payable
to such Lender hereunder until Agent receives such payment from such Lender or
such obligation is otherwise fully satisfied; provided, however, that nothing
contained in this sentence shall relieve such Lender of its obligation to
reimburse the Agent for such amount in accordance with this Section 1.3(B).
(3) Borrower agrees, unconditionally, irrevocably and absolutely, to
pay immediately to Agent, for the account of Lenders, the amount drawn under a
Letter of Credit or paid pursuant to a LC Guaranty. If Borrower at any time
fails to make such payment in accordance with the terms of this Agreement,
Borrower shall be deemed to have elected to borrow from the Lenders on such date
Revolving Credit Loans equal in aggregate amount to the amount paid by Agent or
the issuing Lender, as the case may be, under such Letter of Credit or LC
Guaranty. The provisions of Section 1.3(A) and (B) notwithstanding, in the event
that any Lender is prohibited by any Legal Requirement from issuing or
participating in any LC Guaranty (or portion thereof), then Agent shall issue
such LC Guaranty (or such Lender's portion thereof) in lieu of such Lender and
such Lender shall not be deemed to have a participation therein. In such event,
any payments received by Agent pursuant to Section 1.3(C) of the Loan Agreement
which would otherwise be paid by Agent to such Lender shall be retained by Agent
to reimburse Agent for any amounts paid by Agent in respect to the LC Guaranty
(or portion thereof) Agent issued in lieu of such Lender.
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(4) Agent shall give prompt telephone, telex, or telecopy notice to
each Lender of each issuance of, or amendment to, a Letter of Credit specifying
the effective date of the Letter of Credit or amendment, the amount, the
beneficiary, and the expiration date of the Letter of Credit, in each case as
established originally or through the relevant amendment, as applicable, each
Lender's pro rata participation in such Letter of Credit and whether Agent has
classified the Letter of Credit as a commercial, performance, or financial
letter of credit for regulatory reporting purposes.
SECTION 1 INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest.
(1) Interest. (i) Interest shall accrue on the Base Rate
Revolving Credit Portion, the Base Rate Term A Portion and the Base
Rate Term B Portion outstanding at the end of each day (computed on the
basis of a calendar year of 360 days and actual days elapsed) at a
fluctuating rate per annum equal to the sum of the Applicable Margin
plus the Base Rate. After the date hereof, the foregoing rates of
interest shall be increased or decreased, as the case may be, by an
amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the day
that any such change in the Base Rate becomes effective. The Base Rate
in effect on the date hereof shall be the Base Rate effective on the
opening of business on the date hereof, but if this Agreement is
executed on a day that is not a Business Day, the Base Rate in effect
on the date hereof shall be the Base Rate effective as of the opening
of business on the last Business Day immediately preceding the date
hereof.
(1)
(2) Interest shall accrue on each LIBOR Revolving Credit
Portion, LIBOR Term A Portion and LIBOR Term B Portion outstanding at
the end of each day (computed on the basis of a calendar year of 360
days and actual days elapsed) at rates equal to the sum of the LIBOR
Rate applicable to each such LIBOR Revolving Credit Portion, LIBOR Term
A Portion and LIBOR Term B Portion plus the Applicable Margin.
(2) LIBOR Option.
(1) Conditions for Basing Interest on the LIBOR Rate. Upon the
condition that:
(1) Agent shall have received a LIBOR Request from
Borrower at least 3 Business Days prior to the first day of the LIBOR
Period requested;
(2) There shall have occurred no change in applicable law
which would make it unlawful for any Lender to obtain deposits of U.S.
dollars in the London interbank foreign currency deposits market;
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(3) As of the date of the LIBOR Request and the first day
of the LIBOR Period, there shall exist no Default or Event of Default
which has not been waived by Required Lenders; and
(4) Agent shall have determined in good faith that Agent
is able to determine the LIBOR Rate in respect of the Requested LIBOR
Period;
then interest on the LIBOR Portion requested during the LIBOR Period
requested will be based on the applicable LIBOR Rate. The foregoing
notwithstanding, Borrower acknowledges that there may not be more than
five LIBOR Portions outstanding at any one time.
(2) Indemnification for Funding and Other Losses. Each LIBOR
Request shall be irrevocable and binding on Borrower. Borrower shall
indemnify Agent and each Lender against any expense or loss suffered by
Agent or any Lender as a result of any failure on the part of Borrower
to fulfill, on or before the date specified in any LIBOR Request, the
applicable conditions set forth in this Agreement or as a result of the
prepayment of the applicable LIBOR Portion prior to the last day of the
applicable LIBOR Period, including, without limitation, any loss
(including loss of anticipated profits) or expense incurred by reason
of the liquidation or redeployment of deposits or other funds acquired
by Agent or any Lender to fund or maintain the requested LIBOR Portion.
Upon request by Borrower, Agent or the applicable Lender shall provide
Borrower with a certificate of an officer of Agent or any applicable
Lender setting forth the calculation of the amount of any such loss and
the basis therefor, which calculation shall, in the absence of manifest
error be conclusive.
(3) Change in Applicable Laws, Regulations, etc. If (x) any
Legal Requirement shall make it unlawful for any Lender to fund through
the purchase of U.S. dollar deposits any LIBOR Portion, or otherwise to
give effect to its obligations as contemplated under this Section
2.1.1(B), or shall impose on any Lender any costs based on or measured
by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the LIBOR Rate is determined as provided herein or a
category of extensions of credit or other assets of such Lender which
includes any LIBOR Portion, or shall impose on any Lender any
restrictions on the amount of such a category of liabilities of assets
which any such Lender may hold, or (y) any Lender shall determine in
good faith that such Lender is unable to obtain deposits of U.S.
dollars in the London interbank foreign currency deposits market in the
applicable amounts for the requested LIBOR Period, (a) Agent or such
Lender may by notice thereof to Borrower terminate the LIBOR Option,
with respect to the Loans made or to be made by such Lender, (b) any
LIBOR Portion subject thereto shall immediately bear interest
thereafter at the rate provided for in Section 2.1.1(A)(i) payable on
the dates provided for in Section 3.2.2(i) and (c) Borrower shall
indemnify such Lender against any out-of-pocket loss, penalty or
expense incurred by such Lender by reason of the liquidation or
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redeployment of deposits or other funds acquired by such Lender or to
fund or maintain such LIBOR Portion. The applicable Lender shall
promptly give Borrower written notice of when such condition shall
cease to exist.
(4) Taxes. It is the understanding of Borrower, Agent and
Lenders that each Lender shall receive payments of amounts of principal
of and interest on the Revolving Credit Loans, Term Loan A and Term
Loan B with respect to the LIBOR Portions from time to time subject to
a LIBOR Option free and clear of, and without deduction for, any Taxes.
If (i) any Lender shall be subject to any such Tax in respect of any
such LIBOR Portion or any part thereof or (ii) Borrower shall be
required to withhold or deduct any such Tax from any such amount, the
LIBOR Rate applicable to such LIBOR Portion shall be adjusted by such
Lender to reflect all additional costs incurred by such Lender in
connection with the payments by such Lender or the withholding by
Borrower of such Tax and Borrower shall provide such Lender with a
statement detailing the amount of any such Tax actually paid by
Borrower. Determination by such Lender of the amount of such costs
shall, in the absence of manifest error, be conclusive, and at
Borrower's request, such Lender shall demonstrate the basis of such
determination. If after any such adjustment, any part of any Tax paid
by such Lender is subsequently recovered by Lender, such Lender shall
promptly reimburse Borrower to the extent of the amount so recovered. A
certificate of an officer of such Lender setting forth the amount of
such recovery and the basis therefor shall, in the absence of manifest
error, be conclusive.
2.1.2 Default Rate of Interest. Upon the occurrence and during the
continuance of an Event of Default at the option of Agent or Required Lenders
the principal amount of all Loans shall bear interest at a rate per annum equal
to two percent (2%) above the interest rate otherwise applicable thereto (the
"Default Rate").
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate
of all amounts deemed interest hereunder or under the Notes and charged or
collected pursuant to the terms of this Agreement or pursuant to the Notes
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If any
provisions of this Agreement, or the Notes are in contravention of any such law,
such provisions shall be deemed amended to conform thereto.
2.2 Computation of Interest and Fees. Interest, unused line fees,
Letter of Credit fees, LC Guaranty fees, and collection charges hereunder shall
be calculated daily and shall be computed on the actual number of days elapsed
over a year of 360 days. For the purpose of computing interest hereunder, all
items of payment received by Agent shall be deemed applied by Agent on account
of the Obligations (subject to final payment of such items) on the first
Business Day after receipt by Agent of such items in Agent's account located in
Chicago, Illinois.
2.3 Letter of Credit and LC Guaranty Fees. Borrower shall pay to Agent
for the ratable benefit of Lenders:
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(1) for Standby Letters of Credit and LC Guaranties of Standby
Letters of Credit, a fee equal to the annualized LC Percent of the
aggregate face amount of such Letters of Credit and LC Guaranties
outstanding from time to time during the term of this Agreement, plus
all normal and customary charges associated with the issuance thereof
as set forth on Exhibit S hereof. Said fees shall be payable on the
first calendar day of each month (for the immediately preceding month)
computed through the last day of the preceding month; provided that
such normal and customary charges shall be payable upon the issuance of
such Letter of Credit or LC Guaranty. All such fees and charges shall
be deemed fully earned and shall be due and payable upon issuance of
each such Letter of Credit or LC Guaranty and shall not be subject to
rebate or proration upon the termination of this Agreement for any
reason; and
(2) for Trade Letters of Credit and LC Guaranties of Trade
Letters of Credit, a fee equal to the annualized LC Percent of the face
amount of each such Letter of Credit or LC Guaranty, plus the normal
and customary charges associated with the issuance thereof as set forth
on Exhibit S hereof. Said fees shall be payable on the first calendar
day of each month (for the immediately preceding month) computed
through the last day of the preceding month; provided that such normal
and customary charges shall be payable upon the issuance of such Letter
of Credit or execution of such LC Guaranty. All of such fees and
charges shall be fully earned and due and payable upon issuance,
renewal or extension (as the case may be) of each such Letter of Credit
or LC Guaranty, and shall not be subject to rebate or proration upon
the termination of this Agreement for any reason.
2.4 Unused Line Fee. Borrower shall pay to Agent for the ratable
benefit of Lenders a fee equal to the Applicable Margin per annum of the average
daily amount by which the Maximum Revolving Loan Amount exceeds the sum of the
outstanding principal balance of Revolving Credit Loans (exclusive of Swingline
Loans) plus the LC Amount. The unused line fee shall be payable monthly in
arrears on the first day of each calendar month hereafter.
2.5 Collection Charges. If items of payment are received by Agent at a
time when there are no Revolving Credit Loans outstanding, such items of payment
shall be subject to a collection charge equal to one days' interest on the
amount thereof at the rate then applicable to the Base Rate Revolving Credit
Portion of the Revolving Credit Loans, which collection charges shall be payable
by Borrower to Agent on the first Business Day of each month.
2.6 Audit and Appraisal Expenses. Borrower shall pay to Agent all
out-of-pocket expenses incurred by Agent in connection with such audits and
appraisals of Borrower's books, records and assets and such other matters as
Agent shall deem appropriate. Such expenses shall be payable on the first day of
the month following the date of issuance by Agent of a request for payment
thereof to Borrower, which request shall itemize such fees and expenses in
reasonable detail.
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2.7 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Agent or any Lender (in respect
to clauses (iii) and (iv) only) incurs legal or accounting expenses or any other
costs or out-of-pocket expenses in connection with (i) the negotiation and
preparation of this Agreement or any of the other Loan Documents, any amendment
of or modification of this Agreement or any of the other Loan Documents; (ii)
the administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Agent, any Lender,
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's affairs; (iv) any
attempt to enforce any rights of Agent or any Lender against Borrower or any
other Person which may be obligated to Agent or Lenders by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (v) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such legal and accounting expenses, other costs and out of
pocket expenses of Agent or Lenders shall be charged to Borrower. All amounts
chargeable to Borrower under this Section 2.7 shall be Obligations secured by
all of the Collateral, shall be payable on demand to Agent or such Lender, as
the case may be, and shall bear interest from the date such demand is made until
paid in full at the rate applicable to the Base Rate Revolving Credit Portion
from time to time. Borrower shall also reimburse Agent for expenses incurred by
Agent in its administration of the Collateral to the extent and in the manner
provided in Section 6 hereof. The foregoing notwithstanding, Borrower shall not
be required to reimburse Agent or any Lender for any costs or expenses incurred
in any action where there is entered a final non-appealable court order pursuant
to which the Agent or the Lender is not granted its requested relief in whole or
in part.
2.8 Bank Charges. Borrower shall pay to Agent (for its benefit or the
benefit of a Lender, as applicable), on demand, any and all fees, costs or
expenses which Agent or any Lender pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Agent or any Lender, of proceeds of loans made
by Agent or any Lender to Borrower pursuant to this Agreement and (ii) the
depositing for collection, by Agent or any Lender, of any check or item of
payment received or delivered to Agent or any Lender on account of the
Obligations.
2.9 Capital Adequacy Charge. In the event that any Lender (an "Affected
Lender") shall have determined that the adoption (effected after the date
hereof) of any law, rule or regulation regarding capital adequacy, or any change
therein or in the interpretation or application thereof or compliance by any
such Affected Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority, does or shall have the effect of reducing the rate of return on such
Affected Lender's capital as a consequence of its obligations hereunder to a
level below that which such Affected Lender could have achieved but for such
adoption, change or compliance (taking into consideration such Affected Lender's
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policies with respect to capital adequacy) by an amount deemed by such Affected
Lender, in its reasonable discretion, to be material, then from time to time,
after submission by such Affected Lender to Borrower of a written demand
therefor, which demand shall be made within sixty (60) days of such reduction,
Borrower shall pay to such Affected Lender such additional amount or amounts as
will compensate such Affected Lender for such reduction. A certificate of such
Affected Lender claiming entitlement to payment as set forth above shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such payment, the additional amount
or amounts to be paid to such Affected Lender, and the method by which such
amounts were determined. In determining such amount, such Affected Lender may
use any reasonable averaging and attribution methods. Each Lender and Agent
agrees to allocate any such cost increase among its similarly situated customers
in good faith and on an equitable basis; provided, however, that any such
Affected Lender shall not be entitled to such amounts unless similar assessments
are imposed by such Affected Lender on other comparable borrowers of such
Affected Lender. In the event that the provisions of this Section 2.9 and/or
Section 2.1.1(B)(iv) result in the effective interest rates being charged to
Borrower by any Lender being increased, on a per annum basis, by more than one
quarter percent (1/4%), Borrower, at its option and expense, may obtain a
substitute Lender (who shall be reasonably acceptable to Agent) for such Lender.
In such event, Borrower shall provide written notice to any such Affected Lender
or other Lender and Agent that Borrower requires any such Affected Lender or any
Lender subject to a Tax under Section 2.1.1(B)(iv) to sell and transfer all its
interest in this Agreement and its Revolving Credit Note, Term Note A, Term Note
B, Revolving Credit Loan Commitments and interests and obligations in respect to
the LC Amount to a substitute Lender (who shall be reasonably acceptable to
Agent) for a price in cash equal to principal balance of such Affected Lender or
other Lender's outstanding Loans plus all accrued but unpaid interest thereon
plus all accrued but unpaid fees due any such Affected Lender or other Lender
under the terms hereof. Any such sale and transfer shall be made within thirty
(30) days after such Affected Lender or other Lender's and Agent's receipt of
Borrower's notice referred to hereunder pursuant to the terms of Section 12.3(c)
hereof. Any Lender who becomes an Affected Lender shall, within ten (10) days of
the circumstances giving rise to such fact, give Borrower written notice of such
fact.
SECTION 1 LOAN ADMINISTRATION.
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner: (i) Borrower may
give Agent a Notice of Revolving Credit Loan, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists
and is continuing a Default or an Event of Default; and (ii) the becoming due of
any amount required to be paid under this Agreement, the Term Notes A or Term
Notes B, whether as interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation. As an accommodation to
Borrower, Agent may permit telephonic requests for loans and electronic
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transmittal of instructions, authorizations, agreements or reports to Agent by
Borrower. Unless Borrower specifically directs Agent in writing not to accept or
act upon telephonic or electronic communications from Borrower, Agent shall have
no liability to Borrower for any loss or damage suffered by any Borrower as a
result of Agent's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Agent by
Borrower and Agent shall have no duty to verify the origin of any such
communication or the authority of the person sending it. Except as otherwise
provided in Section 2.1.1(B), each Revolving Credit Loan shall be made on
notice, given not later than 11:00 a.m. (Milwaukee time) on the Business Day of
the proposed Revolving Credit Loan, by Borrower to Agent, which shall give to
each Lender prompt written notice thereof by telecopier, telex or cable. Each
such notice (a "Notice of Revolving Credit Loan") shall be in writing or by
telephone to Agent at (414) 798-4800, confirmed immediately in writing,
specifying therein the requested date and amount of such Revolving Credit Loan.
Each Lender shall, not later than 2:00 p.m. (Milwaukee time) on each requested
date, wire to a bank designated by Agent the amount of that Lender's Revolving
Credit Percentage of the requested Revolving Credit Loan. Agent shall, before
2:30 P.M. (Milwaukee time) on the date of the proposed Revolving Credit Loan,
subject to the provisions hereof, wire to a bank designated by Borrower and
reasonably acceptable to Agent, the amount of such Revolving Credit Loan to the
extent received from the Lenders. The failure of any Lender to make the
Revolving Credit Loan to be made by it shall not relieve any other Lender of its
obligation hereunder to make its Revolving Credit Loan. Neither Agent nor any
other Lender shall be responsible for the failure of any other Lender to make
the Revolving Credit Loan to be made by such other Lender.
If at any time one or more Lenders refuse or fail to make a requested
Revolving Credit Loan when all conditions to a Revolving Credit Loan have been
satisfied or waived, then Agent may, at its option, but shall have no obligation
whatsoever to, purchase all, but not less than all, of the Revolving Credit
Note, Term Note A, Term Note B and interests and obligations in respect to the
LC Amount held by the Lender(s) (a "Defaulting Lender") who so fail or refuse,
and to assume such Lender's commitments to make Revolving Credit Loans and each
such Lender shall be obligated to sell and transfer such Revolving Credit Note,
Term Note A, Term Note B and interests and obligations in respect to the LC
Amount to Agent for a price in cash equal to the principal balance outstanding
plus all accrued but unpaid interest thereon plus all accrued but unpaid fees
due any such Defaulting Lender under the terms hereof, and the foregoing
provisions of this Section will be applicable to Agent with respect to the
Revolving Credit Notes so purchased by it. In the event that Agent does not so
purchase the interest of any such Defaulting Lender, then Borrower, at its
option and expense, may obtain a substitute Lender (who shall be reasonably
acceptable to Agent) for the Defaulting Lender. In such event, Borrower shall
provide written notice to the Defaulting Lender and Agent that Borrower requires
such Defaulting Lender to sell and transfer all of its interest in this
Agreement and its Revolving Credit Note, Term Note A, Term Note B, Revolving
Credit Loan Commitments and interests and obligations in respect to the LC
Amount to such substitute Lender for a price in cash equal to the principal
balance plus all accrued by unpaid interest thereon plus all accrued but unpaid
fees due any such Defaulting Lender under the terms hereof, and the foregoing
provisions of this Section will be applicable to such substitute Lender with
respect to the Revolving Credit Notes purchased by it. Upon such purchase, the
Defaulting Lender shall be relieved of any further liability or obligation under
the Loan Documents, however such purchase by either Agent or a substitute
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Lender, shall not relieve any such Defaulting Lender from any breach of contract
claims available to Agent and/or Borrower against such Lender as a result of its
failure to make any such Revolving Credit Loan.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Agent to
disburse the proceeds of Term Loan A, Term Loan B and each Revolving Credit Loan
requested, or deemed to be requested, pursuant to this Section 3.1.2 as follows:
(i) the proceeds of Term Loan A, Term Loan B and each Revolving Credit Loan
shall be disbursed by Agent in lawful money of the United States of America in
immediately available funds, in the case of Term Loan A, Term Loan B and the
initial Revolving Credit Loan, in accordance with the terms of the written
disbursement letter from Borrower, and in the case of each subsequent borrowing,
by wire transfer to such bank account as may be agreed upon by Borrower and
Agent from time to time or elsewhere if pursuant to a written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan requested under
Section 3.1.1(ii) shall be disbursed by Agent by way of direct payment of the
relevant interest or other Obligation.
3.1.3 Letter of Credit and LC Guaranty Requests. A request for a
Letter of Credit or LC Guaranty shall be made in the following manner: Borrower
may give Agent and Bank a written notice of its request for the issuance of a
Letter of Credit or LC Guaranty, not later than 11:00 a.m. Milwaukee time, one
Business Day before the proposed issuance date thereof, in which notice Borrower
shall specify the proposed issuer and issuance date; provided, that no such
request may be made at a time when there exists and is continuing a Default or
Event of Default. Such request shall be accompanied by an executed application
and reimbursement agreement in form and substance satisfactory to the Person
being asked to issue the Letter of Credit or LC Guaranty, as well as any
required corporate resolutions.
3.2 Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lenders and accepted by Lenders specifically
containing payment provisions which are in conflict with this Section 3.2 (in
which event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Agent for the ratable benefit of Lenders
immediately upon the earliest of (i) the receipt by Agent or Borrower of any
proceeds of any of the Collateral other than Equipment or real Property, to the
extent of said proceeds, except that, so long as no Event of Default exists and
is continuing, if, after application of the proceeds to the Base Rate Revolving
Credit Portion, any remaining Loans outstanding at the time of receipt by any
Borrower or Agent of any such proceeds are LIBOR Revolving Credit Portions, then
Borrower may at its option direct that such proceeds be held by Agent in a
non-interest bearing cash collateral account maintained by Agent to be applied
to the payment of principal on the last day of the LIBOR Period applicable to
each LIBOR Portion in the order of maturity or Borrower may place such proceeds
in an interest bearing account provided that such account is pledged to Agent,
for its benefit and the ratable benefit of Lenders, in a manner reasonably
satisfactory to Agent; (ii) the occurrence of an Event of Default in consequence
of which Agent or Required Lenders elect(s) to accelerate the maturity and
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payment of the Obligations, or (iii) termination of this Agreement pursuant to
Section 4 hereof; provided, however, that if an Overadvance shall exist at any
time, Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest.
(1) Base Rate Portion. Interest accrued on Base Rate Portions
shall be due and payable on the earliest of (a) the first calendar day
of each month (for the immediately preceding month), computed through
the last calendar day of the preceding month, (b) the occurrence of an
Event of Default in consequence of which Agent or Required Lenders
elect(s) to accelerate the maturity and payment of the Obligations or
(c) termination of this Agreement pursuant to Section 4 hereof.
(2) LIBOR Portion. Interest accrued on each LIBOR Portion
shall be due and payable on each LIBOR Interest Payment Date and on the
earliest of (1) the last day of the LIBOR Period applicable to such
LIBOR Portion, (2) the occurrence of an Event of Default in consequence
of which Required Lenders elect to accelerate the maturity and payment
of the Obligations or (3) termination of this Agreement pursuant to
Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Agent for its benefit and/or the ratable benefit of Lenders
or to any other Person designated by Agent in writing.
3.2.4 Other Obligations. The balance of the Obligations requiring
the payment of money, if any, shall be payable by Borrower to Agent for its
benefit and/or the ratable benefit of Lenders as and when provided in this
Agreement, the Notes, the Other Agreements or the Security Documents, or on
demand, whichever is later.
3.3 Mandatory Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. Provided Section 4.2.3 is not applicable, except as provided below
or in Section 6.4.2 hereof, if Borrower sells any of the Equipment or real
Property, or if any of the Collateral is lost or destroyed or taken by
condemnation, Borrower shall pay to Agent for the ratable benefit of Lenders,
unless otherwise agreed by Required Lenders, as and when received by Borrower
and as a mandatory prepayment of Term Loan A and Term Loan B, as herein
provided, a sum equal to the net cash proceeds (including insurance payments)
received by Borrower from such sale, loss, destruction or condemnation. The
applicable prepayment shall be applied first to the installments of principal
due under Term Note(s) B in the inverse order of their maturities until paid in
full and second to the installments of principal due under Term Note(s) A in
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inverse order of their maturities until paid in full and third to reduce the
outstanding principal balance of the Revolving Credit Loans and finally to
cash-collateralize any LC Amount. To the extent that the Collateral sold, lost,
destroyed or condemned consists of Accounts, Inventory or other Property other
than Equipment or real Property, the applicable prepayment shall be applied to
reduce the outstanding principal balance of the Revolving Credit Loans.
Notwithstanding the foregoing, if the proceeds of condemnation or insurance with
respect to any loss or destruction of Equipment, Inventory or real Property are
less than $500,000, Agent and Lenders shall apply such proceeds to the
outstanding principal balance of the Revolving Credit Loans and shall, provided
no Default or Event of Default shall have occurred and be continuing, permit
Borrower within 180 days (or such longer period as reasonably consented to by
Agent) after the receipt by the Borrower of such proceeds to reborrow such
proceeds in accordance with the terms of this Agreement for use in replacing or
repairing the damaged or lost Collateral. If such damaged or lost Collateral is
not replaced or repaired within such 180 day (or such longer period as
reasonably consented to by Agent) period, all such proceeds shall be applied to
installments of principal due under the Term Notes A or Term Notes B in the
manner specified in the second sentence of this Section 3.3.1 until payment
thereof in full.
3.3.2 Other Mandatory Prepayments.
(1) Provided Section 4.2.3 is not applicable, Borrower shall make a
mandatory prepayment of the Term Loan A and Term Loan B in the amount of the net
proceeds received by Borrower from any offering or sale of its debt or equity
Securities.
(2) Any applicable prepayment made pursuant to Section 3.3.2 (a)
above shall be applied, first, to the installments of principal due under Term
Note(s) B in inverse order of their maturities until paid in full and, second,
to the installments of principal due under Term Note(s) A in inverse order of
their maturities until paid in full.
3.3.3 Optional Prepayments. Borrower may, at its option from time
to time, prepay installments of Term Notes A or Term Notes B in the inverse
order of maturity, provided that the aggregate amount of all such prepayments
made within any fiscal year shall not exceed Five Million Dollars ($5,000,000)
without the prior written consent of Agent and Required Lenders. Any such
optional prepayment shall be applied first to installments of principal due
under Term Notes(s) B in inverse order of their maturities until paid in full
and second to the installments of principal due under Term Note(s) A in inverse
order of their maturities until paid in full. Any such optional prepayment shall
be accompanied by the amount required by Section 2.1.1(B)(ii), if any. Borrower
shall not be required to pay any prepayment or other fee in connection with any
such optional prepayment. In respect to proposed optional prepayments in excess
of Five Million Dollars ($5,000,000), Agent and Required Lenders may grant or
withhold their consent to any such prepayment in their sole discretion and may
condition such consent upon the payment by Borrower of a prepayment fee
acceptable to Agent and Required Lenders; provided, however, that no such
consent or discretionary prepayment fee shall be required in connection with
prepayment in full of the Total Credit Facility and Section 4.2.3 shall be
applicable to such prepayments.
3.3.4 Application of Payments and Collections. All items of payment
received by Agent by 12:00 noon, Chicago time, on any Business Day shall be
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deemed received on that Business Day. All items of payment received after 12:00
noon, Chicago time, on any Business Day shall be deemed received on the
following Business Day. For the purpose of computing interest hereunder, all
items of payment received by Agent shall be deemed applied by Agent on account
of the Obligations (subject to final payment of such items) on the first
Business Day after receipt of such item in immediately good funds. If an Event
of Default exists and is continuing, Borrower irrevocably waives the right to
direct the application of any and all payments and collections received by Agent
from or on behalf of Borrower, and Borrower does hereby irrevocably agree that
Agent shall, after the occurrence and during the continuation of an Event of
Default, have the continuing exclusive right to apply and reapply any and all
such payments and collections received at any time or times hereafter by Agent
or its agent against the Obligations, in such manner as Agent may deem
advisable, notwithstanding any entry by Agent upon any of its books and records.
If as the result of collections of Accounts as authorized by Section 6.2.6
hereof a credit balance exists in the Loan Account, such credit balance shall
not accrue interest in favor of Borrower, but shall be available to Borrower at
any time or times for so long as no Default or Event of Default exists. Such
credit balance shall not be applied or be deemed to have been applied as a
prepayment of Term Loan A or Term Loan B, except that Agent may, at its option,
offset such credit balance against any of the Obligations upon and after the
occurrence of an Event of Default.
3.4 All Loans to Constitute One Obligation. The Loans shall constitute
one general obligation of Borrower, and shall be secured by Agent's Lien for its
benefit and the ratable benefit of Lenders upon all of the Collateral.
3.5 Loan Account. Agent shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Agent or any Lender, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all
charges and expenses properly chargeable to Borrower.
3.6 Statements of Account. Agent will account to Borrower monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent shall be deemed final, binding and conclusive,
absent manifest error, upon Borrower unless Agent is notified by Borrower in
writing to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
SECTION 1 TERM AND TERMINATION
4.1 Term of Agreement. Subject to Agent's and Lenders' right to cease
making Loans to Borrower upon or during the continuation of any Default or Event
of Default, this Agreement shall be in effect for a period of five (5) years
from the Closing Date, through and including September 20, 2004 (the "Original
Term"), unless terminated as provided in Section 4.2 hereof.
4.2 Termination.
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4.2.1 Termination by Agent or Required Lenders. Agent or Required
Lenders may terminate this Agreement with notice (or in respect to Events of
Default arising under Section 10.1.10 without notice) after the occurrence of an
Event of Default resulting in the Obligations being declared due and payable.
4.2.2 Termination by Borrower. Upon at least 90 days prior written
notice to Agent, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds and all Letters of
Credit and LC Guaranties have expired or have been cash collateralized to
Agent's satisfaction. Any notice of termination given by Borrower shall be
irrevocable unless Required Lenders otherwise agree in writing, and Lenders
shall have no obligation to make any Loans or issue or procure any Letters of
Credit or LC Guaranties on or after the termination date stated in such notice.
Borrower may elect to terminate this Agreement in its entirety only. No section
of this Agreement or type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of termination of
this Agreement for any reason, Borrower shall pay to Agent for its benefit and
the ratable benefit of Lenders (in addition to the then outstanding principal,
accrued interest and other charges owing under the terms of this Agreement and
any of the other Loan Documents) as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to (i) one percent (1%) of the
Total Credit Facility less permanent principal payments applied on the Term
Loans (the "Reduced Facility"), if termination occurs during the first
twelve-month period of the Original Term (September 20, 1999 through September
19, 2000); (ii) one-half percent (1/2%) of the Reduced Facility, if termination
occurs during the second 12-month period of the Original Term (September 20,
2000 through September 19, 2001); or (iii) one-quarter of one percent (1/4%) of
the Reduced Facility, if termination occurs within the third 12-month period of
the Original Term (September 20, 2001 through September 19, 2002). If
termination occurs on or after September 20, 2002, no termination charge shall
be payable.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination and Agent for its benefit and the ratable benefit
of Lenders shall retain its Liens in the Collateral and all of its rights and
remedies under the Loan Documents notwithstanding such termination until
Borrower has paid the Obligations to Agent and Lenders, in full, in immediately
available funds, together with the applicable termination charge, if any.
Notwithstanding the payment in full of the Obligations, Agent shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Agent or Lenders may incur as a result of
dishonored checks or other items of payment received by Agent or any Lender from
Borrower or any Account Debtor and applied to the Obligations, Agent shall, at
its option, (i) have received a written agreement, executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Agent and Lenders from any such
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loss or damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Agent, in its reasonable discretion, may
deem necessary to protect Agent and/or Lenders from any such loss or damage.
SECTION 1 SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Agent and Lenders of the Obligations, Borrower hereby grants to
Agent for its benefit and the ratable benefit of Lenders a continuing Lien upon
all of Borrower's assets, including all of the following Property and interests
in Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(1) Accounts;
(2) Inventory;
(3) Equipment;
(4) General Intangibles;
(5) Investment Property;
(6) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Agent
or any Lender or a bailee or Affiliate of Agent or any Lender;
(7) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A) through (F) above,
including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(8) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (A)
through (G) above.
5.2 Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Agent's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Agent's Lien upon the Collateral.
Unless prohibited by applicable law, Borrower hereby authorizes Agent to execute
and file any such financing statement on Borrower's behalf. The parties agree
that a carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in any appropriate office
in lieu thereof. At Agent's request, Borrower shall also promptly execute or
cause to be executed and shall deliver to Agent any and all documents,
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instruments and agreements deemed necessary by Agent to give effect to or carry
out the terms or intent of the Loan Documents.
5.3 Safekeeping of Collateral. Agent shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof while any
Collateral is in Agent's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at Borrower's sole
risk.
5.4 Lien on Realty. The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by the Mortgages. If
Borrower shall acquire at any time or times hereafter any interest in other real
Property (other than leasehold interests in sales offices), Borrower agrees
promptly to execute and deliver to Agent, for its benefit and the ratable
benefit of Lenders, as additional security and Collateral for the Obligations,
deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel (herein
collectively referred to as "New Mortgages") covering such real Property. The
Mortgages and each New Mortgage shall be duly recorded (at Borrower's expense)
in each office where such recording is required to constitute a valid Lien on
the real Property covered thereby. In respect to each Mortgage and each New
Mortgage, Borrower shall deliver to Agent, at Borrower's expense, mortgagee
title insurance policies issued by a title insurance company reasonably
satisfactory to Agent insuring Agent, as mortgagee; such policies shall be in
form and substance reasonably satisfactory to Agent and shall insure a valid
first Lien in favor of Agent for its benefit and the ratable benefit of Lenders,
on the Property covered thereby, subject only to those exceptions reasonably
acceptable to Agent and its counsel. Borrower shall also deliver to Agent such
other documents, including, without limitation, ALTA Surveys of the real
Property, as Agent and its counsel may reasonably request relating to the real
Property subject to any such New Mortgage.
SECTION 1 COLLATERAL ADMINISTRATION
6.1 General.
6.1.1 Location of Collateral. All Collateral, other than Inventory
in transit and motor vehicles, will at all times be kept by Borrower and its
Subsidiaries at one or more of the business locations set forth in Exhibit B
hereto and shall not, without the prior written approval of Agent, be moved
therefrom except, prior to an Event of Default and Agent's and/or Required
Lenders' acceleration of the maturity of the Obligations in consequence thereof,
for (i) sales of Inventory in the ordinary course of business; and (ii) removals
in connection with dispositions of Equipment that are authorized by subsection
6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability and such other risks in
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such amounts and with such insurance companies as are reasonably satisfactory to
Agent. Borrower shall deliver the originals of such policies to Agent with
satisfactory lender's loss payable endorsements, naming Agent for its benefit
and the ratable benefit of Lenders as sole loss payee, assignee or additional
insured, as appropriate. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Agent in the event of cancellation of the policy for any reason whatsoever
and a clause specifying that the interest of Agent shall not be impaired or
invalidated by any act or neglect of Borrower or the owner of the Property or by
the occupation of the premises for purposes more hazardous than are permitted by
said policy. If Borrower fails to provide and pay for such insurance, Agent may,
at its option, but shall not be required to, procure the same and charge
Borrower therefor. Borrower agrees to deliver to Agent, promptly as rendered,
true copies of all reports made in any reporting forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of
the sale thereof shall be borne and paid by Borrower. If Borrower fails to
promptly pay any portion thereof when due, Agent may, at its option, but shall
not be required to, pay the same and charge Borrower therefor. Agent shall not
be liable or responsible in any way for the safekeeping of any of the Collateral
or for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Agent's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other person whomsoever, but the same shall be
at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower
shall execute and deliver to Agent a Borrowing Base Certificate in the form
attached hereto as Exhibit C on a monthly basis or, if requested by Agent, more
frequently. Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit to Agent on such
periodic basis as Agent shall request a sales and collections report for the
preceding period, in form satisfactory to Agent. On or before the fifteenth day
of each month from and after the date hereof, Borrower shall deliver to Agent,
in form acceptable to Agent, a detailed aged trial balance of all of its
Accounts existing as of the last day of the preceding month, specifying the
names, addresses, face value, dates of invoices and due dates for each Account
Debtor obligated on an Account so listed ("Schedule of Accounts"), and, upon
Agent's request therefor, copies of proof of delivery and the original copy of
all documents, including, without limitation, repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Agent shall
reasonably request. If requested by Agent, Borrower shall execute and deliver to
Agent formal written assignments of all of its Accounts weekly or daily, which
shall include all Accounts that have been created since the date of the last
assignment, together with copies of invoices or invoice registers related
thereto. Agent agrees to promptly deliver to Lenders the Borrowing Base
Certificates, Schedules of Accounts or other Reports delivered to it by Borrower
pursuant to Sections 6.2.1, 6.2.2, 6.3.1 and 6.4.1.
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6.2.2 Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Agent as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $150,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Agent with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and during the continuation of an
Event of Default, Agent shall have the right to settle or adjust all disputes
and claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Agent may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including reasonable attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable
to any governmental taxing authority, Agent is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however, that
Agent shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower. Borrower will be given notice of, and will be
consulted with respect to, such payment if no Event of Default has occurred and
is continuing.
6.2.4 Account Verification. Whether or not a Default or an Event of
Default has occurred, any of Agent's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Agent, any designee of
Agent or Borrower, to verify the validity, amount or any other matter relating
to any Accounts by mail, telephone, telegraph or otherwise. Borrower shall
cooperate fully with Agent in an effort to facilitate and promptly conclude any
such verification process. So long as no Event of Default has occurred and is
continuing, Agent will verify accounts using an anonymous name or some third
party service.
6.2.5 Maintenance of Dominion Account. Borrower shall maintain a
Dominion Account(s) pursuant to a lockbox arrangement acceptable to Agent with
such banks as may be selected by Borrower and be acceptable to Agent. Borrower
shall issue to any such banks an irrevocable letter of instruction directing
such banks to deposit all payments or other remittances received in the lockbox
to the Dominion Account for application on account of the Obligations. All funds
deposited in the Dominion Account shall immediately become the property of
Agent, for its benefit and the ratable benefit of Lenders, and Borrower shall
obtain the agreement by such banks in favor of Agent to waive any offset rights
against the funds so deposited. Agent assumes no responsibility for such lockbox
arrangement, including, without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
6.2.6 Collection of Accounts, Proceeds of Collateral. To expedite
collection, Borrower shall endeavor in the first instance to make collection of
its Accounts for Agent. All remittances received by Borrower on account of
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Accounts, together with the proceeds of any other Collateral, shall be held as
Agent's property by Borrower as trustee of an express trust for Agent's benefit
and Borrower shall immediately deposit same in kind in the Dominion Account.
Agent retains the right at all times during the continuance of a Default or an
Event of Default to notify Account Debtors that Accounts have been assigned to
Agent and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees to Borrower.
6.3 Administration of Inventory.
6.3.1 Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its Inventory. Borrower shall furnish Agent
Inventory reports in form and detail satisfactory to Agent at such times as
Agent may request, but at least once each month, not later than the fifteen
day of such month. Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Agent a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Agent shall request.
6.3.2 Returns of Inventory. If at any time or times hereafter any
Account Debtor returns any Inventory to Borrower the shipment of which generated
an Account on which such Account Debtor is obligated in excess of $100,000.
Borrower shall immediately notify Agent of the same, specifying the reason for
such return and the location, condition and intended disposition of the returned
Inventory.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with Section
6.4.2 hereof, and shall furnish Agent with a current schedule containing the
foregoing information on at least an annual basis and more often if requested
by Agent. Immediately on request therefor by Agent, Borrower shall deliver to
Agent any and all evidence of ownership, if any, of any of the Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $250,000 or less, provided that all proceeds thereof are
remitted to Agent for application to the Loans in accordance with Section 3.3.1
hereof, or (ii) replacements of Equipment that is substantially worn, damaged or
obsolete with Equipment of like kind, function and value, provided that the
replacement Equipment shall be acquired prior to or concurrently with any
disposition of the Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Liens in favor of Agent, and
Borrower shall have given Agent at least 5 days' prior written notice of such
disposition.
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6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to the Base Rate Revolving Credit
Portion from time to time.
SECTION 1 REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and Lenders
to enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Agent and Lenders that:
7.1.1 Organization and Qualification. Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower and
each of its Subsidiaries is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit D hereto and in all other states and jurisdictions in which
the failure of Borrower or any Subsidiary to be so qualified would have a
material adverse effect on the financial condition, business or Properties of
Borrower or any Subsidiary.
7.1.2 Corporate Power and Authority. Borrower and each of its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents and the Purchase
Documents to which it is a party. The execution, delivery and performance of
this Agreement and each of the other Loan Documents have been duly authorized by
all necessary corporate action and do not and will not (i) require any consent
or approval of the shareholders of Borrower or any of its Subsidiaries; (ii)
contravene Borrower's or any of its Subsidiaries' charter, articles or
certificate of incorporation or by-laws; (iii) violate, or cause Borrower or any
of its Subsidiaries to be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award in
effect having applicability to Borrower or any of its Subsidiaries; (iv) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower or any
of its Subsidiaries is a party or by which Borrower or any of its Subsidiaries
or its or such Subsidiary's Properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any Lien (other than Permitted
Liens) upon or with respect to any of the Properties now owned or hereafter
acquired by Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents and the Purchase Documents when delivered under this
Agreement will be, a legal, valid and binding obligation of Borrower and each of
its Subsidiaries (to the extent a party thereto) enforceable against each of
them in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit E hereto states (i) the correct
name of each of the Subsidiaries of Borrower, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by Borrower, (ii) the name of
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Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of each Subsidiary of Borrower and (iv) the number of authorized, issued and
treasury shares of Borrower and each Subsidiary of Borrower. Borrower has good
title to all of the shares it purports to own of the stock of each of its
Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. Except as disclosed on Exhibit E hereto, there are no
outstanding options to purchase, or any rights or warrants to subscribe for, or
any commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any of Borrower's Subsidiaries.
7.1.5 Corporate Names. Neither Borrower nor any of Borrower's
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit F hereto. Except as set forth on Exhibit F,
neither Borrower or any of Borrower's Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person.
7.1.6 Business Locations; Agent for Process. Borrower's and each
of its Subsidiaries' chief executive office and other places of business are as
listed on Exhibit B hereto. During the preceding one-year period, neither
Borrower nor any of its Subsidiaries has had an office, place of business or
agent for service of process other than as listed on Exhibit B. Except as shown
on Exhibit B, no inventory is stored with a bailee, warehouseman or similar
party, nor is any Inventory consigned to any Person.
7.1.7 Title to Properties; Priority of Liens. Borrower and each of
its Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of the Collateral and all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. Borrower has
paid or discharged all lawful claims which, if unpaid, might become a Lien
against any of Borrower's Properties that is not a Permitted Lien. The Liens
granted to Agent for its benefit and the ratable benefit of Lenders under
Section 5 hereof are first priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Agent, with respect to each Account:
(1) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(2) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all
purchase orders, contracts or other documents relating thereto and
forming a part of the contract between Borrower and the Account Debtor;
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(3) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Agent;
(4) Such Account, and Agent's security interest therein, is
not, and will not (by voluntary act or omission of Borrower) be in the
future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for disputes
resulting in returned goods where the amount in controversy is deemed
by Agent to be immaterial, and each such Account is absolutely owing to
Borrower and is not contingent in any respect or for any reason;
(5) Borrower has made no agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or
allowances which are granted by Borrower in the ordinary course of its
business for prompt payment and which are reflected in the calculation
of the net amount of each respective invoice related thereto and are
reflected in the Schedules of Accounts submitted to Agent pursuant to
Section 6.2.1 hereof;
(6) There are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the invoice and
statements delivered to Agent with respect thereto;
(7) To the best of Borrower's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) is
Solvent; and
(8) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectability of such Account.
7.1.9 Equipment. The Equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted. Borrower will not permit any of
the Equipment to become affixed to any real Property leased to Borrower so that
an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form acceptable to Agent, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first priority (except
for Permitted Liens) Liens in favor of Agent, for its benefit and the ratable
benefit of Lenders.
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7.1.10 Financial Statements; Fiscal Year. (a) The Consolidated and
consolidating balance sheets of Borrower and such other Persons described
therein (including the accounts of all Subsidiaries of Borrower for the
respective periods during which a Subsidiary relationship existed) as of June
30, 1999, and the related statements of income, changes in stockholder's equity,
and changes in financial position for the periods ended on such dates, have been
prepared in accordance with GAAP (except for year-end adjustments, which shall
not be material, and the absence of footnotes), and present fairly the financial
position of Borrower at such dates and the results of Borrower's operations for
such periods. Since June 30, 1999, there has been no material change in the
condition, financial or otherwise, of Borrower and such other Persons as shown
on the Consolidated balance sheet as of such date and no change in the aggregate
value of Equipment and real Property owned by Borrower or such other Persons,
except changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse. The fiscal year of Borrower and
each of its Subsidiaries ends on December 31st of each year.
(1) The balance sheets of Pacific Western Extruded Plastics Company as
of June 27, 1999 and the related statements of income and cash flow for the
periods ended on such dates, have been prepared in accordance with GAAP (except
for year-end adjustments, which shall not be material, and the absence of
footnotes), and present fairly, in all material respects, the financial position
of Pacific Western Extruded Plastics Company at such dates and the results of
Pacific Western Extruded Plastics Company's operations for such periods (subject
to normal year-end non-material adjustments). Since June 27, 1999, there has
been no material change in the condition, financial or otherwise, of Pacific
Western Extruded Plastics Company as shown on the balance sheet as of such date
and no change in the aggregate value of equipment and real property owned by
Pacific Western Extruded Plastics Company, except changes in the ordinary course
of business, none of which individually or in the aggregate has been materially
adverse. Pacific Western Extruded Plastics Company had no Subsidiaries that are
active.
(2) The pro forma unaudited balance sheet of the Borrower delivered to
the Agent and the Lenders pursuant to Section 7.1.10(a) has been prepared on a
basis in conformity with GAAP (except for the omission of footnotes and prior
period comparative data required by GAAP and for variations from GAAP which in
the aggregate are not material and for reallocations of values with respect to
categories of assets acquired in connection with, and adjustment for actual
fees, expenses and transaction costs incurred in connection with, the
Acquisition) and presents fairly the financial condition of the Borrower,
assuming consummation of the Acquisition.
(3) The Projections provided to the Agent and the Lenders pursuant to
Section 8.1.5 have been prepared on the basis of the assumptions which are set
forth therein. Such projections have been prepared in good faith and represent,
on the date of this Agreement, the good faith opinion of the Borrower's
management as to the most probable course of business of the Borrower on the
basis of the assumptions which are set forth therein. .
7.1.11 Full Disclosure. The financial statements referred to in
Section 7.1.10 hereof do not, nor does this Agreement or any other written
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statement of Borrower to Agent or any Lender, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. The financial statements referred to in
Section 7.1.10 hereof do not contain any untrue statement of material fact or
omit a material fact necessary to make the statements contained therein or
herein not misleading. There is no fact which Borrower or any other Credit Party
has failed to disclose to Agent and Lenders in writing which materially affects
adversely or, so far as Borrower can now foresee, will materially affect
adversely the Properties, business, prospects, profits or condition (financial
or otherwise) of Borrower or any of its Subsidiaries or the ability of Borrower
or its Subsidiaries to perform this Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Borrower and each of its
Subsidiaries is now and, after giving effect to the Loans at all times will be,
Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of
any Person.
7.1.14 Taxes. Borrower's federal tax identification number is
41-1642846. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit G hereto. Borrower and each of its Subsidiaries
have filed all federal, state and local tax returns and other reports any of
them is required by law to file and has paid, or made provision for the payment
of, all taxes, assessments, fees, levies and other governmental charges upon any
of them, any of their income and Properties as and when such taxes, assessments,
fees, levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor.
The provision for taxes on the books of Borrower and its Subsidiaries are
adequate for all years not closed by applicable statutes, and for its current
fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement except for a fee payable to Donaldson, Lufkin &
Jenrette in an amount not to exceed amounts previously disclosed to Agent.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Borrower and
each of its Subsidiaries owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses necessary for the present and
planned future conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service marks, tradenames,
copyrights, licenses and other similar rights are listed on Exhibit H hereto.
7.1.17 Governmental Consents. Borrower and each of its Subsidiaries
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
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franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Properties as
now owned or leased by it.
7.1.18 Compliance with Laws. Borrower and each of its Subsidiaries
has duly complied with, and its Properties, business operations and leaseholds
are in compliance in all material respects with, the provisions of all federal,
state and local laws, rules and regulations applicable to Borrower or such
Subsidiary, as applicable, its Properties or the conduct of its business and
there have been no citations, notices or orders of noncompliance issued to
Borrower or any of its Subsidiaries under any such law, rule or regulation,
which in any case could reasonably be expected to have a material adverse effect
on Borrower's business, assets or prospects. Borrower and each of its
Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in material compliance with all federal, state and local
laws, rules and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. ss.201 et seq.) as amended.
7.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries
is a party or subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its business or the use or
ownership of any of its Properties. Neither Borrower nor any of its Subsidiaries
is a party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on Exhibit I hereto, none
of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by Borrower or any of its Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit J hereto, there
are no material actions, suits, proceedings or investigations pending, or to the
knowledge of Borrower, threatened, against or affecting Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of Borrower or any of its Subsidiaries. Neither Borrower nor any of
its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of Default.
Neither Borrower nor any of its Subsidiaries are or is in default, and no event
has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person for Funded Debt.
7.1.22 Leases. Exhibit K hereto is a complete listing of all
capitalized leases of Borrower and its Subsidiaries and Exhibit L hereto is a
complete listing of all operating leases of Borrower and its Subsidiaries.
Borrower and each of its Subsidiaries is in full compliance with all of the
terms of each of its respective capitalized and operating leases.
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7.1.23 Pension Plans. Except as disclosed on Exhibit M hereto,
neither Borrower nor any of its Subsidiaries has any Plan. Borrower and each of
its Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower or any of its Subsidiaries,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction contemplated
by this Agreement in substantially the same manner in which it has heretofore
been conducted.
7.1.25 Labor Relations. Except as described on Exhibit N hereto,
neither Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.1.26 Representations and Warranties under Transaction Documents.
All representations and warranties made by the Borrower in any of the Purchase
Documents or in the certificates delivered in connection therewith are true and
correct in all material respects as of the date hereof with the same force and
effect as though made on and as of the date hereof, and such representations and
warranties of the Borrower are hereby confirmed to the Agent and the Lenders and
made representations and warranties of the Borrower hereunder as fully as if set
forth herein. The Borrower has no knowledge that any of the representations and
warranties made in the Purchase Documents by or on behalf of any party thereto
other than the Borrower are untrue or incorrect.
7.1.27 Year 2000. Borrower has conducted an assessment of all
material computer software programs used in its business (collectively, the
"Software") in order to determine whether the Software is Year 2000 Ready (as
defined below). Based on such assessment, the Software is Year 2000 Ready,
except where the failure to be Year 2000 Ready could not reasonably be expected
either individually or in the aggregate to have a material adverse effect.
"Year 2000 Ready" means that the Software (i) is capable of correctly
processing, providing and/or receiving date data within and between the 20th
and 21st centuries; and (ii) operates or is expected to operate on a basis
comparable to its current operation during and after calendar year 2000 A.D.,
including, but not limited to recognizing and properly processing leap years,
provided that all other products, i.e., software, firmware and hardware, used
with the Software properly exchange date data with the Software.
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7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Agent have consented to such
changes or such changes are expressly permitted by this Agreement.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 1 COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender,
Borrower covenants that, unless otherwise consented to by Required Lenders in
writing, it each shall:
8.1.1 Visits and Inspections. Permit representatives of Agent or
any Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower
and each of its Subsidiaries, inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations.
8.1.2 Notices. Promptly notify Agent in writing of the occurrence
of any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
8.1.3 Financial Statements. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Agent and Lenders the following (all to be prepared in accordance
with GAAP applied on a consistent basis, unless Borrower's certified public
accountants concur in any change therein and such change is disclosed to Agent
and Lenders and is consistent with GAAP):
(1) not later than 90 days after the close of each fiscal year
of Borrower, unqualified audited (in respect to the Consolidated
financial statements only) financial statements of Borrower and its
Subsidiaries and operating divisions as of the end of such year, on a
Consolidated and consolidating basis, certified (in respect to the
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Consolidated financial statements only) by a firm of independent
certified public accountants of recognized standing selected by
Borrower but acceptable to Agent (except for a qualification for a
change in accounting principles with which the accountant concurs);
(2) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower and its Subsidiaries
and operating divisions as of the end of such month and of the portion
of Borrower's fiscal year then elapsed, on a Consolidated and
consolidating basis, certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting the
Consolidated financial position and results of operations of Borrower
and its Subsidiaries for such month and period subject only to changes
from audit and year-end adjustments and except that such statements
need not contain notes;
(3) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any
national securities exchange;
(4) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan; and
(5) such other data and information (financial and otherwise)
as Agent or any Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's and each of its
Subsidiaries' financial condition or results of operations.
The foregoing notwithstanding, Agent and Lenders agree that in
respect to operating divisions, Borrower shall only be required to deliver
income statements pursuant to clauses (i) and (ii) above.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 8.1.3, Borrower shall forward to Agent
and Lenders a copy of the accountants' letter to Borrower's management that is
prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Agent and Lenders a certificate of the aforesaid
certified public accountants certifying to Agent and Lenders that, based upon
their examination of the financial statements of Borrower and its Subsidiaries
performed in connection with their examination of said financial statements,
they are not aware of any Default or Event of Default relating to accounting
matters, or, if they are aware of such Default or Event of Default, specifying
the nature thereof, and acknowledging, in a manner satisfactory to Agent, that
they are aware that Agent and Lenders are relying on such financial statements
in making their decisions with respect to the Loans. Concurrently with the
delivery of the financial statements described in clauses (i) and (ii) of this
Section 8.1.3, or more frequently if requested by Agent, Borrower shall cause to
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be prepared and furnished to Agent a Compliance Certificate in the form of
Exhibit O hereto executed by the Chief Financial Officer of Borrower.
Borrower authorizes Agent or its designated representatives to
communicate directly with its independent certified public accountants and
authorize those accountants to disclose to Agent any and all financial
statements and other supporting financial documents and schedules. Further
within five (5) days after the earlier of the last day of each fiscal year of
Borrower and the date Borrower engaged independent certified public accountants
to audit Borrower's financial statements, Borrower shall deliver to such
independent certified public accountants a letter from Borrower addressed to
such independent certified public accountants indicating that it is a primary
intention of Borrower in engaging such accountants that Agent and Lenders rely
upon such financial statements of Borrower and its Subsidiaries.
8.1.4 Landlord and Storage Agreements. Provide Agent with copies of all
agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory or Equipment may,
from time to time, be kept. In respect to any lease existing on or entered into
after the Closing Date (other than leases for sales offices), Borrower shall
provide Agent with landlord waivers or bailee letters with respect to such
leased premises. Such landlord waivers or bailee letters shall be in a form
supplied by Agent to Borrower with such reasonable revisions as are customarily
accepted by Agent or by similar financial institutions in similar financial
transactions.
8.1.5 Projections. No later than 30 days prior to the end of each
fiscal year of Borrower, deliver to Agent and Lenders Projections of Borrower,
each Subsidiary of Borrower and each of its operating divisions on a
Consolidated and unconsolidated basis for the forthcoming fiscal year, month by
month, except that for the fiscal year ending in 2000, Borrower shall be
permitted to deliver such projections not later than January 10, 2000. The
foregoing notwithstanding, Agent and Lenders agree that, in respect to operating
divisions, Borrower shall only be required to deliver projected profit and loss
statements pursuant to this section.
8.1.6 Interest Rate Protection. Prior to the date which is sixty (60)
days after the Closing Date, Borrower shall have entered into and shall maintain
until at least the third anniversary date of the Closing Date, interest rate
protection agreements with any of Bank, Agent, any Lender, any of their
Affiliates or a Person who has been approved by Agent, which approval shall not
be unreasonably withheld, in form and substance reasonably acceptable to Agent,
which interest rate protection agreements shall fix or cap interest rates on at
least one half (1/2) of the outstanding principal balance of Term Loan A and
Term Loan B. In the event that the interest payable under the Subordinated Notes
is based on a floating rate, then on the Closing Date, Borrower shall have
entered into and shall maintain until at least the third anniversary date of the
Closing Date, additional interest rate protection agreements with any of Bank,
Agent, any Lender, any of their Affiliates or a Person who has been approved by
Agent, which approval shall not be unreasonably withheld, in form and substance
reasonably acceptable to Agent, which interest rate protection agreements shall
fix or cap interest rates on the outstanding principal balance of the
Subordinated Notes. Agent reserves the right to establish a reserve against the
Borrowing Base against which to assess differences arising upon the mark- to-
market practice in connection with such interest rate protection agreements. To
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the extent that any such interest rate protection agreement is with Bank or
Agent or any Lender or their Affiliates, Borrower's obligations thereunder shall
be an Obligation secured by the Collateral. If any such interest rate protection
is with a Person other than Bank, Agent or any Lender or their Affiliates,
Borrower's obligations thereunder shall be unsecured. Any portion of the
Obligations owed to Bank, Agent or any Lender under any interest rate protection
agreements shall be paid, (i) absent a Default or Event of Default hereunder, in
accordance with the applicable interest rate protection agreement or (ii) upon
and during the continuance of a Default or Event of Default hereunder, pro-rata
with the other Obligations.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender,
Borrower covenants that, unless Required Lenders have first consented thereto in
writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions. Except in respect to
the Acquisition, merge or consolidate, or permit any Subsidiary of Borrower to
merge or consolidate, with any Person; nor acquire, nor permit any of its
Subsidiaries to acquire, all or any substantial part of the Properties of any
Person, unless prior to the consummation of any such merger, consolidation or
acquisition, Required Lenders have consented in writing to such transaction,
which consent shall not be unreasonably withheld or delayed; provided that, in
respect to any such transaction involving a purchase price of $1,000,000 or
more, the consent of all Lenders shall be required.
8.2.2 Loans. Except as provided in Section 8.2.7 hereof, make, or
permit any Subsidiary of any Borrower to make, any loans or other advances of
money (other than for salary, travel, advances, advances against commissions and
other similar advances in the ordinary course of business) to any Person, except
that if after giving effect to any such loans or advance there is no existing
and continuing Default or Event of Default, Borrower may make loans and advances
to its officers and executives for the purpose of financing the purchase by such
officers and executives in the open market of shares of Borrower's common stock;
provided that the aggregate amount of such loans and advances under this clause
does not exceed at any point in time Two Million Dollars ($2,000,000).
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any Subsidiary of Borrower to create, incur or suffer to exist,
any Indebtedness, except:
(1) Obligations owing to Agent and Lenders;
(2) Subordinated Debt outstanding in respect to the
Subordinated Debt Documents;
(3) Indebtedness of any Subsidiary of Borrower to Borrower;
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(4) accounts payable to trade creditors and current operating
expenses (other than for Funded Debt) which are not aged more than 30
days from the due date, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being
actively contested in good faith and by appropriate and lawful
proceedings; and Borrower or such Subsidiary shall have set aside such
reserves, if any, with respect thereto as are required by GAAP and
deemed adequate by Borrower or such Subsidiary and its independent
accountants;
(5) Obligations to pay Rentals permitted by Section 8.2.13;
(6) Permitted Purchase Money Indebtedness;
(7) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
(8) Indebtedness outstanding under the Hastings Documents;
(9) Indebtedness outstanding under the Promissory Note and
Stock Pledge Agreement;
(10) Indebtedness under Capitalized Leases listed on Exhibit
K;
(11) Indebtedness incurred in connection with the acquisition
of approximately 30 acres of vacant land in Hembree, Oregon, in a
principal amount not to exceed One Hundred Three Thousand Dollars
($103,000);
(12) Indebtedness owing under interest rate protection
agreements to the extent Borrower is required to enter into such
interest rate protection agreements by the terms of Section 8.1.6;
(13) Indebtedness incurred in connection with performance
bonds, workmen's compensation bonds or the like;
(14) Indebtedness under the Lease of Borrower's manufacturing
plant at 2220 Nugget Way, Eugene, Oregon;
(15) Indebtedness under the lease of real property at 2150
Port of Tacoma Road, Tacoma, Washington; and
(16) Indebtedness not included in paragraphs (i) through (xv)
above which does not exceed at any time, in the aggregate, the sum of
$1,000,000.
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8.2.4 Affiliate Transactions. Enter into, or be a party to, or
permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or stockholder, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to Borrower than what would be
obtainable in a comparable arm's length transaction with a Person not an
Affiliate or stockholder of Borrower or such Subsidiary.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(1) Liens at any time granted in favor of Agent for its
benefit and the ratable benefit of Lenders;
(2) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the
manner described in Section 7.1.14 hereto, but only if in Agent's
judgment such Lien does not adversely affect Agent's or Lenders' rights
or the priority of Agent's Lien in the Collateral;
(3) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation or to secure the performance
of contracts (other than for Funded Debt), statutory obligations,
surety, appeal bonds or the like, but only if payment in respect of any
such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property of
Borrower or materially impair the use thereof in the operation of
Borrower's business;
(4) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(5) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(6) such other Liens as appear on Exhibit P hereto;
(7) Liens on approximately 30 acres of vacant land in Hembree,
Oregon, securing the Indebtedness described in Section 8.2.3(xi);
(8) Liens securing Indebtedness outstanding under the Hastings
Documents;
(9) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title (and with respect to
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leasehold interest, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased
Property, with or without consent of the lessee) which do not in the
aggregate impair the use of any Property material to the operation of
the business of Borrower or its Subsidiaries or the value of such
Property for the purpose of the business of Borrower or its
Subsidiaries;
(10) such other Liens as Required Lenders may hereafter
approve in writing; and
(11) extensions, renewals and replacements of the Liens
referred to in paragraphs (i) through (x) hereof.
8.2.6 Subordinated Debt and Other Indebtedness. Make, or permit any
Subsidiary of Borrower to make, any payment or repurchase of any part or all of
any Subordinated Debt or take any other action or omit to take any other action
in respect of any Subordinated Debt, except in accordance with any applicable
subordination agreement or the subordination provisions of the Subordinated Note
Documents; provided, however that Borrower shall not make any optional
prepayment of the Subordinated Notes without the prior written consent of
Required Lenders. In addition Borrower may not exercise its option to pay in
cash any portion of the interest due on the Subordinated Notes which otherwise
is paid-in-kind, unless all Lenders have, in advance, consented to such cash
payment. Except for regularly scheduled (as of the Closing Date) payments of
principal and interest, make or permit any Subsidiary of any Borrower to make
any payment or repurchase of any part or all of any of the Indebtedness
outstanding under the Hastings Documents or the Promissory Note and Stock Pledge
Agreement. Amend or modify any of the Subordinated Note Documents, the Hastings
Documents or the Promissory Note and Stock Pledge Agreement in any manner
adverse to Borrower or Agent or Lenders.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of
any Borrower to declare or make, any Distributions; provided, however, that:
(a) If after giving effect to any such Distribution there
would be no existing and continuing Default or Event of Default,
Borrower may make regularly scheduled quarterly dividends on its Series
A Stock and Preferred Stock.
(b) Borrower may make repurchases of stock from departing
officers and directors not in excess of $1,500,000 during any fiscal
year provided Borrower shall have Availability over the 60 days prior
to such repurchase of at least $10,000,000 on average and no Default or
Event of Default shall have occurred and be continuing.
8.2.8 Capital Expenditures. Make Capital Expenditures (including,
without limitation, by way of capitalized leases) which, in the aggregate, as to
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Borrower and its Subsidiaries during any fiscal year of Borrower exceeds the
amount set forth opposite such fiscal year in the following schedule
- -----------------------------------------------------------------------------
Fiscal Year Ending Permitted Capital Expenditure
- -----------------------------------------------------------------------------
December 31, 1999
$2,750,000
- -----------------------------------------------------------------------------
December 31, 2000 $6,250,000
plus the Carryover Amount
- -----------------------------------------------------------------------------
December 31, 2001 $5,250,000
plus the Carryover Amount
- -----------------------------------------------------------------------------
December 31, 2002 $4,500,000
and each subsequent fiscal year plus the Carryover Amount
- -----------------------------------------------------------------------------
For any fiscal year, Carryover Amount shall be the lesser of $1,000,000 or the
amount of permitted Capital Expenditures for the previous fiscal year without
giving effect to any Carryover Amount minus the actual amount of Capital
Expenditures made within such fiscal year.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of
any of, or permit any Subsidiary of Borrower to sell, lease or otherwise dispose
any of, its Properties, including any disposition of Property as part of a sale
and leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower, or (iii) dispositions expressly authorized by this Agreement
including, without limitation, Section 6.4.2.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to
issue any additional shares of its capital stock except director's qualifying
shares.
8.2.11 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
8.2.12 Restricted Investment. Except as otherwise permitted by
Section 8.2.2, make or have, or permit any Subsidiary of Borrower to make or
have, any Restricted Investment.
8.2.13 Leases. Become, or permit any of its Subsidiaries to become,
a lessee under any operating lease (other than a lease under which Borrower or
any of its Subsidiaries is lessor) of Property if the aggregate Rentals payable
during any current or future period of 12 consecutive months under the lease in
question and all other leases under which Borrower or any of its Subsidiaries is
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then lessee would exceed $1,000,000. The term "Rentals" means, as of the date of
determination, all payments which the lessee is required to make by the terms of
any lease.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary of
Borrower.
8.3 Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Agent and/or Lenders,
Borrower covenants that it will be in full compliance with each of the financial
covenants set forth on Exhibit Q hereto. If GAAP changes from the basis used in
preparing the audited financial statements delivered to Agent by Borrower on or
before the Closing Date, Borrower will provide Agent with certificates
demonstrating compliance with such financial covenants and will include, at the
election of Borrower or upon the request of Agent, calculations setting forth
the adjustments necessary to demonstrate how Borrower is in compliance with such
financial covenants based upon GAAP as in effect on the Closing Date.
SECTION 1 CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any
of the other Loan Documents, and without affecting in any manner the rights of
Agent or any Lender under the other sections of this Agreement, Lenders shall
not be required to make any Loan or issue or cause to be issued any Letter of
Credit or incur any LC Guaranty under this Agreement unless and until each of
the following conditions has been and continues to be satisfied:
9.1 Documentation. Agent shall have received, in form and substance
satisfactory to it and its counsel, a duly executed copy of this Agreement and
the other Loan Documents, together with such additional documents, instruments
and certificates as Agent and its counsel shall require in connection therewith
from time to time, including all documents, instruments, agreements and
schedules listed in the Schedule of Documents attached hereto and incorporated
herein as Exhibit R, all in form and substance satisfactory to Agent and its
counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
9.5 Acquisition. The Acquisition shall have been consummated, or will
be consummated simultaneously with the closing of the transactions contemplated
hereby, substantially in accordance with the terms of the Purchase Documents,
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the terms and conditions of which are acceptable to Agent and Required Lenders,
and pursuant to which Pacific Western Extruded Plastics Company shall have been
merged into Borrower.
9.6 Environmental Surveys. The results of the Phase I Environmental
Survey (and, if applicable Phase II Environmental Surveys) obtained in respect
to the real Property to be acquired by Borrower pursuant to the Acquisition
shall be acceptable to Agent and the Lenders existing as of the Closing Date.
9.7 Subordinated Notes and Cash Equity. Agent shall have received
evidence satisfactory to it that Borrower shall have received at least
Thirty-Two Million Five Hundred Thousand Dollars ($32,500,000) from the sale of
the Subordinated Notes. The terms and conditions of the Subordinated Note
Documents shall be acceptable to Agent and the Lenders existing as of the
Closing Date.
9.8 Transaction Fees. Agent shall have determined to its satisfaction
that the amount of transaction fees payable in connection with the transactions
contemplated hereby shall not exceed Seven Million Dollars ($7,000,000).
9.9 Availability. Agent shall have determined to its sole satisfaction
that immediately after the Acquisition has been consummated, Lenders have made
the initial Loans and issued the initial Letters of Credit and LC Guaranties
contemplated hereby and all closing and other transaction fees payable in
connection with the transactions contemplated hereby and by the Purchase
Documents have been paid or reserved for, Availability shall equal or exceed Ten
Million Dollars ($10,000,000).
SECTION 1 EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Interest, Principal and Fees. Borrower shall fail
to pay any interest or principal due in respect to outstanding Revolving Credit
Loans, Term Loan A, Term Loan B or any fees payable in respect to unused
Revolving Credit Loans on the due date thereof (whether due at stated maturity,
on demand, upon acceleration or otherwise).
10.1.2 Payment of Other Obligations. Borrower shall fail to pay any
of the Obligations (other than interest and principal due in respect to
outstanding Revolving Credit Loans, Term Loan A, Term Loan B or any fees payable
in respect to unused Revolving Credit Loans) on or within five (5) days after
the due date for such Obligation (whether due at stated maturity, on demand,
upon acceleration or otherwise).
10.1.3 Misrepresentations. Any representation, warranty or other
statement made or furnished to Agent or Lenders by or on behalf of Borrower or
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any Subsidiary of Borrower in this Agreement, any of the other Loan Documents or
any instrument, certificate or financial statement furnished in compliance with
or in reference thereto proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2
hereof.
10.1.4 Breach of Specific Covenants. Borrower or any Subsidiary of
Borrower shall fail or neglect to perform, keep or observe any covenant
contained in Sections 5.2, 5.4, 6.1.1, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on
the date that Borrower is required to perform, keep or observe such covenant.
10.1.5 Breach of Other Covenants. Borrower or any Subsidiary of
Borrower shall fail or neglect to perform, keep or observe any covenant
contained in this Agreement (other than a covenant which is dealt with
specifically elsewhere in Section 10.1 hereof) and the breach of such other
covenant is not cured to Required Lenders' satisfaction within five (5) days
after the sooner to occur of Borrower's receipt of notice of such breach from
Agent or any Lender or the date on which such failure or neglect first becomes
known to any officer of Borrower or any Subsidiary of any Borrower; provided,
however, that if a cure cannot be effected within such five (5) day period,
Borrower shall have ten (10) additional days to effect such cure if during such
ten-day period Borrower is diligent in pursuing such a cure.
10.1.6 Default Under Security Documents/Other Agreements. Any event
of default shall occur under, or Borrower or any Subsidiary of Borrower shall
default in the performance or observance of any term, covenant, condition or
agreement contained in, any of the Security Documents or the Other Agreements
and such default shall continue beyond any applicable grace period.
10.1.7 Other Defaults. There shall occur any default or event of
default on the part of Borrower under (x) the Subordinated Note Documents or the
Hastings Documents or (y) any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its Property is bound, which
other agreement, document or instrument creates or relates to any Indebtedness
(other than the Obligations) with a principal balance of $750,000 or more,
including, if the payment or maturity of such Indebtedness referred to in this
clause (y) is accelerated in consequence of such event of default or demand for
payment of such Indebtedness referred to in this clause (y) is made.
10.1.8 Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Agent shall have permitted) by insurance.
10.1.9 Intentionally Omitted.
10.1.10 Insolvency and Related Proceedings. Borrower shall cease to
be Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
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any petition for an order for relief shall be filed by or against Borrower under
the Bankruptcy Code (if against Borrower or any Subsidiary, the continuation of
such proceeding for more than 30 days), or Borrower or any Subsidiary shall make
any offer of settlement, extension or composition to its unsecured creditors
generally.
10.1.11 Business Disruption: Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower or any Subsidiary of
Borrower for a period which significantly affects Borrower's capacity to
continue the business of Borrower and its Subsidiaries, taken as a whole, on a
profitable basis; or Borrower or any Subsidiary of Borrower shall suffer the
loss or revocation of any license or permit now held or hereafter acquired by
Borrower or such Subsidiaries which is necessary to the continued or lawful
operation of its business; or Borrower or any Subsidiary of Borrower shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which Borrower or such
Subsidiary leases, uses or occupies any Property shall be canceled or terminated
prior to the expiration of its stated term; or any part of the Collateral shall
be taken through condemnation or the value of such Property shall be impaired
through condemnation.
10.1.12 Change of Ownership or Control. Either (i) the Spell Group
shall cease to own and control, beneficially, at least ten percent (10%) of the
issued and outstanding capital stock of Borrower, on a fully diluted basis after
giving effect to the exercise of all options and warrants or (ii) a Change of
Control occurs.
10.1.13 ERISA. A Reportable Event shall occur which Agent or
Required Lenders, in its or their sole discretion, shall determine in good faith
constitutes grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United States
district court of a trustee for any Plan, or if any Plan shall be terminated or
any such trustee shall be requested or appointed, or if Borrower or any
Subsidiary of Borrower is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's or such Subsidiary's complete or partial withdrawal from such Plan.
10.1.14 Challenge to Agreement. Borrower, any Subsidiary of
Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement, or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Agent, for its
benefit and the ratable benefit of Lenders.
10.1.15 Criminal Forfeiture. Borrower or any Subsidiary of Borrower
shall be criminally indicted or convicted under any law that could lead to a
forfeiture of any Property of Borrower or any Subsidiary of Borrower.
10.1.16 Judgments. Final judgment or judgments (after the
expiration of all times to appeal therefrom) for the payment of money in excess
of $250,000 in the aggregate shall be rendered against Borrower or any
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Subsidiary of Borrower and the same shall not (i) be fully covered by insurance
or other comparable bond, or (ii) within thirty days after the entry thereof,
have been discharged or execution thereof stayed pending appeal, or shall not
have been discharged within five days after the expiration of any such stay.
10.2 Acceleration of the Obligations. Upon the occurrence of an Event
of Default and during the continuance thereof, Agent may and shall, at the
request of Required Lenders, (i) without notice, terminate this facility with
respect to further Revolving Credit Loans and Letters of Credit and LC
Guaranties, whereupon no Revolving Credit Loans may be made hereunder and no
Letters of Credit or LC Guaranties may be issued hereunder, and/or (ii) with
notice, declare all Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower; provided, however, that upon the occurrence of an Event of Default
specified in Section 10.1.10 hereof, the Obligations shall become due and
payable without declaration, notice or demand by Agent.
Agent shall take such action with respect to any Default or Event of
Default as shall be directed by the Required Lenders; provided that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of Agent and Lenders taken as a whole, including any action (or the
failure to act) pursuant to the Loan Documents.
10.3 Other Remedies. Upon and after the occurrence and continuation of
an Event of Default, Agent and/or Lenders shall have and may exercise from time
to time the following rights and remedies:
10.3.1 All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights to
which Agent or Lenders may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Agent at a place designated by Agent which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Agent for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Agent, in its sole discretion,
may deem advisable. Borrower agrees that 10 days written notice to Borrower of
any public or private sale or other disposition of Collateral shall be
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reasonable notice thereof, and such sale shall be at such locations as Agent may
designate in said notice. Agent shall have the right to conduct such sales on
Borrower's premises, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Agent shall have the right
to sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent and Lenders may purchase all
or any part of the Collateral at public or, if permitted by law, private sale
and, in lieu of actual payment of such purchase price, may set off the amount of
such price against the Obligations. The proceeds realized from the sale of any
Collateral may be applied, after allowing 2 Business Days for collection, first
to the costs, expenses and attorneys' fees incurred by Agent in collecting the
Obligations, in enforcing the rights of Agent under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivering any Collateral, second to unpaid fees and
reimbursable costs and expenses, third to the interest due upon any of the
Obligations, fourth, to the principal of the Obligations and to any amounts due
under any interest rate protection agreements, and fifth to any other unpaid
Obligations. If any deficiency shall arise, Borrower shall remain liable to
Agent and Lenders therefor, and for any other unpaid Obligations.
10.3.4 Agent is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Agent's and Lenders' benefit.
10.3.5 Agent or Required Lenders may, at its or their option,
require Borrower to deposit with Agent funds equal to the LC Amount and, if
Borrower fails to promptly make such deposit, Lenders may advance such amount
as a Revolving Credit Loan (whether or not an Overadvance is created thereby).
Each such Revolving Credit Loan shall be secured by all of the Collateral and
shall bear interest and be payable at the same rate and in the same manner as
Base Rate Revolving Credit Portions. Any such deposit or advance shall be held
by Agent as a reserve to fund future payments on such LC Guaranties and future
drawings against such Letters of Credit. At such time as all LC Guaranties have
been paid or terminated and all Letters of Credit have been drawn upon or
expired any amounts remaining in such reserve shall be applied against any
outstanding Obligations, or, if all Obligations have been indefeasibly paid in
full, returned to Borrower.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Agent or any Lenders or contained in any other
agreement between Agent and/or Lenders and Borrower, heretofore, concurrently,
or hereafter entered into, shall be deemed cumulative to and not in derogation
or substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Agent or Lenders to require
strict performance by Borrower of any provision of this Agreement or to exercise
or enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, and remedies shall continue in
full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Agent and/or Lenders shall have been fully
satisfied. None of the undertakings, agreements, warranties, covenants and
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representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement or any other
Loan Documents shall be deemed to have been suspended or waived by Agent or
Lenders, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of Agent, Lenders or Required Lenders (as applicable) and
directed to Borrower.
SECTION 1 AGENT
11.1 Power of Attorney, Authorization and Action. Each Lender hereby
appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under this Agreement, and the other Loan Documents as are expressly
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Lenders, and such instructions
shall be binding upon all Lenders; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or the other Loan Documents or applicable law.
Agent agrees to give each Lender promptly a copy of each notice given to it by
Borrower pursuant to the terms of this Agreement and the other Loan Documents.
11.2 Agent's Reliance, Etc. Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement or the other
Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, Agent: (i)
may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to Agent; (ii) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representations to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty beyond
Agent's customary practices to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of Borrower or to inspect the property
(including the books and records) of Borrower; (v) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; and
(vi) shall incur no liability under or in respect of this Agreement or the other
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed in good faith by it to be genuine and signed or sent by the proper
party or parties.
11.3 FCC and Affiliates. With respect to its commitment hereunder to
make Revolving Credit Loans, Term Loan A and Term Loan B and to issue or procure
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Letters of Credit and LC Guaranties, FCC shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include FCC in its
individual capacity. FCC and its Affiliates may lend money to, and generally
engage in any kind of business with, Borrower, any of its Subsidiaries and any
Person who may do business with or own securities of Borrower or any such
Subsidiary, all as if FCC were not Agent and without any duty to account
therefor to Lenders.
11.4 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 7.1.10 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
11.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower), ratably according to the respective principal
amounts of the Notes then held by each of them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by Agent under this Agreement, provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or wilful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable shares of any out-of-pocket expenses (including reasonable counsel fees)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that Agent is not reimbursed for such expenses by Borrower.
11.6 Successor Agent. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent which shall be
reasonably acceptable to Borrower. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank or financial institution organized under the laws of
the United States of America or of any state thereof and having a combined
capital and surplus of at least Five Hundred Million Dollars ($500,000,000) and
which shall be reasonably acceptable to Borrower. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 11 shall inure to its benefit as to any actions taken
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or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
SECTION 1 MISCELLANEOUS
12.1 Power of Attorney.
Borrower hereby irrevocably designates, makes, constitutes and appoints
Agent (and all Persons designated by Agent) as Borrower's true and lawful
attorney (and agent-in-fact) and Agent, or Agent's agent, may, without notice to
Borrower and in Borrower's or Agent's name, but at the cost and expense of
Borrower for the limited purposes specified in Sections 12.1.1 and 12.1.2 below:
12.1.1 At such time or times after the occurrence and during the
continuance of a Default or an Event of Default as Agent or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Agent or under Agent's
control.
12.1.2 At such time or times upon or after the occurrence and
during the continuance of an Event of Default as Agent or its agent in its sole
discretion may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release any of the Accounts or other Collateral or any legal proceedings brought
to collect any of the Accounts or other Collateral, each in a commercially
reasonable manner under the circumstances; (iii) sell or assign any of the
Accounts and other Collateral upon such terms, for such amounts and at such time
or times as Agent deems advisable; (iv) take control, in any manner, of any item
of payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) receive, open
and dispose of all mail addressed to Borrower and notify postal authorities to
change the address for delivery thereof to such address as Agent may designate;
(vii) endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Agent's
determination, to fulfill Borrower's obligations under this Agreement.
The power of attorney granted hereby shall constitute a power coupled
with an interest and shall be irrevocable.
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12.2 Indemnity. Borrower hereby agrees to indemnify Agent and Lenders
and hold Agent and Lenders harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by Agent and
Lenders (including reasonable attorneys fees and legal expenses) as the result
of Borrower's failure to observe, perform or discharge Borrower's duties
hereunder. In addition, Borrower shall defend Agent and Lenders against and save
them harmless from all claims of any Person with respect to the Collateral
(except those resulting from the negligence or intentional misconduct of Agent
or any Lender). Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Agent or any Lender by
any Person under any Environmental Laws or similar laws by reason of any
Borrower's or any other Person's failure to comply with laws applicable to solid
or hazardous waste materials or other toxic substances. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
12.3 Modification of Agreement; Sale of Interest.
(1) The Loan Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and may not be modified,
altered or amended except by an agreement in writing signed by Borrower,
Required Lenders or all Lenders as required by the terms hereof, and, if
required by the terms hereof, Agent. Borrower may not sell, assign or transfer
any of the Loan Documents or any portion thereof, including without limitation,
Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to Agent's and any Lender's sale of
participations, assignment, transfer or other disposition in accordance with the
terms hereof, at any time or times, of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, Agent's and
any Lender's rights, title, interests, remedies, powers or duties thereunder,
whether evidenced in writing or not; Borrower agrees that it will use
commercially reasonable efforts to assist and cooperate with Agent and any
Lender in any manner reasonably requested by Agent or such Lender to effect the
sale of participations in or assignment of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, review of
appropriate disclosure documents or placement memoranda and executing
appropriate amendments to the signature pages hereto to reflect the addition of
any Lender and such Lender's respective commitments. In addition, Borrower will
make its management available to meet with potential Lenders or Participating
Lenders from time to time as reasonably requested by Agent. The foregoing
notwithstanding, except with respect to sales, assignments or transfers to
Affiliates under common control pursuant to which the selling, assigning or
transferring Lender retains its voting rights, no Lender shall sell, assign,
transfer or otherwise dispose (except as otherwise permitted by Section 12.3(d))
of any of the Loan Documents or any portion thereof or interest therein, without
the prior written consent of Agent (which shall not be unreasonably withheld or
delayed). Any Lender who desires to sell or assign any of its rights and
interests hereunder shall, if no Event of Default is existing and continuing,
consult with Borrower as to the identify of any such potential assignee, but
Borrower shall not have the right to approve any such assignee.
(2) In respect to any assignment by a Lender of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Loan Commitments, the Revolving Credit Loans owed to it
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and the Revolving Credit Note held by it, Term Loan A owed to it and Term Loan A
Note held by it and Term Loan B owed to it and Term Note B held by it) (i) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations, except in respect to assignments by Fleet until such
time as Fleet has a uniform percentage interest in the Revolving Loan
Commitment, Term Loans A and Term Loans B (ii) except in the case of an
assignment of all of a Lender's rights and obligations under this Agreement, (A)
the aggregate amount of the Revolving Loan Commitment, Term Loan A and Term Loan
B of the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $5,000,000, and in integral multiples
of $1,000,000 thereafter, or such lesser amount as to which Borrower and Agent
may consent to, which consent shall not be unreasonably withheld, or delayed,
and (B) after giving effect to each such assignment, the amount of the Revolving
Loan Commitment, Term Loan A and Term Loan B of the assigning Lender shall in no
event be less than $5,000,000, (iii) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance, an Assignment and
Acceptance in the form of Exhibit T hereto (an "Assignment and Acceptance"),
together with any Revolving Credit Note, or Term Note A and Term Note B subject
to such assignment and a processing and recordation fee of $3,500, and (iv) any
Lender may without the consent of Borrower or the Agent, and without paying any
fee, assign to any Affiliate of such Lender that is a bank or financial
institution all of its rights and obligations under this Agreement. The
foregoing notwithstanding, no Person may become a Lender or a Participating
Lender hereunder, unless such Person is a financial institution having
stockholders' equity (or the equivalent) of at least One Hundred Million Dollars
($100,000,000). Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto). If, pursuant to this Section
12.3, any interest in this Agreement or any Revolving Credit Loan, Term Loan A
or Term Loan B, any Note, Letter of Credit or LC Guaranty is transferred to any
transferee which is organized under the laws of any jurisdiction other than the
United States or any state thereof, the transferor Lender shall cause such
transferee (other than any Participating Lender), and shall cause any
Participating Lender, concurrently with the effectiveness of such transfer, (a)
to represent to the transferor Lender (for the benefit of the transferor Lender,
Agent, and Borrower) that under applicable law and treaties no Taxes will be
required to be withheld by Agent, Borrower or the transferor Lender with respect
to any payments to be made to such transferee in respect of the Revolving Credit
Loans, Term Loan A, Term Loan B, any Note, Letters of Credit or LC Guaranties,
(b) to furnish to the transferor Lender, Agent and Borrower either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
such transferee claims entitlement to complete exemption form U.S. federal
withholding tax on all interest payments hereunder), and (c) to agree (for the
benefit of the transferor Lender, Agent and Borrower) to provide the transferor
Lender, Agent and Borrower a new Form 4224 or Form 1001 upon the obsolescence of
any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
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(3) In the event any Lender assigns or otherwise transfers all or any
part of its Revolving Credit Note, Term Note A or Term Note B, any such Lender
shall so notify Borrower and Borrower shall, upon the request of such Lender,
issue new Revolving Credit Notes, Term Notes A and Term Notes B in exchange for
the old Revolving Credit Note, Term Note A and Term Note B.
(4) Any Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of Borrower (a
"Participating Lender") participating interests in any Loans, the commitments of
that Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) Borrower and the Agent shall continue to deal solely
and directly with the originating Lender in connection with the originating
Lender's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Lender shall grant any participation under which the
Participating Lender shall have rights to approve any amendment to or waiver of
this Agreement or the Loan Documents, except to the extent such amendment or
waiver would: (A) extend the final maturity date for payment of the Loans in
which such Participating Lender is participating; (B) reduce the interest rate
or the amount of principal or fees applicable to the Loans in which such
Participating Lender is participating; or (C) release all or substantially all
of the Collateral, except as expressly provided herein. In those cases in which
an originating Lender grants rights to a Participating Lender to approve any
amendment to or waiver of this Agreement or the other Loan Documents respecting
the matters described in clauses (A) through (C) of the preceding sentence, the
relevant participation agreements shall provide for a voting mechanism whereby a
majority of the amount of such Lender's portion of the Loans (irrespective of
whether held by such Lender or a Participating Lender) shall control the vote
for all of such Lender's portion of the Loans. In the case of any participation,
the Participating Lender shall not have any rights under this Agreement or any
of the other Loan Documents entered into in connection herewith (the
Participating Lender's right against such Lender in respect of such
participation to be those set forth in the participation or other agreement
executed by such Lender and the Participating Lender relating thereto). All
amounts payable by the Borrower hereunder shall be determined as if the
originating Lender had not sold any such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participating Lender shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(5) Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board or U.S. Treasury Regulation 31
CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
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(6) No amendment or waiver of any provision of this Agreement or the
Notes or any other Loan Document, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however: (a) that no amendment, waiver or consent shall, unless
in writing and signed by each Lender affected thereby do any of the following:
(i) increase the aggregate Revolving Loan Commitments or subject any Lender to
any additional obligations, (ii) reduce the principal of, or decrease the rate
of interest on, the Notes or other amount payable hereunder other than those
payable only to FCC in its capacity as Agent which may be reduced by FCC
unilaterally, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Notes or other amounts payable hereunder, other than those
payable only to FCC in its capacity as Agent which may be postponed by FCC
unilaterally, (iv) reduce the aggregate unpaid principal amount of the Notes, or
the number of Lenders which shall be required for the Lenders or any of them to
take any action hereunder, (v) release or discharge any Person liable for the
performance of any obligations of Borrower hereunder or under any of the Loan
Documents except in accordance with the terms of such Loan Documents or as
otherwise permitted herein, (vi) increase the advance rates contained in the
definition of the Borrowing Base or otherwise amend the definition of the
Borrowing Base or amend the definitions of Eligible Accounts or Eligible
Inventory, (vii) to the extent Agent's or Lenders' consent is required by the
terms hereof, release all or substantially all of the Collateral or (viii)
amend, modify, supplement, or grant any waiver or consent under this Section
12.3 or (ix) waive any Event of Default of the nature described in Section
10.1.12; (b) that no amendment, waiver or consent shall be effective unless in
writing and signed by either Required Lenders or all Lenders, as required by the
terms hereof and, if such amendment, waiver or consent affects Agent or its
rights hereunder, Agent.
(7) The foregoing notwithstanding, provided that no Event of Default
has occurred and is continuing, no Lender shall effect any transfer, assignment
or participation of its interests hereunder if the effect of any such transfer,
assignment or participation is to increase, in any material amount, Borrower's
costs hereunder.
12.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.5 Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Agent and Lenders permitted under Section
12.3 hereof.
12.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
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12.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
12.8 Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
(A) If to Agent: Fleet Capital Corporation
20800 Swenson Drive
Suite 350
Waukesha, Wisconsin 53187
Attention: Loan Administration Manager
Facsimile No.: (414) 798-4882
With a copy to: Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Suite 2600
Chicago, IL 60601
Attention: John T. McEnroe
Facsimile No.: (312) 609-5005
(B) If to Borrower: Eagle Pacific Industries, Inc.
2430 Andersen Consulting Tower
333 South Seventh Street
Minneapolis, MN 55402
Attention: William Spell, President and COO
Facsimile No.: (612) 371-9651
With copies to: Eagle Pacific Industries, Inc.
1550 Valley River Drive
Eugene, Oregon 97440
Attention: Roger R. Robb
Facsimile No.: (541) 984-4750
and
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Fredrikson & Byron, P.A.
900 Second Avenue South
1100 International Centre
Minneapolis, MN 55402
Attention: Dobson West and Lynn Gardin
Facsimile No.: (612) 347-7077
(C) If to any Lender, at its address indicated on the
signature pages hereof or in a notice to Borrower of
an assignment of a Note.
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
request or demand to or upon Agent or Lenders pursuant to Section 3.1.1 or 4.2.2
hereof shall not be effective until received by Agent.
12.9 Agent and/or Required Lenders' Consent. Except as may be otherwise
expressly provided, whenever Agent or Required Lenders' consent is required to
be obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Agent or Required Lenders shall be authorized to give or withhold such consent
in its or their sole and absolute discretion and to condition its consent upon
the giving of additional collateral security for the Obligations, the payment of
money or any other matter.
12.10 Credit Inquiries. Borrower hereby authorizes and permits Agent or
any Lender to respond to usual and customary credit inquiries from third parties
concerning Borrower or any of its Subsidiaries.
12.11 Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
2.12 Entire Agreement. This Agreement and other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral and written.
12.13 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
12.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED IN AND SHALL BE DEEMED TO HAVE BEEN MADE IN
CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT IF
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS,
THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
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FORECLOSURE OF AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S
OR LENDERS' OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR
AGENT OR LENDERS, BORROWER HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF
COOK COUNTY, ILLINOIS, OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF
OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3 BUSINESS DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR LENDERS TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR
LENDERS OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
12.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED FOR HEREIN, PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF
PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY
TIME HELD BY AGENT OR ANY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND
HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD;
(iii) NOTICE PRIOR TO AGENT OR ANY LENDER TAKING POSSESSION OR CONTROL OF THE
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COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING AGENT OR LENDERS TO EXERCISE ANY OF AGENT'S OR LENDERS' REMEDIES; (iv)
THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF
ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE EACH
MATERIAL INDUCEMENT TO AGENT'S AND LENDERS' ENTERING INTO THIS AGREEMENT AND
THAT AGENT AND LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
12.16 Publicity. Borrower hereby consents to Agent's use of the name or
tradestyle of Borrower in any announcements or advertisements relating to the
completion of the transactions contemplated hereby and the role played by Agent
in providing financing to Borrower hereunder in such media and in such manner as
Agent, in its sole discretion, determines.
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IN WITNESS WHEREOF, this Agreement has been duly executed in Chicago,
Illinois, on the day and year specified at the beginning of this Agreement.
EAGLE PACIFIC INDUSTRIES, INC.
By: /s/ William Spell
Name: William H. Spell
Title: Chief Executive Officer
Accepted in Chicago, Illinois:
FLEET CAPITAL CORPORATION
("Agent" and "Lender")
By: /s/ Brian Conole
Name: Brian Conole
Title: Senior Vice President
Address:
20800 Swenson Drive
Suite 350
Waukesha, Wisconsin 53187
Attention: Loan Administration Manager
Telecopier No.: (414) 798-4882
Revolving Loan Commitment: $35,000,000
Amended and Restated Term Loan Commitment:
Second Amended and Restated Term Loan
Total Term Loan A Commitment: $28,000,000
Term Loan B Commitment: $12,000,000
HARRIS TRUST AND SAVINGS BANK ("Lender")
By: /s/ William J. Kane
Name: William J. Kane
Title: Vice President
Address:
111 West Monroe Street
Fifth Floor Center
Chicago, Illinois 60603
Attention: Commercial Finance
Telecopier No.: (312) 765-1641
Revolving Loan Commitment: $10,000,000
Amended and Restated Term Loan
Commitment: $2,133,200
Second Amended and Restated Term Loan
Commitment: $4,866,800
Total Term Loan A Commitment:
$7,000,000
Term Loan B Commitment: $3,000,000
<PAGE>
APPENDIX A
GENERAL DEFINITIONS
When used in the Second Amended and Restated Loan and Security
Agreement dated as of September 20, 1999, by and among Eagle Pacific Industries,
Inc. ("Borrower"), the lenders signatories thereto ("Lenders") and Fleet Capital
Corporation ("FCC") as agent for such Lenders (FCC, in such capacity, "Agent"),
the following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquired
any interest.
Acquisition - the acquisition by merger or otherwise by
Borrower of Pacific Western Extruded Plastics Company pursuant to the
Purchase Documents.
Acquisition Agreement - shall have the meaning contained in
the definition of Purchase Documents.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock
of a Person; or (iii) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a Person or a Subsidiary of a
Person.
Agreement - the Second Amended and Restated Loan and Security
Agreement referred to in the first sentence of this Appendix A, all
Exhibits thereto and this Appendix A.
ALTA Survey - a survey prepared in accordance with the
standards adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1986, known as the
"Minimum Standard Detail Requirements of Land Title Surveys". The ALTA
Survey shall be in sufficient form to satisfy the requirements of
Chicago Title Insurance Company to provide extended coverage over
survey defects and shall also show the location of all easements,
utilities, and covenants of record, dimensions of all improvements,
encroachments from any adjoining property, and certify as to the
location of any flood plain area affecting the subject real estate. The
ALTA Survey shall contain the following certification: "To Eagle
Pacific Industries, Inc., Fleet Capital Corporation, as Agent and
Chicago Title Insurance Company. This is to certify that this map of
plat and the survey on which it is based were made in accordance with
the "Minimum Standard Detail Requirements for Land Title Surveys"
jointly established and adopted by ALTA and ACSM in 1986. (signed
(SEAL) License No. __________".
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Amended and Restated Loan Agreement - as defined in Recital A.
Amended and Restated Term Loan Commitment - as defined in
Section 1.2.1 of the Agreement.
Amended and Restated Term Loan Percentage - as defined in
Section 1.2.1 of the Agreement.
Applicable Margin - the percentages set forth below with
respect to the Base Rate Revolving Credit Portion, the Base Rate Term A
Portion, the Base Rate Term B Portion, the LIBOR Revolving Credit
Portion, the LIBOR Term A Portion, the LIBOR Term B Portion and unused
line fees:
Applicable Margin
<TABLE>
<CAPTION>
LIBOR LIBOR LIBOR Base Rate Base Rate Base Rate
Revolving Term A Term B Revolving Term A Term B Unused
Credit Portion Portion Portion Credit Portion Portion Portion Line Fee
------------------- ------------ ------------ ----------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
2.50% 2.75% 3.25% .50% .75% 1.25% .50%
</TABLE>
The foregoing notwithstanding, if Borrower's EBITDA, for any
twelve-month period ending on or after December 31, 2000, as evidenced
by the financial statements delivered to Agent pursuant to Section
8.1.3(ii), equals or exceeds $30,000,000, the Applicable Margin shall
be reduced for the subsequent twelve-month period to the percentage set
forth below with respect to the Base Rate Revolving Credit Portion, the
Base Rate Term A Portion, the Base Rate Term B Portion, the LIBOR
Revolving Credit Portion, the LIBOR Term A Portion, the LIBOR Term B
Portion and unused line fees.
<TABLE>
<CAPTION>
LIBOR LIBOR LIBOR Base Rate Base Rate Base Rate
Revolving Term A Term B Revolving Term A Term B Unused
Credit Portion Portion Portion Credit Portion Portion Portion Line Fee
------------------- ------------ ------------ ----------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
2.25% 2.50% 3.00% .25% .50% 1.00% .375%
</TABLE>
Any change in Applicable Margin shall be effective
prospectively as of the first day of the fiscal month of Borrower next
following the fiscal month during which the applicable Consolidated
financial statements to Borrower for the twelve-month period referred
to above are delivered to Agent pursuant to Section 8.1.3(ii).
Availability - the aggregate amount of money which Borrower is
entitled to borrow from time to time as Revolving Credit Loans, such
amount being the difference derived when the sum of the principal
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amount of Revolving Credit Loans then outstanding (including any
amounts which Lender may have paid for the account of Borrower pursuant
to any of the Loan Documents and which have not been reimbursed by
Borrower) is subtracted from the Borrowing Base. If the amount
outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
Bank - Fleet National Bank.
Base Rate - the rate of interest announced or quoted by Bank
from time to time as its prime rate for commercial loans, whether or
not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is discontinued
by Bank as a standard, a comparable reference rate designated by Bank
as a substitute therefor shall be the Base Rate.
Base Rate Portions - collectively, the Base Rate Revolving
Credit Portion, the Base Rate Term A Portion and the Base Rate Term B
Portion.
Base Rate Revolving Credit Portion - that portion of the
Revolving Credit Loan not subject to a LIBOR Option.
Base Rate Term A Portion - that portion of Term Loan A not
subject to a LIBOR Option.
Base Rate Term B Portion - that portion of Term Loan B not
subject to a LIBOR Option.
Board - the Board of Governors of the Federal Reserve System
of the United States of America.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) the Maximum Revolving Loan Amount; or
(ii) an amount equal to:
(a) the sum of eighty-five percent (85%) of
the net amount of Eligible Accounts (other than
Eligible Accounts with dating terms) outstanding at
such date, plus eighty-five percent (85%) of the
lesser of Eight Million Dollars ($8,000,000) or the
net amount of Eligible Accounts with dating terms
outstanding at such date;
PLUS
(b) the lesser of (1) Twenty-Seven Million
Five Hundred Thousand Dollars ($27,500,000); or (2)
the sum of (x) fifty-five percent (55%) of the value
of Eligible Inventory at such date calculated on the
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basis of the lower of cost or market with the cost of
raw materials and finished goods calculated on a
first-in, first-out basis; plus (y) the lesser of One
Million Three Hundred Seventy-Five Thousand Dollars
($1,375,000) or fifty-five percent (55%) of the value
of Eligible In-Transit Inventory at such date
calculated on the basis of the lower of cost or
market with the cost of raw materials and finished
goods calculated on a first-in, first-out basis.
MINUS (subtract from the lesser of (i) or (ii) above)
(iii) an amount equal to the sum of (a) the LC Amount
plus (b) the amount of any reserve established by Agent
pursuant to Section 1.1.1 above.
For purposes hereof, the net amount of Eligible Accounts at
any time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
Business Day - (i) when used with respect to the LIBOR Option,
shall mean a day on which dealings may be effected in deposits of
United States dollars in the London interbank foreign currency deposits
market and on which the Agent is conducting business and on which banks
may conduct business in London, England, Chicago, Illinois, and New
York, New York and (ii) when used with respect to the other provisions
of this Agreement, shall mean any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed either
in the State of Illinois or in the State of Wisconsin.
Change of Control - means the occurrence of any of the
following events: (i) all or substantially all of the Borrower's
assets, on a consolidated basis, are sold as an entirety to any Person
or related group of Persons or there shall be consummated any
consolidation or merger of the Borrower (A) in which the Borrower is
not the continuing or surviving company (other than a consolidation or
merger with a wholly owned Subsidiary in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant
to which the Common Stock would be converted into cash, securities or
other property, in any case, other than a sale of assets or
consolidation or merger of the Borrower in which the holders of the
Common Stock immediately prior to the sale of assets or consolidation
or merger have, directly or indirectly, at least a majority of the
Common Stock of the transferee or continuing or surviving company
immediately after such sale of assets or consolidation or merger, (ii)
any "person"(as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than the Spell Group, is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act provided
that such person shall be deemed to have "beneficial ownership" of all
shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the
outstanding voting securities of the Borrower; (iii) during any period
of two consecutive years, individuals who at the beginning of such
period constituted the Board (together with any new directors whose
election by such Board of Directors or whose nomination for election by
the shareholders of the Borrower, as the case may be, was approved by a
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vote of at least a majority of the directors of the Company then still
in office) who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved
cease for any reason to constitute a majority of the Board of Directors
of the Borrower then in office; or (iv) a "Change of Control" (as
defined in the Subordinated Debt Documents) shall occur.
Capital Expenditures - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful
life of more than one year, including the total principal portion of
Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Closing Date - the date on which all of the conditions
precedent in Section 9 of the Agreement are satisfied.
Code - the Uniform Commercial Code as adopted and in force in
the State of Illinois, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Commitment Termination Date - the earliest of (i) September
20, 2004; (ii) the date of termination of the Commitment to make
further Revolving Credit Loan pursuant to Section 4.2.1 or 4.2.2
hereof; and (iii) the date of termination of the Commitment to make
further Revolving Credit Loans pursuant to Section 10.2 hereof.
Common Stock - means (i) the Common Stock, $.01 par value of
the Borrower, (ii) the Class B Common Stock and (iii) and other class
of capital stock of the Borrower hereafter authorized that is not
limited to a fixed sum or percentage of par or stated or liquidation
value with respect to the rights of the holders thereof to participate
in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Borrower.
Consolidated - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an
Event of Default.
Default Rate - as defined in Section 2.1.2 of the Agreement.
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Distribution - in respect of any corporation means and
includes: (I) the payment of any dividends or other distributions on
capital stock of the corporation (except distributions in such stock)
and (ii) the redemption or acquisition of Securities unless made
contemporaneously from the net proceeds of the sale of Securities.
Dominion Account - a special account of Agent, for its benefit
and the ratable benefit of Lenders, established by Borrower pursuant to
the Agreement at a bank selected by Borrower, but acceptable to Agent
in its reasonable discretion, and over which Agent shall have sole and
exclusive access and control for withdrawal purposes.
Eligible Account - an Account arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services
which Agent, in its reasonable credit judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if:
(1) it arises out of a sale made by Borrower to a Subsidiary
or an Affiliate of Borrower or to a Person controlled by an Affiliate
of Borrower; or
(2) in respect to Accounts without dating terms, it is unpaid
for more than 60 days after the original due date shown on the invoice;
or
(3) in respect to Accounts without dating terms, it is due or
unpaid more than 90 days after the original invoice date; or
(4) in respect to Accounts with dating terms, it is due or
unpaid for more than 240 days after the original invoice date;
provided, however, that invoices qualifying for dating hereunder cannot
be issued prior to December 1 or after March 31 of the subsequent year,
and any invoice issued with dating must be paid on or before the next
July 31;
(5) 25% or more of the Accounts from the Account Debtor are
not deemed Eligible Accounts hereunder; or
(6) the total unpaid Accounts of the Account Debtor exceed 20%
of the net amount of all Eligible Accounts, to the extent of such
excess; or
(7) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(8) the Account Debtor is also Borrower's creditor or
supplier, or the Account Debtor has disputed liability with respect to
such Account, or the Account Debtor has made any claim with respect to
any other Account due from such Account Debtor to Borrower, or the
Account otherwise is or may become subject to any right of setoff by
the Account Debtor; or
(9) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
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or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in the
premises in respect of the Account Debtor in an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or any other petition or other application for relief under the federal
bankruptcy laws has been filed against the Account Debtor, or if the
Account Debtor has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator or custodian
to be appointed for it or for all or a significant portion of its
assets or affairs; or
(10) it arises from a sale to an Account Debtor outside the
United States or Canada (other than Quebec), unless the sale is on
letter of credit, guaranty or acceptance terms in each case acceptable
to Agent in its sole discretion; or
(11) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or
(12) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns
its right to payment of such Account to Agent, for its benefit and the
ratable benefit of Lenders, in a manner satisfactory to Agent so as to
comply with the Assignment of Claims Act of 1940 (31 U.S.C. ss.203 et
seq., as amended); or
(13) the Account is subject to a Lien other than a Permitted
Lien; or
(14) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by Borrower and accepted
by the Account Debtor or the Account otherwise does not represent a
final sale; or
(15) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(16) Borrower has made any agreement with the Account Debtor
for any deduction therefrom, except for discounts or allowances which
are made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of the
face value of each invoice related to such Account; or
(17) the Account is not at all times subject to Agent's duly
perfected, first priority security interest and no other Lien except a
Permitted Lien; or
(18) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof.
In addition, no Account with dating terms shall be an Eligible
Account if the original invoice date therefor is any date between April 1
through and including November 30 of an applicable year.
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Eligible Inventory - such Inventory of Borrower (other than
packaging materials and supplies) which Agent in its reasonable credit
judgments deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory
if:
(19) it is not raw materials or finished goods that is, in
Agent's opinion, readily marketable in its current form; or
(20) it is not in good, new and saleable condition; or
(21) it is slow-moving, obsolete or unmerchantable; or
(22) it does not meet all standards imposed by any
governmental agency or authority; or
(23) it does not conform in all respects to the warranties and
representations set forth in the Agreement,
(24) it is not at all times subject to Agent's duly perfected,
first priority security interest and no other Lien except a Permitted
Lien;
(25) it is not situated at a location in compliance with the
Agreement or is in transit; or
(i) is not situated at a location in the United States of
America.
Eligible In-Transit Inventory - such Inventory of Borrower
that is in transit and that, except for the fact that it is in transit,
would qualify as Eligible Inventory. In addition to the foregoing, no
Inventory shall be Eligible In-Transit Inventory, unless such UCC and
other filings, acceptable to Agent in its sole discretion, have been
made against such Inventory in such locations as are acceptable to
Agent in its sole discretion to perfect Agent's security interest
thereon.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower or in which Borrower has an
interest, whether now owned or hereafter acquired by Borrower and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time promulgated
thereunder.
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Event of Default - as defined in Section 10.1 of the
Agreement.
Funded Debt- as defined in Exhibit Q to the Agreement.
GAAP - generally accepted accounting principles in the United
States of America in effect from time to time.
General Intangibles - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including, without limitation, all choses in action, causes of action,
corporate or other business records, deposit accounts, inventions,
designs, patents, patent applications, trademarks, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Accounts by an Account Debtor,
all rights to indemnification and all other intangible property of
every kind and nature (other than Accounts).
Hastings Documents - that certain Redevelopment Contract with
the City of Hastings, Nebraska and related Promissory Notes.
Indebtedness - as applied to a Person means, without
duplication
(26) all items which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is
to be determined, including, without limitation, Capitalized Lease
Obligations,
(27) all obligations of other Persons which such Person has
guaranteed,
(28) all reimbursement obligations in connection with letters
of credit or letter of credit guaranties issued for the account of such
Person, and
(29) in the case of Borrower (without duplication), the
Obligations.
Inventory - all of Borrower's inventory, whether now owned or
hereafter acquired including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all
work in process; all raw materials and other materials and supplies of
every nature and description used or which might be used in connection
with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or
consumed in Borrower's business; and all documents evidencing any
General Intangibles relating to any of the foregoing, whether now owned
or hereafter acquired by Borrower.
Investment Property - all of Borrower's investment property,
whether now owned or hereinafter acquired by Borrower, including,
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without limitation, all securities (certificated or uncertificated),
securities accounts, securities entitlements, commodity accounts and
contracts.
LC Amount - at any time, the aggregate undrawn face amount of
all Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which any Lender or any
Affiliate of any Lender shall guaranty the payment or performance by
Borrower of its reimbursement obligation under any letter of credit.
LC Percent - the Applicable Margin in respect to the LIBOR
Revolving Credit Portion.
Legal Requirement - any requirement imposed upon any Lender or
any Participating Lender by any law of the United States of America or
the United Kingdom or by any regulation, order, interpretation, ruling
of official directive (whether or not having the force of law) of the
Board, the Bank of England or any other board, central bank or
governmental or administrative agency, institution or authority of the
United States of America, the United Kingdom or any political
subdivision of either thereof.
Letter of Credit - any letter of credit issued by Agent or
Bank for the account of Borrower.
LIBOR Interest Payment Date - with respect to any LIBOR
Portion, the first day of each calendar month during the applicable
LIBOR Period.
LIBOR Option - the option granted pursuant to Section 2.1.1(B)
to have the interest on all or any portion of the principal amount of
Term Loan A, Term Loan B and/or Revolving Credit Loans based on a LIBOR
Rate.
LIBOR Period - any period of one month, two months, three
months or six months commencing on a Business Day, selected as provided
in Section 2.1.1(B); provided, however that no LIBOR Period shall
extend beyond the last day of the Original Term, unless Borrower, Agent
and Lenders have agreed to an extension of the Original Term beyond the
expiration of the LIBOR Period in question and that, with respect to
any LIBOR Term A or LIBOR Term B Portion, no applicable LIBOR Period
shall extend beyond the scheduled installment payment date for such
LIBOR Term A or LIBOR Term B Portion. If any LIBOR Period so selected
shall end on a date that is not a Business Day, such LIBOR Period shall
instead end on the next preceding or succeeding Business Day as
determined by Agent in accordance with the then current banking
practice in London; provided, that Borrower shall not be required to
pay double interest, even though the preceding LIBOR Period ends and
the new LIBOR Period begins on the same day. Each determination by
Agent of the LIBOR Period shall, in the absence of manifest error, be
conclusive.
LIBOR Portion - a LIBOR Revolving Credit Portion, a LIBOR Term
A Portion or a LIBOR Term B Portion.
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LIBOR Rate - with respect to any LIBOR Portion for the related
LIBOR Period, an interest rate per annum (rounded upwards, if
necessary, to the next higher 1/8 of 1%) equal to the product of (a)
the Base LIBOR Rate (as hereinafter defined) and (b) Statutory
Reserves. For purposes of this definition, the term "Base LIBOR Rate"
shall mean the rate (rounded to the nearest 1/8 of 1% or, if there is
no nearest 1/8 of 1%, the next higher 1/8 of 1%) at which deposits of
U.S. dollars approximately equal in principal amount to the LIBOR
Portion specified in the applicable LIBOR Request are offered to Bank,
in the London interbank foreign currency deposits market at
approximately 11:00 a.m., London time, two (2) Business Days prior to
the commencement of such LIBOR Period, for delivery on the first day of
such LIBOR Period. Each determination by Agent of any LIBOR Rate shall
in the absence of manifest error, be conclusive, and at Borrower's
request, Agent shall demonstrate the basis of such determination.
LIBOR Request - a notice in writing (or by telephone confirmed
by telex, telecopy or other facsimile transmission on the same day as
the telephone request) from Borrower to Agent requesting that interest
on a portion of the Revolving Credit Loan, Term Loan A or Term Loan B
be based on the LIBOR Rate, specifying: (i) the first day of the LIBOR
Period; (ii) the length of the LIBOR Period consistent with the
definition of that term; and (iii) the dollar amount of the LIBOR
Revolving Credit Portion, LIBOR Term A Portion or LIBOR Term B Portion
consistent with the definition of such terms.
LIBOR Revolving Credit Portion - that portion of the Revolving
Credit Loans specified in a LIBOR Request (including any portion of
Revolving Credit Loans which is being borrowed by Borrower concurrently
with such LIBOR Request) which is not less than $1,000,000 and is an
integral multiple of $100,000, which does not exceed the outstanding
balance of Revolving Credit Loans not already subject to a LIBOR Option
and, which, as of the date of the LIBOR Request specifying such LIBOR
Revolving Credit Portion, has met the conditions for basing interest on
the LIBOR Rate in Section 2.1.1(B) of the Agreement and the LIBOR
Period of which was commenced and not terminated.
LIBOR Term A Portion - that portion of Term Loan A specified
in a LIBOR Request which is not less than $1,000,000 and is an integral
multiple of $100,000, which does not exceed the outstanding balance of
Term Loan A not already subject to a LIBOR Option and, which, as of the
date of the LIBOR Request specifying such LIBOR Term A, has met the
conditions for basing interest on the LIBOR Rate in Section 2.1.1(B) of
the Agreement and the LIBOR Period of which was commenced and not
terminated.
LIBOR Term B Portion - that portion of Term Loan B specified
in a LIBOR Request which is not less than $1,000,000 and is an integral
multiple of $100,000, which does not exceed the outstanding balance of
Term Loan B not already subject to a LIBOR Option and, which, as of the
date of the LIBOR Request specifying such LIBOR Term B Portion, has met
the conditions for basing interest on the LIBOR Rate in Section
2.1.1(B) of the Agreement and the LIBOR Period of which was commenced
and not terminated.
A-11
<PAGE>
Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract. The
term "Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, Borrower shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of
Agent pursuant to Section 3.5 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loans - all loans and advances of any kind made by Lenders
pursuant to the Agreement.
Maximum Revolving Loan Amount - shall mean Forty-Five Million
Dollars ($45,000,000) unless, at the Closing Date, Lenders with
aggregate Revolving Loan Commitments, Term Loans A and Term Loans B of
Twenty-Five Million Dollars ($25,000,000) or more are parties to this
Agreement, in which event the Maximum Revolving Loan Amount shall be
Fifty Million Dollars ($50,000,000). In addition, the Maximum Revolving
Loan Amount shall be automatically increased without any action by any
party hereto to Fifty Million Dollars ($50,000,000) after the Closing
Date at such time as Lenders with aggregate Revolving Loan Commitments
of $50,000,000 or more are parties to the Agreement.
Mortgages - the mortgages, deeds of trust, security deeds
and/or leasehold mortgages (x) executed by a predecessor-in-interest to
Borrower by merger on or about the Original Closing Date of the
Original Loan Agreement in favor of FCC (and amended as of the Closing
Date to reflect the terms and provisions of the Agreement) and by which
one of Borrower's predecessors-in-interest granted and conveyed to FCC,
as security for the Obligations, a Lien upon the real Property of
Borrower located in or at (i) Hastings, Nebraska, (ii) 21500 Northwest
Plastics Drive, Hillsboro, Oregon, and (iii) West Jordan, Utah and (y)
executed by Borrower on or about the Closing Date in favor of Agent for
its benefit and the ratable benefit of Lenders, and by which Borrower
shall grant and convey to Agent for its benefit and the ratable benefit
of Lenders, as security for the Obligations, a Lien upon Borrower's
interest in one or more parcels of real property located in or at (i)
Visalia, California; (ii) Perris, California; (iii) Cameron Park,
California; (iv) Eugene, Oregon; (v) Tacoma, Washington; and (vi)
Sunnyside, Washington.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
New Mortgages - as defined in Section 5.4 of the Agreement.
A-12
<PAGE>
Notes - collectively, the Revolving Credit Notes, Term Notes A
and Term Notes B.
Notice of Revolving Credit Loan - as defined in Section 3.1.1
of the Agreement.
Obligations - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or
payable from Borrower to Agent, any Lender or Bank of any kind or
nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Agreement, any
of the other Loan Documents, any interest rate protection agreement,
swaps or caps or otherwise, whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary,
due or to become due, now existing or hereafter arising and however
acquired.
Original Closing Date - May 10, 1996.
Original Loan Agreement - as defined in Recital A of the
Amended and Restated Loan Agreement.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Subsidiary of
Borrower or any other third party and delivered to Agent or any Lender
in respect of the transactions contemplated by the Agreement.
Overadvance - the amount, if any, by which the outstanding
principal amount of Revolving Credit Loans exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the
right by any Lender to participate in any of the Loans described in the
Agreement and who shall have entered into a participation agreement in
form and substance satisfactory to such Lender.
Patent Assignment - the Amended and Restated Patent Security
Agreement executed by Borrower on or about the Closing Date in favor of
Agent and by which Borrower assigned to Agent and granted to Agent a
security interest in, as security for all of the Obligations, all of
Borrower's rights, title and interest in and to all of its patents.
Permitted Liens - any Lien of a kind specified in subsection
8.2.5 of the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money
Indebtedness of Borrower incurred after the date hereof which is
secured by a Purchase Money Lien and which, when aggregated with the
principal amount of all other such Indebtedness and Capitalized Lease
Obligations of Borrower at the time outstanding, does not exceed One
Million Two Hundred Fifty Thousand Dollars ($1,250,000). For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
A-13
<PAGE>
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
Preferred Stock - Borrower's 8% convertible preferred stock,
$0.01 par value.
Projections - Borrower's forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c)
cash flow statements, and (d) capitalization statements, all prepared
on a consistent basis with Borrower's historical financial statements,
together with appropriate supporting details and a statement of
underlying assumptions.
Promissory Note and Stock Pledge Agreement - that certain
Promissory Note and Stock Pledge Agreement dated as of July 10, 1995
between Pacific Acquisition Corp., Pacific Plastics, Inc. (a
predecessor-in-interest to Borrower) and the selling shareholder
signatories thereto, as in effect on the Original Closing Date.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Purchase Documents - the Stock Purchase Agreement
("Acquisition Agreement") by and between Borrower, Mitsubishi Chemical
America, Inc. ("MCA") and Mitsubishi Plastics, Inc. ("MPI"), pursuant
to which Borrower purchased from MCA and MPI all of the outstanding
common stock of Pacific Western Extruded Plastics Company ("Western
Pacific"). Subsequently, Western Pacific was merged into Borrower.
Purchase Money Indebtedness - means and includes (i)
Indebtedness (other than the Obligations) for the payment of all or any
part of the purchase price of any fixed assets, (ii) any Indebtedness
(other than the Obligations) incurred at the time of or within 10 days
prior to or after the acquisition of any fixed assets for the purpose
of financing all or any part of the purchase price thereof, and (iii)
any renewals, extensions or refinancings thereof, but not any increases
in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all times
be confined solely to the fixed assets the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness
secured by such Lien.
Reduced Facility - as defined in Section 4.2.3.
Rentals - as defined in Section 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
A-14
<PAGE>
Required Lenders - as of any date, the Lenders with at least
fifty and one tenth percent (50.1%) of the aggregate principal amount
of the Revolving Loan Commitments, Term Loan A and Term Loan B;
provided, that if any time there are two or fewer Lenders, Required
Lenders shall mean all Lenders; and further provided that any decision
to foreclose upon any real Property shall require the consent of the
Lenders holding seventy-five percent (75%) of the aggregate principal
amount of the Revolving Loan Commitments, Term Loan A and Term Loan B.
Restricted Investment - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or
capital contribution, or otherwise, or in any Property except the
following:
(2) investments in one or more Subsidiaries of Borrower to the
extent existing on the Closing Date;
(3) Property to be used in the ordinary course of business;
(4) Current Assets arising from the sale of goods and services
in the ordinary course of business of Borrower and its Subsidiaries;
(5) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one
year from the date of acquisition thereof;
(6) investments in certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust company
organized under the laws of the United States or any state thereof
having capital surplus and undivided profits aggregating at least
$100,000,000; and
(7) investments in commercial paper given the highest rating
by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof.
Revolving Credit Loan - a Loan made by a Lender as provided in
Section 1.1 of the Agreement.
Revolving Credit Loan Commitments - as defined in Section
1.1.1 of the Agreement.
Revolving Credit Note - the Revolving Credit Note(s) to be
executed by Borrowers in favor of Lenders to evidence the Revolving
Credit Loans, which shall be in the form of Exhibit A-1 to the
Agreement.
Revolving Credit Percentage - as defined in Section 1.1.1 of
the Agreement.
A-15
<PAGE>
Schedule of Accounts - as defined in subsection 6.2.1 of the
Agreement.
Second Amended and Restated Term Loan Commitment - as defined
in Section 1.2.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
Security Documents - the Mortgages, any New Mortgage, the
Patent Assignment, the Trademark Assignments and all other instruments
and agreements now or at any time hereafter securing the whole or any
part of the Obligations.
Series A Stock - Borrower's Series A 7% Convertible Preferred
Stock, $0.01 par value.
Solvent - as to any Person, such Person (I) owns Property
whose fair saleable value is greater than the amount required to pay
all of such Person's Indebtedness (including contingent debts), (ii) is
able to pay all of its Indebtedness as such Indebtedness matures and
(iii) has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage.
Spell Group - shall mean collectively (i) William H. Spell and
(ii) Harry W. Spell, Richard W. Perkins, Bruce A. Richard, and, in
either case, any of their spouses or any family trust which is
controlled by any of the foregoing.
Standby Letter of Credit - any Letter of Credit issued by
Agent or Bank for the account of Borrower which is not a Trade Letter
of Credit.
Statutory Reserves - a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency or
supplemental reserves), expressed as a decimal, established by the
Board and any other banking authority to which Bank, Agent or any
Lender is subject for Eurocurrency Liabilities (as defined in
Regulation D of the Board or any successor thereto). Such reserve
percentages shall include, without limitation, those imposed under such
Regulation D. LIBOR Portions shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or
offsets which may be available from time to time to Bank or any Lender
under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any
reserve percentage, provided that no adjustment shall reduce Statutory
Reserves below the amount in effect on the Closing Date. At Borrower's
request, Agent or the applicable Lender shall provide Borrower with
Agent's or the applicable Lender's calculations of Statutory Reserves.
Subordinated Debt - Indebtedness of Borrower that is
subordinated to the Obligations in a manner satisfactory to Agent.
A-16
<PAGE>
Subordinated Note Documents - that certain Securities Purchase
Agreement dated on or about the Closing Date by and between Borrower
and the holders of the Subordinated Notes and all schedules, exhibits
and other documents and agreements executed and/or delivered in
connection therewith.
Subordinated Notes - those certain subordinated promissory
notes dated on or about the Closing Date in the original aggregate
principal amount of $32,500,000 executed by Borrower in favor of the
purchasers thereof.
Subsidiary - any corporation of which a Person owns, directly
or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
Swingline Loan(s) - as defined in Section 1.1.2 of the
Agreement.
Tax - in relation to any LIBOR Portion and the applicable
LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever nature required by any Legal Requirement (i) to be
paid by Agent or any Lender and/or (ii) to be withheld or deducted from
any payment otherwise required hereby to be made by Borrower to Agent
or any Lender; provided, that the term "Tax" shall not include any
taxes imposed upon the net income of Agent or any Lender.
Term Loan - collectively, Term Loan A and Term Loan B.
Term Loan A - the Loan described in Section 1.2.1 of the
Agreement.
Term Loan A Commitment - as defined in Section 1.2.1 of the
Agreement.
Term Loan A Percentage - as defined in Section 1.2.1 of the
Agreement.
Term Loan B - the Loan described in Section 1.2.2 of the
Agreement.
Term Loan B Commitment - as defined in Section 1.2.2 of the
Agreement.
Term Loan B Percentage - as defined in Section 1.2.2 of the
Agreement.
Term Note - collectively, Term Note A and Term Note B.
Term Note A - the Secured Promissory Note(s) to be executed by
Borrower in favor of Lenders to evidence Term Loan A, which shall be in
the form of Exhibit A-2 to the Agreement.
Term Note B - the Secured Promissory Note(s) to be executed by
Borrower in favor of Lenders to evidence Term Loan B, which shall be in
the form of Exhibit A-3 to the Agreement.
Total Credit Facility - One Hundred Million Dollars
($100,000,000).
A-17
<PAGE>
Trade Letter of Credit - a Letter of Credit issued by Bank or
Agent for the account of Borrower in connection with the purchase of
Inventory by Borrower.
Trademark Assignment - the Amended and Restated Trademark
Security Agreement executed by Borrower on or about the Closing Date in
favor of Agent and by which Borrower assigned to Agent, and granted to
Agent a security interest in, as security for the Obligations all of
Borrower's right, title and interest in and to all of its trademarks.
Voting Stock - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
Other Terms. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing.
A-18
<PAGE>
LIST OF EXHIBITS
Exhibit A-1 Form of Revolving Credit Notes
Exhibit A-2 Form of Term Note A
Exhibit A-3 Form of Term Note B
Exhibit B Borrower's and each Subsidiary's of Borrower Business
Locations
Exhibit C Form of Borrowing Base Certificate
Exhibit D Jurisdictions in which Borrower and each Subsidiary of
Borrower is Authorized to do Business
Exhibit E Capital Structure of Borrower
Exhibit F Corporate Names
Exhibit G Tax Identification Numbers of Subsidiaries
Exhibit H Patents, Trademarks, Copyrights and Licenses
Exhibit I Contracts Restricting Borrower's Right to Incur Debts
Exhibit J Litigation
Exhibit K Capitalized Leases
Exhibit L Operating Leases
Exhibit M Pension Plans
Exhibit N Labor Contracts
Exhibit O Compliance Certificate
Exhibit P Permitted Liens
Exhibit Q Financial Covenants
Exhibit R Schedule of Documents
Exhibit S Letter of Credit Charges
Exhibit T Form of Assignment and Acceptance Agreement
<PAGE>
EXHIBIT A-1
REVOLVING CREDIT NOTE
[$50,000,000] September __, 1999
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, (hereinafter "Borrower"), hereby
PROMISES TO PAY to the order of ____________________________, a ________________
corporation ("Lender"), or its registered assigns, at the principal office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of [aggregate amount of Fifty
Million Dollars ($50,000,000)], or such lesser principal amount as may be
outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect
to the Revolving Credit Loan, together with interest on the unpaid principal
amount of this Note outstanding from time to time.
This promissory note (the "Note") is one of the Revolving Credit Notes
referred to in, and issued pursuant to, that certain Second Amended and Restated
Loan and Security Agreement dated as of September ___, 1999 by and among
Borrower, the lender signatories thereto (including Lender) and Fleet Capital
Corporation ("FCC"), as agent for said lenders (FCC in such capacity "Agent")
(hereinafter, as amended from time to time, the "Loan Agreement"), and is
entitled to all of the benefits and security of the Loan Agreement. All of the
terms, covenants and conditions of the Loan Agreement and the Security Documents
are hereby made a part of this Note and are deemed incorporated herein in full.
All capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement and, if
not sooner paid in full, on the Commitment Termination Date, unless the term
hereof is extended in accordance with the Loan Agreement. Interest thereon shall
be paid until such principal amount is paid in full at such interest rates and
at such times as are specified in the Loan Agreement.
Upon and after the occurrence, and during the continuation, of an Event
of Default, this Note shall or may, as provided in the Loan Agreement, become or
be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
<PAGE>
This Note shall be interpreted, governed by, and construed in
accordance with, the internal laws of the State of Illinois.
EAGLE PACIFIC INDUSTRIES, INC.,
a Minnesota corporation ("Borrower")
By:________________________________
Name:___________________________
Title:__________________________
A-1-2
<PAGE>
EXHIBIT A-2
SECURED PROMISSORY NOTE
(Term Note A)
[$35,000,000] September __, 1999
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of ______________________, a ______________
corporation (hereinafter "Lender"), or its registered assigns at the office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States, in immediately
available funds, at the time of payment, the principal sum of [Thirty-Five
Million Dollars ($35,000,000)], together with interest from and after the date
hereof on the unpaid principal balance outstanding from time to time.
This Secured Promissory Note (the "Note") is the one of the Term Notes
A referred to in, and is issued pursuant to, that certain Second Amended and
Restated Loan and Security Agreement among Borrower, the lender signatories
thereto (including Lender) and Fleet Capital Corporation ("FCC") as agent for
said lenders (FCC, in such capacity, "Agent") dated the date hereof
(hereinafter, as amended from time to time, the "Loan Agreement"), and is
entitled to all of the benefits and security of the Loan Agreement. All of the
terms, covenants and conditions of the Loan Agreement and the Security Documents
are hereby made a part of this Note and are deemed incorporated herein in full.
All capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Loan Agreement.
For so long as no Event of Default shall have occurred the principal
amount and accrued interest of this Note shall be due and payable on the dates
and in the manner hereinafter set forth:
(a) Interest on the unpaid principal balance outstanding from
time to time shall be paid at such interest rates and at such times as
are specified in the Loan Agreement;
(b) Principal shall be due and payable quarterly commencing on
December 31, 1999, and continuing on the last day of each March, June,
September and December thereafter to and including the last day of the
quarter immediately preceding the Commitment Termination Date, in
installments of [One Million Two Hundred Fifty Thousand Dollars
($1,250,000)] each; and
(c) The entire remaining principal amount then outstanding,
together with any and all other amounts due hereunder, shall be due and
payable on the Commitment Termination Date.
<PAGE>
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.3 of the Loan Agreement. Borrower may also terminate
the Loan Agreement and, in connection with such termination, prepay this Note in
the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, become or be
declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note and the other Term Notes A amend and restate, and are issued
in substitution for, and in replacement of, that certain Secured Promissory Note
dated December 31, 1997 executed by Eagle Pacific Industries, Inc. in favor of
Fleet Capital Corporation having a current principal amount of Ten Million Six
Hundred Sixty-Six Thousand Dollars ($10,666,000). This Note also evidences
additional advances made by Lender on the date hereof under Term Loan A. The
replacement of the Prior Note with this Note shall not be construed (i) to deem
paid or forgiven the unpaid principal amount of, or unpaid accrued interest on,
the Prior Note outstanding at the time of replacement, or (ii) to release,
cancel, terminate or otherwise adversely affect all or any part of any lien,
mortgage, deed of trust, security interest or other encumbrance heretofore
granted as security for the obligations, liabilities or indebtedness of Borrower
under or in respect of the Prior Note which has not otherwise been expressly
released.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered in Chicago, Illinois, on the date first above written.
EAGLE PACIFIC INDUSTRIES, INC.,
a Minnesota corporation ("Borrower")
By:____________________________________
Name:_______________________________
Title:______________________________
A-2-3
<PAGE>
EXHIBIT A-3
SECURED PROMISSORY NOTE
(Term Note B)
[$15,000,000]
September __, 1999
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of ______________________, a ______________
corporation (hereinafter "Lender"), or its registered assigns at the office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States, in immediately
available funds, at the time of payment, the principal sum of [Fifteen Million
Dollars ($15,000,000)], together with interest from and after the date hereof on
the unpaid principal balance outstanding from time to time.
This Secured Promissory Note (the "Note") is one of the Term Notes B
referred to in, and is issued pursuant to, that certain Second Amended and
Restated Loan and Security Agreement dated as of September ___, 1999 by and
among Borrower, the lender signatories thereto (including Lender) and Fleet
Capital Corporation ("FCC") as agent for said lenders (FCC in such capacity
"Agent") (hereinafter, as amended from time to time, the "Loan Agreement"), and
is entitled to all of the benefits and security of the Loan Agreement. All of
the terms, covenants and conditions of the Loan Agreement and the Security
Documents are hereby made a part of this Note and are deemed incorporated herein
in full. All capitalized terms used herein, unless otherwise specifically
defined in this Note, shall have the meanings ascribed to them in the Loan
Agreement.
For so long as no Event of Default shall have occurred and be
continuing the principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest on the unpaid principal balance outstanding from
time to time shall be paid at such interest rates and at such times as
are specified in the Loan Agreement; and
(b) Principal shall be due and payable quarterly commencing on
December 31, 1999 and continuing on the last day of each March, June,
September and December thereafter to and including September 30, 2002
in equal quarterly installments of $[1,250,000].
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon any
termination of the Loan Agreement pursuant to Section 4 thereof.
<PAGE>
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.3 of the Loan Agreement. Borrower may also prepay
this Note in the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, become or be
declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
EAGLE PACIFIC INDUSTRIES, INC.,
a Minnesota corporation ("Borrower")
By:_______________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
EXHIBIT O
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
_______________, 19__
_______________________________
_______________________________
_______________________________
The undersigned, the chief financial officer of Eagle Pacific
Industries, Inc., a Minnesota corporation ("Borrower"), gives this certificate
to Fleet Capital Corporation ("FCC"), as Agent, in accordance with the
requirements of subsection 8.1.3 of that certain Second Amended and Restated
Loan and Security Agreement ("Loan Agreement") dated as of September ___, 1999,
by and among Borrower, the lender signatories thereto ("Lenders") and FCC, as
agent for Lenders (FCC, in such capacity ("Agent") . Capitalized terms used in
this Certificate, unless otherwise defined herein, shall have the meanings
ascribed to them in the Loan Agreement.
1. Based upon my review of the [consolidated] balance sheets and
statements of income of Borrower for the [fiscal year] [quarterly period] ending
____________________, 19__, copies of which are attached hereto, I hereby
certify that:
(a) The Consolidated Net Worth is $_________________;
(b) The Fixed Charge Coverage Ratio is $______________;
(c) The Interest Coverage Ratio is $_________________;
(d) The Funded Debt to EBITDA Ratio is $______________;
(e) Availability is $_________________;
(e) Capital Expenditures during the period and for the fiscal year to
date total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than:
______________________ _________________________________________ [if none, so
state]; and
3. No Event of Default exists on the date hereof, other than
___________________ _________________________________________ [if none, so
state].
Very truly yours,
-------------------------------
Chief Financial Officer
<PAGE>
EXHIBIT Q
FINANCIAL COVENANTS
Consolidated Net Income means, with respect to Borrower and its
Subsidiaries for any fiscal period, the net income (or loss) of Borrower and its
Subsidiaries for such period taken as a whole (determined in accordance with
GAAP on a consolidated basis), but excluding in any event: (a) any gains or
losses on the sale or other disposition of Investments or fixed or capital
assets or from any transaction classified as extraordinary under GAAP, any taxes
on such excluded gains and any tax deductions or credits on account of any such
excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings
and losses of any business entity, substantially all the assets of which have
been acquired in any manner by Borrower, realized by such business entity prior
to the date of such acquisition, (d) net earnings and losses of any business
entity which shall have merged into Borrower earned or incurred prior to the
date of such merger, (e) net earnings of any business entity (other than a
Consolidated Subsidiary) in which Borrower has an ownership interest unless such
net earnings shall have been received by Borrower in the form of cash
distributions; (f) earnings resulting from a reappraisal, revaluation or
write-up of assets; (g) any charge to net earnings resulting from the
amortization of the value of stock options given to employees to the extent
required by FASB 25; (h) any increase or decrease of net income arising from a
change in Borrower's accounting methods; (i) any gains resulting from the
forgiveness of Funded Debt or the retirement of Funded Debt at a discount; (j)
any gain arising from the acquisition of any Securities of Borrower; and (k) any
reversal of any contingency reserve, except that provision for such contingency
reserve shall have been made from income arising during such period.
EBITDA - With respect to any fiscal period, the sum of Borrower's
Consolidated Net Income plus amounts deducted in determining Consolidated Net
Income in respect of: (a) any provision for (or less any benefit from) income
taxes whether current or deferred; (b) amortization and depreciation expense;
(c) Interest Expense for such period, and (d) prior to December 31, 1999, that
portion of cost of goods sold resulting from the write-up of Inventory in
connection with the Acquisition pursuant to APB 16; provided that the aggregate
amount added to EBITDA pursuant to this clause (d) shall not exceed $3,000,000.
Fixed Charge Coverage Ratio - With respect to any period of
determination, the ratio of (i) EBITDA of Borrower for such period minus income
taxes paid in cash and non-financed Capital Expenditures during such period to
(ii) Fixed Charges.
Fixed Charges - For any period of determination, the sum of (a)
scheduled principal payments of Funded Debt (including the principal portion of
scheduled payments of Capital Lease Obligations), (b) Interest Expense paid in
cash included in the determination of Consolidated Net Income, and (c) dividends
paid on Borrower's capital stock.
Funded Debt - means (i) Indebtedness arising from the lending of money
by any Person to Borrower, including, without limitation, the Obligations; (ii)
Indebtedness, whether or not in any such case arising from the lending by any
Person of money to Borrower (A) which is represented by notes payable or drafts
<PAGE>
accepted that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C) upon which
interest charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii) Indebtedness
that constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations
with respect to letters of credit or guaranties of letters of credit and (v)
Indebtedness of Borrower under any guaranty of obligations that would constitute
Funded Debt under clauses (i) through (iii) hereof if owed directly by Borrower
or any guaranty having the economic effect of guaranteeing any of the
obligations of any other Person. In computing the amount of Funded Debt, the
Subordinated Notes will be valued at full face value (less any payments thereon)
without giving effect to any original issue discount.
Funded Debt to EBITDA Ratio - With respect to any date, the ratio of
(i) total funded Funded Debt as of such date to (ii) EBITDA. For purposes of the
Funded Debt to EBITDA Ratio, (i) for the period from 10/1/99 through 12/31/99,
EBITDA shall be actual EBITDA for such period multiplied by four (4); (ii) for
the period from 10/1/99 through 3/31/2000, EBITDA for such period shall be
actual EBITDA for such period multiplied by two (2); and (iii) for the period
from 10/1/99 through 6/30/00, EBITDA for such period shall be actual EBITDA for
such period multiplied by four-thirds (4/3).
Interest Coverage Ratio - With respect to any period of determination,
the ratio of (i) EBITDA for such period to (ii) Interest Expense paid in cash
for such period, all as determined in accordance with GAAP.
Interest Expense - With respect to any fiscal period, the interest
expense incurred for such period excluding interest income as determined in
accordance with GAAP.
Investment - All investments in the property or assets of any person,
in cash or property, whether by way of advance, loan, extension of credit by
Borrower or any of its Subsidiaries (by way of guaranty or otherwise) or capital
contribution, or purchase of stock, bonds, notes, debentures or other securities
or any assets constituting the purchase of a business or line of business.
Net Worth - Book net worth of the Borrower as determined in accordance
with GAAP. For purposes of this Exhibit Q, Net Worth shall include any
unamortized value assigned to the Warrants issued in connection with the
Subordinated Notes which value was calculated in accordance with GAAP and is
contained in Borrower's Consolidated Financial Statements.
Interest Coverage Ratio - Borrower shall not permit the Interest
Coverage Ratio as of the last date of the period set forth below to be less than
the ratio set forth opposite such period below:
- -----------------------------------------------------------
Period Ratio
- -----------------------------------------------------------
From 10/1/99 to December 31, 1999 2.65 to 1
- -----------------------------------------------------------
For 6 months ending 3/31/2000 3.25 to 1
- -----------------------------------------------------------
For 9 months ending 6/30/2000 3.25 to 1
- -----------------------------------------------------------
For 12 months ending 9/30/2000 3.25 to 1
- -----------------------------------------------------------
<PAGE>
- -----------------------------------------------------------
Period Ratio
- -----------------------------------------------------------
For 12 months ending 12/31/2000 3.50 to 1
- -----------------------------------------------------------
Trailing 12 month periods ending on
March 31, 2001, June 30, 2001, 3.35 to 1
September 30, 2001 and
December 31, 2001
- -----------------------------------------------------------
Trailing 12 month periods ending on
each March 31, June 30, September 30 4.00 to 1
and December 31 thereafter.
- -----------------------------------------------------------
Fixed Charge Coverage Ratio - Borrower shall not permit the Fixed
Charge Coverage Ratio as of the last date of the period set forth below to be
less than the ratio set forth opposite such period below:
- -----------------------------------------------------------------
Period Ratio
- -----------------------------------------------------------------
From 10/1/99 to December 31, 1999 1.10 to 1
- -----------------------------------------------------------------
For 6 months ending 3/31/2000 1.20 to 1
- -----------------------------------------------------------------
For 9 months ending 6/30/2000 1.20 to 1
- -----------------------------------------------------------------
For 12 months ending 9/30/2000 1.20 to 1
- -----------------------------------------------------------------
For 12 months ending 12/31/2000 1.20 to 1
- -----------------------------------------------------------------
Trailing 12 month periods ending on 1.15 to 1
March 31, 2001, June 30, 2001,
September 30, 2001 and December 31, 2001
- -----------------------------------------------------------------
Trailing 12 month periods ending on 1.20 to 1
each March 31, June 30, September 30
and December 31 thereafter
- -----------------------------------------------------------------
Net Worth - Borrower shall achieve Net Worth as of the last day of each
period set forth below of not less than the amount set forth opposite such
period below:
- -----------------------------------------------------
Period Ratio
- -----------------------------------------------------
At the Closing Date $15,000,000
- -----------------------------------------------------
For Quarter ending 12/31/99 18,000,000
- -----------------------------------------------------
For Quarter ending 3/31/99 19,800,000
- -----------------------------------------------------
<PAGE>
- -----------------------------------------------------
For Quarter ending 6/30/2000 22,500,000
- -----------------------------------------------------
For Quarter ending 9/30/2000 25,200,000
- -----------------------------------------------------
For Quarter ending 12/31/2000 27,000,000
- -----------------------------------------------------
For Quarter ending 3/31/2001 28,500,000
- -----------------------------------------------------
For Quarter ending 6/30/2001 30,700,000
- -----------------------------------------------------
For Quarter ending 9/30/2001 32,900,000
- -----------------------------------------------------
For Quarter ending 12/31/2001 34,400,000
- -----------------------------------------------------
For Quarter ending 3/31/2002 35,800,000
and each Quarter thereafter
- -----------------------------------------------------
Funded Debt to EBITDA Ratio - Borrower shall not permit the Funded Debt
to EBITDA Ratio for any period set forth below to be greater than the ratio set
forth opposite such period below:
- -----------------------------------------------------
Period Ratio
- -----------------------------------------------------
Quarter Ended 12/31/99 3.85 to 1
- -----------------------------------------------------
6 months ending 3/31/2000 3.25 to 1
- -----------------------------------------------------
9 months ended 6/30/2000 3.25 to 1
- -----------------------------------------------------
For 12 months ended 9/30/2000 3.00 to 1
- -----------------------------------------------------
For 12 months ended 12/31/2000 3.00 to 1
- -----------------------------------------------------
Trailing twelve month periods ending 2.75 to 1
3/31/2001, 6/30/2001, 9/30/2001
and 12/31/2001
- -----------------------------------------------------
Trailing 12 month periods ending on 2.50 to 1
each March 31, June 30, September 30
and December 31 thereafter
- -----------------------------------------------------
<PAGE>
EXHIBIT R
SCHEDULE OF DOCUMENTS
(A) Certified copies of Borrower's casualty insurance policies, together
with loss payable endorsements on Agent's standard form of Loss Payee
Endorsement naming Agent as loss payee, and certified copies of Borrower's
liability insurance policies, together with endorsements naming Agent as a
co-insured;
(B) Copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Agent, for its benefit and the ratable benefit of Lenders,
in the Collateral and evidence in a form acceptable to Agent that such Liens
constitute valid and perfected security interests and Liens, having the Lien
priority specified herein;
(C) Landlord or warehouseman agreements with respect to all premises
leased by Borrower and which are disclosed on Exhibit B attached hereto. Such
landlord agreements shall be in the form supplied by Agent to Borrower, with
such reasonable revisions as customarily accepted by Agent or by similar
financial institutions in similar financial transactions;
(D) A copy of the Articles or Certificate of Incorporation of Borrower,
and all amendments thereto, certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation;
(E) Good standing certificates for Borrower issued by the Secretary of
State of Minnesota and each jurisdiction where the conduct of Borrower's
business activities or the ownership of its Properties necessitates
qualification;
(F) Amendments to the Security Documents reflecting the transactions
contemplated by the Agreement duly executed, accepted and acknowledged by or on
behalf of each of the signatories thereto;
(G) The Other Agreements duly executed and delivered by Borrower;
(H) A Certificate of the Secretary of Borrower, together with true and
correct copies of the Certificate or Articles of Incorporation and Bylaws of
Borrower, and all amendments thereto, true and correct copies of the resolutions
of the Board of Directors of Borrower authorizing or ratifying the execution,
delivery and performance of this Agreement, the Security Documents, the Other
Agreements and the documents, agreements and contracts evidencing or effecting
the Acquisition and the names of the officer or officers of each Borrower
authorized to sign this Agreement, the Security Documents (or amendments
thereto), the Other Agreements and the documents, agreements and contracts
evidencing or effecting the Acquisition together with a sample of the true
signature of each such officer;
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<PAGE>
(I) The favorable, written opinion of Fredrikson & Byron, P.A., counsel
to Borrower, as to the transactions contemplated by this Agreement and any of
the other Loan Documents;
(J) Duly executed agreement establishing the Dominion Account with a
financial institution acceptable to Lender for the collection or servicing of
the Accounts;
(K) Pay-off statements, releases and UCC-3 termination statements from
Pacific Western Extruded Plastics Company's existing senior lenders;
(L) Fully paid mortgagee title insurance policies (or binding
commitments to issue title insurance policies, marked to Agent's satisfaction to
evidence the form of such policies to be delivered after the Closing Date), in
standard ALTA form, issued by a title insurance company satisfactory to Agent,
each in an amount equal to not less than the fair market value of the real
Property or leasehold interest acquired in the Acquisition, subject to the
Mortgages, insuring the Mortgages to create a valid Lien on all real Property
and valid Liens on the leasehold interest described therein with no exceptions
which Agent shall not have approved in writing and not survey exceptions;
(M) ALTA Surveys in respect to each parcel of real Property described
in (L) above;
(N) Purchase Documents;
(O) Phase I environmental assessments (and, if applicable Phase II
environmental assessments) in respect to each location acquired in the
Acquisition;
(P) Subordinated Note Subordination Agreement;
(Q) Subordinated Debt Documents; and
(R) Such other documents, instruments and agreements as Agent shall
reasonably request in connection with the foregoing matters.
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<PAGE>
EXHIBIT S
LETTER OF CREDIT CHARGES
FEE SCHEDULE - TRADE LETTERS OF CREDIT
- -------------------------------------- ---------------------------------------
Issuance $250.00
- -------------------------------------- ---------------------------------------
Amendment $85.00 - a maximum of six amendments
per LC will be allowed. An amendment to
increase and/or extend the LC will
be treated as an issuance.
- -------------------------------------- ---------------------------------------
LC Fee LC Percent - as defined in the Loan
Agreement
- -------------------------------------- ---------------------------------------
Negotiation / Payment 1/4% flat (minimum $150.00)
- -------------------------------------- ---------------------------------------
Acceptance / Deferred Payment 2.75% p.a. (minimum $150.00)
- -------------------------------------- ---------------------------------------
Cancellation of Unused Credits $100.00
- -------------------------------------- ---------------------------------------
Transfer / Assignment of LC 1/4% flat (minimum $250.00)
- -------------------------------------- ---------------------------------------
Shipping Guaranty / Airway Release $100.00
- -------------------------------------- ---------------------------------------
Wire Transfer $35.00 per transfer
- -------------------------------------- ---------------------------------------
plus any and all out-of-pocket expenses such as courier, postage and telexes,
etc.
FEE SCHEDULE -STANDBY LETTERS OF CREDIT
- -------------------------------------- ---------------------------------------
Issuance $150.00
- --------------------------------------- --------------------------------------
Amendment $150.00 inclusive of automatic renewal
of LC
- --------------------------------------- --------------------------------------
LC Fee LC Percent - as defined in the Loan
Agreement
- --------------------------------------- --------------------------------------
Negotiation / Payment 1/4% flat (minimum $150.00)
- --------------------------------------- --------------------------------------
Transfer of LC 1/4% flat (minimum $2000.00)
- --------------------------------------- --------------------------------------
Wire Transfer $35.00 per transfer
- --------------------------------------- --------------------------------------
plus any and all out-of-pocket expenses such as courier, postage and telexes,
etc.
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<PAGE>
EXHIBIT T
FORM OF
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") made as of
______________, 199__, by and between ________________ ("Assignee") and
______________ ("Assignor"). Eagle Pacific Industries, Inc., a _______________
corporation ("Borrower"), the lenders signatory thereto ("Lenders") and Fleet
Capital Corporation ("FCC") as agent for such Lenders (FCC in such capacity
"Agent") entered into a certain Second Amended and Restated Loan and Security
Agreement dated as of September __, 1999 (the "Loan Agreement") pursuant to
which Lenders extended credit to Borrower in an aggregate principal amount not
to exceed at any time outstanding ___________________ Dollars ($__________). The
parties are entering into this Agreement to provide for the transfer by Assignor
of a portion of its rights and obligations under the Loan Agreement to Assignee.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignee and Assignor agree as
follows:
1. Assignment.
(1) Assignor hereby sells, assigns and transfers to Assignee, and Assignee
hereby purchases and assumes from the Assignor as of the Effective Date (as
defined in Section 4 hereof) subject to the terms and conditions set forth in
Section 12.3(b) of the Loan Agreement (x) (i) ___________ Dollars ($_________)
Revolving Loan Commitment, including without limitation, an equivalent undivided
interest and participation in and to all Letters of Credit and LC Guaranties,
whether outstanding on the Effective Date or issued thereafter, (ii) __________
Dollars ($______) Term Loan A and (iii) ____________ Dollars ($______) Term Loan
B (collectively, the "Assigned Commitment"), which shall be evidenced by a
Revolving Credit Note, in the form of Exhibit A hereto (the "____________
Revolving Credit Note"), a Term Note A, in the form of Exhibit B hereto (the
"____________ Term Note A") and a Term Note B, in the form of Exhibit C hereto
(the "___________ Term Note B") and (y) a proportional ________ percent (___%)
portion of the Revolving Credit Loans, Term Loan A and Term Loan B outstanding
as of the Effective Date (the "Assigned Loans"), also evidenced by the
____________ Revolving Credit Note, the ___________ Term Note A and the _____
Term Note B. As of the date hereof, the face amount of all outstanding Letters
of Credit and LC Guaranties is ______________________ ($_________).
(2) The Assignee hereby irrevocably purchases, takes and assumes,
effective on the Effective Date, all duties, liabilities, obligations, rights
and interests assigned and delegated to it by the Assignor (including, without
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<PAGE>
limitation, the obligation to make Revolving Credit Loans or to incur
obligations in respect to Letters of Credit and LC Guaranties up to the amount
of the Assignee's Assigned Commitment) and agrees to perform and assume all such
duties, liabilities and obligations, and shall have all such rights and
interests on and after the Effective Date as if it had been an original party to
the Loan Agreement and each of the other Loan Documents having a Revolving
Credit Loan Commitment, Term Loan A Commitment and Term Loan B Commitment equal
to ____________ (____%) of the total Revolving Credit Loan Commitments, Term
Loan Commitments and Term Loan B Commitments under the Loan Agreement as is more
specifically set forth in Section 1(a) hereof.
(3) Assignor makes no representation or warranty and assumes no
responsibility with respect to (x) any statements, warranties or representations
made in or in connection with the Loan Agreement or the other Loan Documents or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement and the other Loan Documents, other than that it is
the legal and beneficial owner of the interests being assigned by it hereunder,
that such interests are free and clear of any adverse claim, that it is legally
authorized to enter into this Agreement and that this Agreement constitutes its
legal, valid and binding obligations and (y) the financial condition of Borrower
or the performance or observance by Borrower of any of their respective
obligations under the Loan Agreement or any of the other Loan Documents.
(4) The Assignee (i) represents and warrants that it is legally
authorized to enter into this Agreement, that the same constitutes its legal,
valid and binding obligations and that all necessary consents, licenses,
approvals, authorizations of, and all registrations or declarations with, any
governmental or regulatory authority or body (collectively, the "Consents" and
individually, a "Consent") presently required in connection with its execution,
delivery and performance of this Agreement or for the enforcement of this
Agreement against it have been obtained or made and are in full force and
effect, and agrees that it shall (x) use its best efforts to obtain any
additional Consents that become necessary for such execution, delivery,
performance or enforcement, (y) comply in all material aspects with the terms of
each such Consent and (z) notify the Agent promptly upon any such Consent being
withdrawn, suspended or otherwise limited in effect or ceasing to be in full
force and effect or of any such additional Consent becoming necessary; (ii)
confirms that it has received a copy of the Loan Agreement and each of the other
Loan Documents, together with copies of financial statements which Assignor has
identified as the most recent financial statements delivered in accordance with
the terms of the Loan Agreement and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Agreement; (iii) agrees that it will, independently and without
reliance upon Agent, Assignor or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Agreement and
each of the other Loan Documents; (iv) appoints and authorizes Agent to take
such action as Agent on its behalf and to exercise such powers under the Loan
Agreement and each of the other Loan Documents as are delegated to Agent by the
terms thereof; (v) confirms that it is purchasing and assuming the interests in
the Assigned Commitment, the Assigned Loans, the Loan Agreement and each of the
other Loan Documents hereunder in the course of making loans in the ordinary
course of its commercial lending business and not with any present intention of
distributing or selling such interests (except as permitted under the Loan
Agreement); and (vi) agrees that it will perform in accordance with their terms
all the Obligations which by the terms of the Loan Agreement and each of the
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<PAGE>
other Loan Documents are required to be performed by it as a Lender under the
Loan Agreement and each of the other Loan Documents.
(5) Assignee agrees to indemnify Assignor from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Assignor in any way relating to or
arising out of Assignee's failure to perform Assignee's obligations under the
Assigned Commitment on or after the Effective Date.
2. Payment for Assigned Revolving Credit Loans.
(1) On or before 11:00 a.m. on the Effective Date, Assignee shall
deliver to Assignor in immediately available funds (the "Purchase Price") equal
to __________ percent (____%) of the principal amount of all of the Revolving
Credit Loans, Term Loan A and the Term Loan B outstanding on the Effective Date.
(2) Notwithstanding the terms of the Loan Agreement or the ___________
Revolving Credit Note, the __________ Term Note A or the __________ Term Note B
with respect to: (a) the first interest payments due after the Effective Date on
the LIBOR Portion or the Base Rate Portion, (b) the first unused line fee due
after the Effective Date and (c) fees received by Agent prior to the Effective
Date in respect to Letters of Credit or LC Guaranties outstanding on the
Effective Date:
(1) Whenever Agent receives a payment of such interest, Agent
will promptly pay over to Assignee interest on the LIBOR Portion(s) and
the Base Rate Portion at the interest rates provided for in the Loan
Agreement calculated from the Effective Date;
(2) Whenever Agent receives a payment of such unused line fee,
it will promptly pay over to Assignee its proportionate share of said
fee calculated from the Effective Date in accordance with the terms of
the Loan Agreement; and
(3) Whenever Agent receives a payment of such fees in respect
to Letters of Credit or LC Guaranties outstanding on the Effective
Date, it will promptly pay over to the Assignee its proportionate share
of said fees calculated from the Effective Date in accordance with the
terms of the Loan Agreement.
Agent shall pay over to Assignor (or to another applicable
Lender) (x) the difference between the total amount of the first interest
payments due after the Effective Date in respect to the LIBOR Portion or the
Base Rate Portion and the amounts paid to Assignee pursuant to 2(b)(i) above,
(y) the difference between the first payment of unused line fee due after the
Effective Date and the amounts paid to Assignee pursuant to Section 2(b)(ii)
above and (z) the difference between the first payment of fees in respect to
Letters of Credit or LC Guaranties outstanding on the Effective Date and the
amounts paid to Assignee pursuant to Section 2(b)(iii) above.
3. Delivery of Amendment.
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<PAGE>
On the Effective Date, Assignor and Assignee shall execute an
amendment to the Loan Agreement in the form of Schedule I hereto (the
"Amendment"). Assignor will use its best efforts to cause Borrower to promptly
deliver to Assignee the Amendment and the ______________ Revolving Credit Note,
the _______ Term Note A and the _______ Term Loan B, each executed by Borrowers.
4. Effective Date.
(1) This Agreement shall become effective on the first date (the
"Effective Date") when each of the following conditions precedent is satisfied
in full:
(1) Agent shall have received counterparts of this Agreement
which, when taken together, bear the signature of all of the parties
hereto;
(2) Agent shall have received for and on behalf of Assignor
and Assignee, the Amendment executed by all parties thereto, the
__________ Revolving Credit Note, the ____ Term Note A and the _______
Term Loan B, and the Notes to be delivered to Assignor pursuant to the
Amendment; and
(3) Assignee shall have delivered to the Assignor in
immediately available funds the Purchase Price, and Assignor shall have
delivered to Assignee in immediately available funds amounts due
Assignee pursuant to Section 2 above; and
(4) Agent shall have received the fee payable to it pursuant
to Section 12.3(b) of the Loan Agreement.
(2) All notices shall be delivered to the Assignee, at the following
address:
Attention: ________________________
___________________________________
___________________________________
Attention:_________________________
Telephone No.: (___) ___-_________
Telecopier No.: (___) ___-________
5. Governing Law.
This Agreement and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Illinois applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.
6. Counterparts.
This Agreement may be executed in any number of counterparts,
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.
________________________, as Assignor
By:_________________________________
Name:_______________________________
Title:______________________________
________________________, as Assignor
By:_________________________________
Name:_______________________________
Title:______________________________
Accepted and Agreed to as of
this ______ day of ____________, _______
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<PAGE>
SCHEDULE I
FORM OF AMENDMENT TO LOAN AND SECURITY AGREEMENT
AMENDMENT, dated as of __________________, to the Loan and Security
Agreement, dated as of ________________, ____, among Eagle Pacific Industries,
Inc. ("Borrower"), the lenders named therein ("Lenders") and Fleet Capital
Corporation, as Agent (the "Loan Agreement"). The terms used herein and not
otherwise defined shall have the meanings attributed to them in the Loan
Agreement.
WHEREAS, pursuant to the Loan Agreement, inter alia, Lenders: (i) have
committed to make Revolving Credit Loans to Borrower in the principal amount of
up to Fifty Million Dollars ($50,000,000); (ii) have committed to incur certain
obligations on behalf of Borrower in respect to Letters of Credit and LC
Guaranties; (iii) have made a Term Loan A to Borrower in the principal amount of
Thirty-Five Million Dollars ($35,000,000); and (iv) have made a Term Loan B to
Borrower in the aggregate amount of Fifteen Million Dollars ($15,000,000);
WHEREAS, ________________________________ has sold, transferred and
assigned the following Revolving Credit Loans, the Revolving Credit Loan
Commitment, Term Loan A and Term Loan B to the following parties:
(a) [LENDER NO. 1]
(i) Assigned Revolving Credit Loans: ____________________ Dollars
($__________);
(ii) Assigned Revolving Credit Loan Commitment: _________________
Dollars ($__________);
(iii) Assigned Term Loan A: _________________ Dollars ($__________);
and
(iv) Assigned Term Loan B: _________________ Dollars ($__________).
(b) [LENDER NO. 2]
(i) Assigned Revolving Credit Loans: _________________ Dollars
($__________);
(ii) Assigned Revolving Credit Loan Commitment: _________________
Dollars ($__________);
(iii) Assigned Term Loan A: _________________ Dollars ($__________);
and
(iv) Assigned Term Loan B: _________________ Dollars ($__________).
WHEREAS, as a result of such sale, assignment and transfer each of
LENDER NO. 1 and LENDER NO. 2 has become a Lender with a Revolving Credit Loan
Commitment, Term Loan A and Term Loan B under the Loan Agreement; and
T-6
<PAGE>
WHEREAS, the parties hereto desire to amend the Loan Agreement to add
LENDER NO. 1 and LENDER NO. 2 as Lenders.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and contained in the Loan Agreement, the parties
hereto hereby agree as follows:
1. The signature block to the Loan Agreement is hereby amended to read
as the signature block to this Amendment.
2. Borrower hereby confirms that the representations and warranties of
Borrower contained in the Loan Documents are correct in all material respects on
the date hereof, except (i) to the extent that any such representation or
warranty expressly relates to an earlier date, and (ii) for changes therein
permitted or contemplated by the Loan Agreement.
3. Borrower represents and warrants that no Default or Event of Default
exists as of the date hereof.
4. On the date hereof, Borrower shall issue and deliver to Agent
Revolving Credit Notes, Term Notes A and Term Notes B to each of LENDER NO. 1,
LENDER NO. 2 and [Assigning Lender] in the amount of each Lender's respective
Revolving Credit Loan Commitment, outstanding Term Loan A and outstanding Term
Loan B. Upon the delivery to Agent of such Notes, Agent shall deliver to
Borrower for cancellation the Notes previously delivered to [Assigning Lender].
5. Notices to LENDER NO. 1 and LENDER NO. 2 shall be addressed as
follows:
(a) LENDER NO. 1
(b) LENDER NO. 2
6. Except as otherwise specifically set out herein, the provisions of
the Loan Agreement shall remain in full force and effect.
7. This Amendment and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Illinois applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.
T-7
<PAGE>
8. This Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
EAGLE PACIFIC INDUSTRIES, INC. LENDER NO. 1
By:________________________________ By:_______________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
FLEET CAPITAL CORPORATION, as Agent Revolving Credit Loan Commitment:
$_____________
By:________________________________ Outstanding Term Loan A: $__________
Name:______________________________
Title:_____________________________ Outstanding Term Loan B: $__________
ASSIGNING LENDER LENDER NO. 2
By:________________________________ By:_______________________________
Name:______________________________ Name:_____________________________
Title:_____________________________ Title:____________________________
Revolving Credit Loan Commitment: Revolving Credit Loan Commitment:
$__________ $___________
Outstanding Term Loan A: $__________ Outstanding Term Loan A: $__________
Outstanding Term Loan B: $__________ Outstanding Term Loan B: $__________
T-8
SECURITIES
PURCHASE AGREEMENT dated as
of September 20, 1999, by
and among EAGLE PACIFIC
INDUSTRIES, INC., a
corporation organized under
the laws of the State of
Minnesota (the "Company"),
and the Persons listed on
Schedule 1.1 hereto
(individually, an
"Investor" and
collectively, the
"Investors").
RECITALS
WHEREAS, the Company and its Subsidiaries (as hereinafter
defined) manufacture and distribute polyvinyl chloride pipe and polyethylene
tubing products used for turf and water irrigation, water works, natural gas,
water wells, fiber optic lines, electronic and telephone lines and commercial
and industrial plumbing (the "Subject Business");
WHEREAS, the Company plans to acquire from Mitsubishi Chemical
America, Inc., a Delaware corporation ("Mitsubishi") and Mitsubishi Plastics
Industries Ltd., a Japanese corporation ("MPI") all of the outstanding capital
stock of Pacific Western Extruded Plastics Company, a Delaware corporation ("PW
Pipe") for a cash purchase price equal to $80,000,000 (subject to adjustment)
and thereafter PW Pipe will be merged with and into the Company, with the
Company being the surviving corporation (such transactions being, the
"Acquisition");
WHEREAS, the Company desires to issue to the Investors and the
Investors, severally and not jointly, desire to purchase from the Company up to
$32,500,000 principal amount of senior subordinated notes, on the terms and for
the consideration provided herein;
WHEREAS, the proceeds of the notes shall be used to (i) fund a
portion of the Acquisition, (ii) refinance certain indebtedness of the Company
and PW Pipe and (iii) pay related fees and expenses, subject to the terms and
conditions set forth in this Agreement and the other Transaction Documents (as
hereinafter defined);
WHEREAS, in consideration of the Investors several agreement
to purchase the Notes, the Company desires to issue to the Investors and the
Investors, jointly and not severally, desire to purchase from the Company
warrants to purchase shares of the common stock of the Company, subject to the
terms and conditions contained in this Agreement and the Warrant Agreement (as
hereinafter defined);
WHEREAS, the Notes shall be subordinated in all respects to
the $100,000,000 senior credit facility provided to the Company pursuant to the
terms of the Second Amended and Restated Loan and Security Agreement dated the
date hereof (as such agreement may be amended, modified, restated or otherwise
supplemented from time to time in accordance with the provisions thereof and
hereof, including, without limitation Section 8.11(c) hereof, the "Senior Credit
Agreement") among the Company, the financial institutions party thereto from
time to time (the "Senior Lenders") and Fleet Capital Corporation, as agent for
the Senior Lenders (in such capacity, the "Senior Bank Agent").
<PAGE>
NOW THEREFORE, the parties to this Agreement hereby agree as
follows:
Article I
DEFINITIONS
1.1 Defined Terms.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Acquisition" has the meaning given to such term in the
recitals to this Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person that directly or indirectly through one or more intermediaries
Controls, is Controlled by or is under common Control with such Person.
"Agreement" means this Agreement, together with all Schedules,
Exhibits and Annexes attached hereto, as amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.
"Applicable Law" means all provisions of laws, statutes,
ordinances, rules, regulations, permits, certificates or orders of any
Governmental Authority applicable to the Person in question or any of its assets
or property, and all judgments, injunctions, orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party or by which any of its assets or properties are bound.
"Applicable Prepayment Premium" means, at any date of
determination in connection with a prepayment of the Notes in accordance with
Sections 3.5 and 3.6 hereof during any period set forth below, an amount equal
to the amount set forth below opposite such period:
Prepayment Date During % of Principal
the Period Being Paid
Closing Date to and including the first anniversary of
the Closing Date 10%
After the first anniversary of the Closing Date to and
including the second anniversary of the Closing Date 8%
After the second anniversary of the Closing Date to and
including the third anniversary of the Closing Date 6%
After the third anniversary of the Closing Date to and
including the fourth anniversary of the Closing Date 4%
After the fourth anniversary of the Closing Date to and
including the fifth anniversary of the Closing Date 2%
After the fifth anniversary of the Closing Date to and
including the sixth anniversary of the Closing Date 1%
At any time after the sixth anniversary of the Closing
Date 0%
<PAGE>
provided, however, that the amount of any Applicable Prepayment Premium payable
to an Investor in accordance with the foregoing may be reduced by such Investor,
in its sole discretion.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. ss. 101 et seq., as amended from time to time.
"Board" means the board of directors of the Company.
"Board of Governors" means the Board of Governors of the
Federal Reserve System of the United States of America.
"Business Day" means any day other than a Saturday, Sunday or
a day on which banks are authorized or required to be closed in New York, New
York; provided, however, that any determination of a Business Day relating to a
securities exchange or other securities market means a Business Day on which
such exchange is open for trading.
"Capital Lease Obligations" means any Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
"Capital Expenditures" means expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person, but
excluding any debt securities convertible into such equity.
"Carryover Amount" for any fiscal year means, an amount equal
to the lesser of $1,000,000 or the aggregate amount of the Capital Expenditures
permitted to made in accordance with Section 8.9(c) for the previous fiscal year
without giving effect to any Carryover Amount minus the actual amount of Capital
Expenditure made in such fiscal year.
<PAGE>
"Cash Equivalents" means:
(i) investments in direct obligations of the United States of America, or
any agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the
date of acquisition thereof;
(ii) investments in certificates of deposit maturing within one year from
the date of acquisition issued by a bank or trust company organized
under the laws of the United States or any state thereof having capital
surplus and undivided profits aggregating at least $100,000,000; and
(iii) investments in commercial paper given the highest rating by a national
credit rating agency and maturing not more than 270 days from the date
of creation thereof.
"Change of Control" means the occurrence of any of the
following events: (i) all or substantially all of the Company's assets, on a
consolidated basis, are sold as an entirety to any Person or related group of
Persons or there shall be consummated any consolidation or merger of the Company
(A) in which the Company is not the continuing or surviving company (other than
a consolidation or merger with a wholly owned Subsidiary in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
any case, other than a sale of assets or consolidation or merger of the Company
in which the holders of the Common Stock immediately prior to the sale of assets
or consolidation or merger have, directly or indirectly, at least a majority of
the Common Stock of the transferee or continuing or surviving company
immediately after such sale of assets or consolidation or merger, (ii) any
"person" (as such term is used in Sections 13(d) and 14 (d) of the Exchange Act)
other than the Spell Group, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 of the Exchange Act provided that such person shall be
deemed to have "beneficial ownership" of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the outstanding voting securities of the Company; or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (together with any new directors whose
election by such members of the Board or whose nomination for election by the
shareholders of the Company, as the case may be, was approved by a vote of at
least a majority of the directors of the Company then still in office) cease for
any reason to constitute a majority of the Board then in office.
"Closing" means the issuance and purchase of the Notes and the
Warrants on the Closing Date.
"Closing Date" has the meaning given to such term in Section
2.2.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations issued thereunder, as from time to time in effect,
or any successor thereto.
"Commission" means the Securities and Exchange Commission (or
a successor thereto).
<PAGE>
"Common Stock" has the meaning given to such term in the
Warrant Agreement.
"Company" has the meaning given to such term in the Preamble
to this Agreement.
"Compliance Sideletter" means the Regulatory Compliance
Sideletter in substantially the form of Exhibit G hereto, as such Sideletter may
be amended, supplemented or otherwise modified from time to time.
"Confidential Information Memorandum" means the Confidential
Information Memorandum of the Company dated July 1999.
"Consolidated" means the consolidation in accordance with GAAP
of the accounts or other items as to which such term applies.
"Consolidated Net Income" means, with respect to the Company
and its Subsidiaries for any fiscal period, the net income (or loss) of the
Company and its Subsidiaries for such period taken as a whole (determined in
accordance with GAAP on a consolidated basis), but excluding in any event: (a)
any gains or losses on the sale or other disposition of Investments or fixed or
capital assets or from any transaction classified as extraordinary under GAAP,
any taxes on such excluded gains and any tax deductions or credits on account of
any such excluded losses; (b) the proceeds of any life insurance policy; (c) net
earnings and losses of any business entity, substantially all the assets of
which have been acquired in any manner by the Company or any of its
Subsidiaries, realized by the business entity prior to the date of such
acquisition, (d) net earnings and losses of business entity which shall have
merged into the Company or any Subsidiary of the Company earned or incurred
prior to the date of such merger, (e) net earnings of any business entity (other
than a Consolidated Subsidiary) in which the Company has an ownership interest
unless such net earnings shall have been received by the Company in the form of
cash distributions; (f) earnings resulting from a reappraisal, revaluation or
write-up of assets; (g) any charge to net earnings resulting from the
amortization of the value of stock options given to employees to the extent
required by FASB 25; (h) any increase or decrease of net income arising from a
change in the Company's accounting methods; (i) any gains resulting from the
forgiveness of Indebtedness or the retirement of Indebtedness at a discount; (j)
any gain arising from the acquisition of any Securities of the Company; and (k)
any reversal of any contingency reserve, except that provision for such
contingency reserve shall have been made from income arising during such period.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Convertible Preferred Stock" means the Company's 8%
Convertible Preferred Stock due 2004 par value $.01 per share issued and sold
pursuant to the terms of the MassMutual Stock Purchase Agreement.
"Default" means any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, become an Event
of Default.
<PAGE>
"Deferred Interest Amount" has the meaning given to such term
in Section 3.3(a).
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terns of any security into which its is convertible, or for
which its is exchangeable, in each case at the option of the holder thereof), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
Section 8.5 hereof.
"EBITDA" means, with respect to the Company and its
Subsidiaries for any fiscal period, the sum of Consolidated Net Income of the
Company and its Subsidiaries for such period plus amounts deducted (or added) in
determining Consolidated Net Income in respect of (a) any provision for (or less
any benefit from) income taxes whether current or deferred, (b) amortization and
depreciation expense, (c) Interest Expense for such period, all as determined in
accordance with GAAP and (d) prior to December 31, 1999, that portion of cost of
goods sold resulting from the write up of inventory in connection with the
Acquisition pursuant to APB16; provided that the aggregate amount added to
EBITDA pursuant to this clause (d) shall not exceed $3,000,000.
"Environmental Laws" means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all rules and regulations from time to time promulgated
thereunder.
"Event of Default" means the occurrence of any event set forth
in Article XI.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Maturity Date" means September 20, 2007.
"Financial Officer" of any Person means its chief financial
officer or principal accounting officer.
<PAGE>
"Funded Debt" means, with respect to the Company and its
Subsidiaries, (i) Indebtedness arising from the lending of money by any Person
to the Company or its Subsidiaries; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to the Company or its
Subsidiaries (A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (iii) Indebtedness that
constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit; (v) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency hedging arrangements or other interest or exchange rate hedging
arrangements; and (vi) Indebtedness of the Company or its Subsidiaries under any
guaranty of obligations that would constitute Indebtedness for Funded Debt under
clauses (i) through (v) hereof or any other obligation, contingent or otherwise,
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person, if owed directly by the Company or such Subsidiary. In
computing the amount of Funded Debt, the Notes will be valued at full face value
(less any payments thereon) without giving effect to any original issue
discount.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" means any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or any
political subdivision thereof, or of any other country.
"Indebtedness" of any Person means, without duplication,
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side
of a balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account
of such Person, and;
(iv) in the case of the Company (without duplication), the
Obligations.
"Indemnified Person" has the meaning given to such term in
Section 12.5.
"Interest Coverage Ratio" means, with respect to the Company
and its Subsidiaries for any period of determination, the ratio of (a) EBITDA
for such period to (b) Interest Expense paid in cash for such period.
<PAGE>
"Interest Expense" means, with respect to the Company and its
Subsidiaries for any period determined on a consolidated basis, the interest
expense incurred for such period excluding interest income, as determined in
accordance with GAAP.
"Interest Payment Date" means each March 20, June 20,
September 20 and December 20.
"Interest Period" means (i) initially, the period from and
including the Closing Date to but excluding the first Interest Payment Date to
occur thereafter and (ii) thereafter, the period from and including each
Interest Payment Date to but excluding the immediately following Interest
Payment Date.
"Investment" means all investments in the property or assets
of any Person, in cash or property, whether by any advance, loan, extension of
credit by the Company or any of its Subsidiaries, (by way of guaranty or
otherwise) or capital contribution, or purchase of a stock, bonds, notes,
debentures or other securities or any assets constituting the purchase of a
business or line of business.
"Leverage Ratio" means, with respect to the Company and its
Subsidiaries for any period of determination, the ratio of (a) Funded Debt
outstanding on such date to (b) EBITDA for such period.
"Lien" means any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of the Agreement, an Obligor
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
"MassMutual Stock Purchase Agreement" means the Preferred
Stock Purchase Agreement dated as of May 1, 1997 among the Company and the
Investors party thereto.
"Material Adverse Effect" means (a) a material adverse effect
on the business, assets, liabilities (actual or contingent), operations, results
of operations, condition (financial or other) or prospects of the Obligors taken
as a whole, (b) any material impairment of the ability any Obligor to perform
any of its respective material obligations under any Transaction Document to
which such Obligor is a party, (c) any material impairment of any material
rights of or benefits available to the Investors under any Transaction Document.
"Mitsubishi" has the meaning given to such term in the
recitals to this Agreement.
"MPI" has the meaning given to such term in the recitals to
this Agreement.
"Multiemployer Plan" has the meaning set forth in Section
4001(a)(3) of ERISA.
<PAGE>
"Note Documents" means this Agreement, the Subsidiary Guaranty
and the Notes.
"Notes" means the $32,500,000 14% Senior Subordinated Notes
due 2007 dated the Closing Date in substantially the form of Exhibit A hereto.
"Notes Purchase Price" has the meaning given to such term in
Section 2.1(c).
"Note Register" shall have the meaning given to such term in
Section 3.7(a).
"Obligations" means the due and punctual payment of the
principal of, premium, if any, and interest on the Notes, and other monetary
obligations, liabilities and the performance of all other obligations of each
Obligor to the Investors, howsoever created, arising or evidenced, whether
direct or indirect, joint or several, absolute or contingent, primary or
secondary, due or to become due, or now existing or hereafter arising, under
this Agreement, the Notes or any other Note Document.
"Obligors" means the Company.
"Permitted Liens" means any Lien permitted in accordance with
Section 8.4.
"Permitted Investments" means,
(i) Investments in the Company or, in a Subsidiary Guarantor;
(ii) Investments in Cash Equivalents;
(iii) Investments made as a result of the receipt of non-cash
consideration from an asset sale that was made pursuant to and
in compliance with Section 8.6 ;
(iv) any acquisition of assets solely in exchange for the issuance
of equity Securities (other than Disqualified Stock) of the
Company;
(v) any interest rate protection agreements entered into in
accordance with the Senior Credit Agreement;
(vi) Investments made in any debtor of the Company as a result of
the receipt of stock, obligations or securities in settlement
of debts created in the ordinary course of business and owing
to the Company or any of its Subsidiaries;
(vii) Investments in receivables owing to the Company or any
subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with
customary trade terms; provided, however, that such trade
terms may include such concessionary trade terms as the
Company or any such Subsidiary deems reasonable under the
circumstances;
<PAGE>
(viii) any other Investments in any Person having an aggregate fair
market value (measured on the date each such investment was
made and without giving effect to subsequent changes in
value), when taken together with all other investments made
pursuant to this clause (vii) not to exceed $3,000,000;
(ix) up to $2,000,000 of loans at any one time outstanding to
officers, directors or employees of the Company, the proceeds
of which are used to purchase common stock of the Company; and
(x) Investments in the Notes.
"Plan" means an employee benefit plan now or hereafter
maintained for employees of the Company or any of its Subsidiaries that is
covered by Title IV of ERISA.
"Projections" means the Company's forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c) cash flow
statements, and (d) capitalization statements, all prepared on a consistent
basis with the Company historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchase Documents" means the Stock Purchase Agreement dated
as of September 20, 1999 between the Company, Mitsubishi and MPI, pursuant to
which the Company is acquiring all of the issued and outstanding capital stock
of PW Pipe, as such Agreement may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"PW Pipe" has the meaning given to such term in the recitals
to this Agreement.
"Person" shall be construed as broadly as possible and
includes natural person, corporation, limited liability company, partnership,
joint venture, trust, unincorporated association or other organization and a
Governmental Authority.
"Proceeding" shall have the meaning set forth in Section 9.2
hereof.
"Registration Rights Agreement" has the meaning given to such
term in the Warrant Agreement.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA.
"Required Investors" means Investors holding Notes
representing a majority of the then outstanding principal balance of the Notes.
"Responsible Officer" of any Person means, (i) with respect to
any individual, such individual or any other Person duly authorized to act on
behalf of such individual and (ii) with respect to any institution, the chief
executive officer or a Financial Officer of such Person.
<PAGE>
"Restricted Investment" means any investment made in cash or
by delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation, or by loan, advance or capital contribution,
or otherwise, or in any Property except for Permitted Investments.
"Restricted Payment" means, with respect to the Company and
its Subsidiaries,
(i) the declaration or payment of any dividend or the
incurrence of any liability to make any other payment or distribution
of cash or other property or assets in respect of the capital stock or
other equity securities of the Company or any Subsidiary, other than
(A) dividends or distributions to the Company or any Subsidiary
Guarantor or (B) dividends or distributions payable solely in shares of
capital stock or (C) dividends or distribution by any Subsidiary of the
Company to the Company to permit the Company (x) to any taxes which are
due and payable by the Company or any of its Subsidiary as a part of a
consolidated tax group or (y) to purchase the Company's capital stock
or other equity securities to the extent permitted by clause (ii)
hereof;
(ii) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of the capital stock or
other equity securities Company or any Subsidiary or any other payment
or distribution made in respect thereof, either directly or indirectly,
except that the Company may repurchase its capital stock or other
equity securities either (x) in open market transactions or (y) from
former employees of the Company or any of its Subsidiaries upon the
death, disability or termination of employment of such Person or
otherwise in accordance with any shareholder agreement, stock option
plan or any employee stock ownership plan; provided, that the aggregate
amount of all such repurchases made pursuant to the foregoing
subclauses (x) and (y) shall not exceed $1,500,000 in any fiscal year;
(iii) any payment or prepayment of principal of, premium, if
any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any Indebtedness
the terms of which provide that such Indebtedness is junior in right of
payment to the Notes; and
(iv) any Restricted Investment.
"Restricted Securities" means the Notes, to the extent the
Notes have not then been sold to the public pursuant to (a) registration under
the Securities Act or (b) Rule 144 (or similar or successor rule) promulgated
under the Securities Act.
"Security" has the meaning given to such term in Section 2(l)
of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Bank Agent" has the meaning given to such term in the
recitals hereof.
<PAGE>
"Senior Credit Agreement" has the meaning given to such term
in the recitals hereof.
"Senior Credit Documents" has the meaning given to the term
"Loan Documents" in the Senior Credit Agreement.
"Senior Indebtedness" means,
(a) all "Obligations" under and as defined in the Senior Credit
Agreement, now existing or hereinafter created, under the Senior Credit
Agreement, including the principal of, and premium (if any) and interest on
loans and other extensions of credit under the Senior Credit Agreement
(including, without limitation, any interest accruing subsequent to the
commencement of any Proceeding whether or not such interest constitutes an
allowed claim in any such Proceeding) and all commitment, facility and other
fees payable under the Senior Credit Agreement and all expenses, reimbursements,
indemnities and other amounts payable by the Company under the Senior Credit
Agreement;
(b) with respect to any Subsidiaries of the Company, the contingent
obligations or guaranty of such Subsidiary, under or in respect of Indebtedness
covered under clause (a) above; and
(c) subject to the provisions of Section 8.11(c), any and all
refinancings, replacements or refunding of any of the amounts referred to in
clauses (a) and (b) above; provided, that the aggregate principal amount of
Indebtedness (or any refinancing, replacement or refunding thereof),
constituting "Senior Indebtedness" hereunder shall not exceed, at any one time
outstanding $110,000,000 (such amount being referred to as the "Maximum
Principal Amount of Senior Indebtedness"); provided further, that the Maximum
Principal Amount of Senior Indebtedness shall be reduced from time to time by
all scheduled payments and mandatory prepayments of the term loans or reduction
of the commitments made from time to time under the Senior Credit Agreement or
any Senior Refinancing Agreement which result in a permanent reduction of the
term loans or commitments thereunder. Senior Indebtedness shall be considered
outstanding whenever any loan commitment under the Senior Credit Agreement or
any Senior Refinancing Agreement is outstanding.
"Senior Lenders" has the meaning given to such term in the
recitals hereof.
"Senior Nonmonetary Default" means the occurrence or existence
of any event, circumstance, condition or state of facts that, by the terms of
any instrument pursuant to which any Senior Indebtedness is outstanding, permits
one or more holders of such Senior Indebtedness (or a trustee or agent on behalf
of the holders thereof) to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise become due and payable, other than
a Senior Payment Default.
"Senior Nonmonetary Default Notice" shall have the meaning
given to such term in Section 9.3(b).
<PAGE>
"Senior Payment Default" means any default in the payment of
principal of (or premium, if any) or interest on, or other amount payable in
respect of, any Senior Indebtedness when due that, by the terms of any
instrument pursuant to which any Senior Indebtedness is outstanding, permits one
or more holders of such Senior Indebtedness (or a trustee or agent on behalf of
the holders thereof) to declare such Senior Indebtedness due and payable prior
to the date on which it would otherwise become due and payable, other than a
Senior Nonmonetary Default.
"Senior Refinancing Agreement" shall have the meaning given to
such term in Section 8.11(c).
"Series A Preferred Stock" means the Company's Series A 7%
Convertible Preferred Stock, $0.01 par value.
"Solvent" means, as to any Person, such Person (i) owns
Property whose fair saleable value is greater than the amount required to pay
all of such Person's Indebtedness (including contingent debts), (ii) is able to
pay all of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"Spell Group" has the meaning given to such term in the
Warrant Agreement.
"Stated Rate" has the meaning given to such term in Section
3.3 hereof.
"Subject Business" has the meaning given to such term in the
recitals to this Agreement.
"Subordinated Obligations" shall have the meaning given to
such term in Section 9.1.
"Subsidiary" means, with respect to any Person, any other
Person of which more than fifty percent (50%) of the shares of stock or other
interests entitled to vote in the election of directors or comparable Persons
performing similar functions (excluding shares or other interests entitled to
vote only upon the failure to pay dividends thereon or other contingencies) are
at the time owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person.
"Subsidiary Guarantor means any Subsidiary of the Company that
is a party to the Subsidiary Guaranty.
"Subsidiary Guaranty" means the Senior Subordinated Subsidiary
Guaranty in substantially the form of Exhibit B hereto, in favor of the
Investors, as such Subsidiary Guaranty may be amended, supplemented or otherwise
modified from time to time.
"Transaction Documents" means the Warrants, the Warrant
Agreement, the Registration Rights Agreement, the Compliance Sideletter, the
Note Documents and any other document, instrument or agreement executed and
delivered by the Company in connection with any of the foregoing.
<PAGE>
"Transfer" means any sale, transfer, assignment, or other
disposition of any interest in, with or without consideration, any security,
including any disposition of any security or of any interest therein which would
constitute a sale thereof within the meaning of the Securities Act.
"US$" and "United States Dollars" shall each mean lawful
currency of the United States.
"United States" means the United States of America.
"Warrant Agreement" means the Warrant Agreement dated the date
hereof among the Company and the other signatories thereto, as such Agreement
may be amended, supplemented or otherwise modified from time to time.
"Warrants" has the meaning given to such term in the Warrant
Agreement.
"Warrant Shares" has the meaning given to such term in the
Warrant Agreement.
1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".
1.3 Use of Defined Terms.
Terms defined in this Agreement and used in any Exhibit, Schedule,
Certificate, Annex or any Transaction Document or other document delivered in
connection with this Agreement, shall have the meanings assigned herein unless
otherwise defined or the context otherwise requires.
1.4 Cross-References.
Unless otherwise specified, references in this Agreement or any
Transaction Document to any Article or Section are references to such Article or
Section of this Agreement or such Transaction Document, as the case may be, and
references in any Article, Section or definition to any clause are references to
such clause of such Section, Article or definition.
1.5 Currency.
Unless otherwise specified herein, all statements or references to
dollar amounts or $ set forth herein or in any other Transaction Document shall
refer to United States Dollars.
<PAGE>
1.6 Accounting Terms; GAAP.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. If any changes in accounting principles from those currently
employed become effective by the promulgation of rules, regulations
pronouncements and opinions by or required by the Financial Accounting Standards
Board (FASB) or the American Institute of Certified Public Accountants (AICPA)
(or any successors thereto) resulting in a change in the financial covenant
calculations set forth in Section 8.9, such covenants shall continue to be
calculated under the previous accounting principles and the holders of the Notes
and the Company agree to negotiate in good faith to amend such covenant
calculations to equitably reflect such changes with the desired result that the
criteria for evaluation of the financial condition of the Company and its
Subsidiaries shall be the same as if such changes had not been made. If no
agreement can be reached regarding such amendments within thirty (30) days after
the effectiveness of such change in accounting principles, then the Company
shall continue to calculate those covenants which were affected using the
pervious accounting principles.
ARTICLE II
PURCHASE AND SALE OF THE NOTES
2.1 Authorization and Issuance of the Notes .
(a) The Company has authorized the issuance of the Notes.
(b) On the Closing Date, the Company shall (i) sell to each Investor,
and each Investor shall severally purchase from the Company, upon satisfaction
of the conditions set forth in Section 6.1 hereof (or waiver in writing of such
conditions by the Investors), a Note in the principal amount equal to the amount
set forth opposite such Investor's name on Schedule 1.1 hereto in consideration
by the Company (x) for receipt of the Note Purchase Price in, (ii) deliver to
each Investor a duly executed Note (payable to the order of such Investor),
(iii) deliver to each Investor a legal opinion from counsel to the Company in
form and substance satisfactory to the Investors and (iv) deliver to each
Investor the additional documents specified in Section 6.1 hereof. The Investors
will deliver to the Company upon satisfaction of the closing conditions set
forth in Section 6.1 hereof (or waiver in writing of such conditions by the
Investors) either (i) the aggregate principal amount set forth opposite such
Investor's name on Schedule 1.1 hereto, in cash by wire transfer of immediately
available funds to an account designated by the Company at least two (2)
Business Days prior to the Closing Date or (y) certificates representing the
number of shares of Convertible Preferred Stock held beneficially or of record
by such Investor set forth opposite such Investor's name on Schedule 1.1 hereto
and upon delivery of such certificates such Investor shall release of all rights
and benefits relating thereto
(c) The Investors and the Company hereby acknowledge and agree that the
Notes are part of an "investment unit" within the meaning of Section 1273(c)(2)
of the Code, which includes the Warrants. Notwithstanding anything to the
contrary contained herein or in the Warrant Agreement, the Investors and the
Company hereby further acknowledge and agree that solely for United States
federal income tax purposes the aggregate "issue price" of the Notes and the
Warrants under Section 1273(b) of the Code (and for purposes of comparable state
and local income tax laws) shall equal $ 29,000,000 and $3,500,000,
respectively. The Investors and the Company agree to use the foregoing issue
prices for all income tax purposes with respect to this transaction.
<PAGE>
(d) The Investors and the Company agree to use the foregoing issue
prices for all income tax purposes with respect to this transaction.
2.2 Closing.
Subject to the satisfaction of the conditions precedent set forth in
Section 6.1 hereof (or the waiver in writing of such conditions by the
Investors), the execution of this Agreement and the other Transaction Documents
and other documentation contemplated hereby and thereby and the delivery of the
Notes and Warrants shall occur on or prior to September 20, 1999, or such later
date as the Company and the Investors shall mutually agree to in writing (the
"Closing Date"), at the offices of Fredrikson & Byron, P.A., 1100 International
Centre, 900 Second Avenue South, Minneapolis, MN 55402-3397.
ARTICLE III
PROVISIONS OF THE NOTES AND THE WARRANTS
3.1 The Notes.
The Notes shall be in the aggregate principal amount of Thirty Two
Million, Five Hundred Thousand Dollars ($32,500,000). The Notes shall be dated
the Closing Date. The aggregate amount of the Notes shall, subject to the
provisions for mandatory and optional prepayment and acceleration contained
herein, mature and be payable in full on the Final Maturity Date.
3.2 General Provisions As To Payments.
(a) The Company shall make each payment in respect of the principal of,
premium, if any, or accrued interest on the Notes, or any other amount due to
the Investors under this Agreement or any other Note Document, not later than
2:00 p.m., New York City time, on the day when due, to the Investors as provided
in the Notes and Schedule 1.1 attached hereto, or in such other manner as
instructed from time to time in writing by the Investor. All payments hereunder
shall be made in United States Dollars by wire transfer of immediately available
funds.
(b) Whenever any payment (including principal of, premium, if any, or
interest on the Notes or other amount) hereunder or under any other Note
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
such interest, or other amount, if applicable.
(c) The Company hereby authorizes the Investors to make appropriate
notations on the grid attached to the Notes, including the date, outstanding
principal amount and any prepayment thereof and the Deferred Interest Amounts to
be added to the principal amount of the Notes in accordance with Section 3.3(a),
<PAGE>
which notations shall be conclusive absent manifest error; provided, however,
that the failure of the Investors to make such notation or any error on the
Notes shall not affect the obligation of the Company to repay, in accordance
with the terms of the Notes and this Agreement, the principal amount of the
Notes together with all interest, prepayment premiums, if any, and other amounts
due hereunder.
(d) Neither the Company nor any of its Subsidiaries shall purchase,
redeem or otherwise acquire any Notes from any holder thereof except upon
payment or prepayment thereof in accordance with the specific terms thereof and
of this Agreement unless the Company or such Subsidiary shall have offered to
purchase, redeem or otherwise acquire, as the case may be, Notes from each
holder of the Notes at the time outstanding upon the same terms and conditions
and on a pro rata basis (based upon the principal amount of the Notes then held
by each such holder). Any Notes so purchased, redeemed or otherwise acquired by
the Company or any Subsidiary of the Company shall be cancelled and not be
deemed outstanding for any purpose under this Agreement.
(e) Except to the extent otherwise provided herein, each payment of
principal of the Notes by the Company shall be made for the account of the
holders thereof pro rata in accordance with the respective unpaid principal
amounts of the Notes held by them and each payment of interest on Notes shall be
made for the account of the holders thereof pro rata in accordance with the
amounts of interest on such Notes then due and payable to the respective
Investors.
3.3 Interest.
(a) Interest shall be payable on the principal amount of the Notes, and
to the maximum extent permitted by Applicable Law, on interest thereon at a
fixed rate per annum equal to 14% (the "Stated Rate"). Notwithstanding the
foregoing, in connection with any Interest Payment Date, the Company may elect
to defer a portion of the interest owing on such Interest Payment Date provided
that (i) no Default or Event of Default has occurred and is continuing, and (ii)
the Company gives the Investors written notice of such election prior to the
commencement of the related Interest Period, which notice shall include the
amount of interest the Company elects to defer on such Interest Payment Date;
and provided further that the maximum amount of interest the Company may elect
to defer on any Interest Payment Date shall be an amount equal to the interest
accrued on the Notes during such Interest Period at a rate equal to 2% per
annum. If the Company elects to defer a portion of the interest due on any
Interest Payment Date (such amount being hereinafter referred to as the
"Deferred Interest Amount"), then the aggregate principal amount of the Notes
shall be automatically deemed to be increased by an amount equal to the Deferred
Interest Amount owing on such Interest Payment Date.
(b) Interest on the Notes shall accrue from day to day and shall be
payable (as provided in Section 3.3(a) above) on each Interest Payment Date,
commencing December 20, 1999, on the date of any prepayment in accordance with
Sections 3.5 and 3.6 hereof and on maturity of the Notes, whether by
acceleration or otherwise. All computations of interest hereunder shall be made
on the basis of a 360-day year consisting of twelve 30-day months.
<PAGE>
(c) Notwithstanding any other provision of this Section 3.3 or any
Note, the Company shall at any time after the seventh anniversary of the date
hereof make interest payments on account of this Note in immediately available
funds at such time and in such amounts as are necessary for this Note not to
have "significant original issue discount" as that term is defined in Section
163(i) of the Code.
(d) In no event whatsoever shall the aggregate of all amounts deemed
interest under the Notes and charged or collected pursuant to the terms of this
Agreement or pursuant to the Notes exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. If any provisions of this Agreement, or the Notes are in
contravention of any such law, such provisions shall be deemed amended to
conform thereto.
3.4 Interest on Overdue Amounts.
So long as any Event of Default shall have occurred and be continuing,
the Company shall pay, in cash on demand from time to time, interest to the
extent permitted by law on the Notes at a rate per annum equal to two percent
(2%) above the Stated Rate.
3.5 Mandatory Prepayment.
(a) The Company shall repay the Notes on September 20, 2005, September
20, 2006 and September 20, 2007, in cash in an amount equal to 33.33% of the
outstanding principal amount of the Notes on each such date, together with
interest accrued but unpaid on the principal portion of the Notes being repaid
on each such date.
(b) Any and all principal of the Notes remaining unpaid, together with
all interest accrued but unpaid thereon, automatically and unconditionally shall
be due and payable in full in cash on the Final Maturity Date.
(c) In the event of a Change of Control, each Investor shall have the
option to require the Company to repurchase all the Notes held by such Investor
at a purchase price in cash equal to the then outstanding principal amount of
the Notes plus the Applicable Prepayment Premium, together with all interest
accrued on such Notes through the date of repurchase. The Company shall give the
Investors notice (a "Change of Control Notice") of any transaction that would
result in a Change of Control not less than thirty (30) days prior to the
anticipated date of the consummation of such transaction (but in no event later
than the third Business Day following the Company becoming aware thereof). Any
Investor may exercise its right to require the Company to repurchase the Notes
held by it by delivering written notice of such exercise (a "Repurchase Notice")
to the Company within twenty (20) days after receipt of the Change of Control
Notice. Within 15 days after the first date of receipt of a Repurchase Notice by
the Company (the "Repurchase Notice Date"), the Company shall give a notice to
all other Investors advising them of the receipt by the Company of such
Repurchase Notice, together with a copy of such Repurchase Notice. The date upon
which the Company shall so advise such other Holders is herein called the
"Company Notice Date". Within 15 days after the Company Notice Date, each such
other Investor also may give a Repurchase Notice to the Company and each such
Repurchase Notice shall be deemed given as of the date of the Repurchase Notice
given by the Investor initially exercising its repurchase rights hereunder. The
repurchase of the Notes shall be consummated on a date selected by the Company
upon at least 15 days' prior written notice to the Investors which have given
the relevant Repurchase Notice(s), but in no event later than the date of
<PAGE>
consummation of such Change of Control or three (3) Business Days after the
Company becomes aware of such Change of Control (the "Repurchase Closing Date").
On the Repurchase Closing Date, the Company shall purchase from the Investors
which have given such Repurchase Notice(s), and such Investor shall sell to the
Company, the Notes held by such Investor for the purchase price specified in
this paragraph (c).
(d) In connection with any Change of Control, the Company covenants to
(i) repay in full all Indebtedness under the Senior Credit Agreement and to
terminate all commitments thereunder and to repay in full all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full and terminate all commitments under all Indebtedness
under the Senior Credit Agreement and all other such Senior Indebtedness or (ii)
obtain the requisite consents under the Senior Credit Agreement and all other
Senior Indebtedness to permit the repurchase of the Notes as provided in
paragraph (c) above. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase the
Notes pursuant to the provisions above. The Company's failure to comply with the
covenant described in the immediately preceding sentence shall constitute an
Event of Default.
3.6 Optional Prepayments.
(a) The Company may, at any time, at its option, prepay the Notes in
whole and from time to time in part, upon not less than thirty (30) Business
Days' prior written notice to the Investors; provided, however, that each
partial prepayment shall be in an aggregate principal amount not less than
$1,000,000 or integral multiples of $100,000 in excess thereof. Each prepayment
of the Notes shall include payment in cash of the principal amount of the Notes
proposed to be prepaid on such prepayment date, all accrued but unpaid interest
thereon to the date of such prepayment on the portion of the Notes being prepaid
and the Applicable Prepayment Premium in respect of the portion of the Notes
being prepaid. In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated pro rata among
all of the Notes outstanding at such time in proportion, to the respective
unpaid principal amounts.
(b) Each notice of prepayment pursuant to this Section 3.6 shall
specify the proposed date of such prepayment, the principal amount of the Notes
to be prepaid, the interest owing on such principal amount and the aggregate
Applicable Prepayment Premium in respect of the Notes being prepaid on such
prepayment date.
3.7 Securities Register.
(a) The Company shall cause to be kept at its principal office a
register for the registration and transfer of the Notes (the "Note Register").
The names and addresses of the holders of the Notes, the transfer of the Notes,
and the names and addresses of the transferees of the Notes shall be registered
in the Note Register.
<PAGE>
(b) The Person in whose name any registered Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes of
this Agreement and the Company shall not be affected by any notice to the
contrary, until due presentment of such Note for registration of transfer so
provided in this Section 3.7(b). Payment of or on account of the principal,
premium, interest and any other amount paid on any registered Note shall be made
to (or based upon the written order of) such registered holder.
3.8 Lost, Etc. Securities.
Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of an Investor being satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any Note, and in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company (if such Investor is a financial institution or other institutional
investor, its own agreement being satisfactory) or, in the case of any such
mutilation, upon surrender of such Note, the Company shall, without charge,
issue register and deliver in lieu of such Note a new Note of like kind
representing the same rights represented by and dated the date of such lost,
stolen, destroyed or mutilated Note. Any such new Note shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Note shall be at any time enforceable by
any Person.
3.9 Several Obligations; Remedies Independent.
No Investor shall have any obligation to any other Investor in respect
of the failure by such Investor to purchase any Note required to be purchased by
such Investor. The amounts payable by the Company at any time hereunder and
under the Notes to each Investor shall be separate and independent debt and
subject to the provisions of Articles IX and XI each holder shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes held
by it and it shall not be necessary for any other holder to consent to or be
joined as an additional party in, any proceedings for such purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Obligor hereby represent and warrant to the Investors
that, after giving effect to the Acquisition and the issuance and sale of the
Notes:
4.1 Organization and Qualification.
Each Obligor and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Obligor and each of its Subsidiaries is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each state or jurisdiction listed on Schedule 4.1 hereto
and in all other states and jurisdictions in which the failure of such Obligor
or any Subsidiary to be so qualified would have a Material Adverse Effect.
<PAGE>
4.2 Corporate Power and Authority; Consent.
(a) Each Obligor and each of its Subsidiaries is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and each of
the other Transaction Document to which it is a party. The execution, delivery
and performance of this Agreement and each of the other Transaction Documents
have been duly authorized by all necessary corporate action and do not and will
not (i) contravene such Obligor's or any of its Subsidiaries' charter, articles
or certificate of incorporation or by-laws; (ii) violate, or cause such Obligor
or any of its Subsidiaries to be in default under, any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award in effect having applicability to such Obligor or any of its Subsidiaries;
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which such
Obligor or any of its Subsidiaries is a party or by which such Obligor or any of
its Subsidiaries or its or such Subsidiary's Properties may be bound or
affected; or (iv) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by such Obligor or any of its Subsidiaries.
(b) Except as set forth on Schedule 4.2(b) hereto, the execution and
delivery of this Agreement and each of the other Transaction Documents by the
Company or any of its Subsidiaries which is a party thereto, the issuance, sale
and delivery of the Notes and the Warrants by the Company, and the consummation
of the transactions contemplated hereby and thereby, do not and will not require
any authorization, registration or filing with, or consent or approval of, any
Person, including, without limitation, any Governmental Authority except for
such as have been made or obtained and are in full force and effect.
4.3 Legally Enforceable Agreement.
This Agreement is, and each of the other Transaction Documents when
delivered under this Agreement will be, a legal, valid and binding obligation of
each Obligor and each of its Subsidiaries (to the extent a party thereto)
enforceable against each of them in accordance with its respective terms.
4.4 Corporate Names.
No Obligor nor any of its Subsidiaries has been known as or used any
corporate, fictitious or trade names except those listed on Schedule 4.4 hereto.
Except as set forth on Schedule 4.4, no Obligor or any of its Subsidiaries has
been the surviving corporation of a merger or consolidation or acquired all or
substantially all of the stock or assets of any Person.
4.5 Business Locations; Agent for Process.
Each Obligor's and each of its Subsidiaries' chief executive office and
other places of business are as listed on Schedule 4.5 hereto. During the
preceding one-year period, no Obligor nor any of its Subsidiaries has had an
office, place of business or agent for service of process other than as listed
on Schedule 4.5 hereto.
<PAGE>
4.6 Title to Properties.
Each Obligor and each of its Subsidiaries has good, indefeasible and
marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its real Property, and all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. Each Obligor
has paid or discharged all lawful claims which, if unpaid, might become a Lien
against any of such Obligor's Properties that is not a Permitted Lien.
4.7 Financial Statements; Fiscal Year.
(a) The (i) audited Consolidated and consolidating balance sheets of
the Company and its Subsidiaries (including the accounts of all Subsidiaries of
the Company for the respective periods during which a Subsidiary relationship
existed) at December 31, 1998, December 31, 1997 and December 31, 1996 and the
related Consolidated and consolidating statements of income, shareholders'
equity and cash flows the fiscal years then ended, together with the related
notes thereto and the auditors' report thereon and (ii) the unaudited
Consolidated and consolidating balance sheet of the Company and its subsidiaries
at June 30, 1999, and the related Consolidated statements of income, changes in
stockholder's equity, and changes in financial position for the six-period then
ended, in each case, have been prepared in accordance with GAAP, applied on a
consistent basis, subject in the case of the financial statements described in
clause (ii) (x) to normal year-end, non-material adjustments and (y) the absence
of footnotes, and present fairly, in all material respects, the financial
position of the Company and its Subsidiaries at such dates and the results of
the Company's and its Subsidiaries operations for such periods. Since December
31, 1998, except for the consummation of the Acquisition and the repurchase of
Common Stock and options to acquire Common Stock from Larry Schnase, there has
been no material change in the condition, financial or otherwise, of the Company
and such other Persons as shown on the Consolidated balance sheet as of such
date and no change in the aggregate value of any equipment and real Property
owned by the Company or its Subsidiaries, except changes in the ordinary course
of business, none of which individually or in the aggregate has had or could
reasonably be expected to have Material Adverse Effect. The fiscal year of the
Company and each of its Subsidiaries ends on December 31st of each year.
(b) The (i) audited Consolidated and consolidating balance sheets of PW
Pipe as of December 27, 1998, December 28, 1997 and December 29, 1996 and the
related statements of income and cash flows for the fiscal years then ended,
together with the related notes thereto and the auditors' report thereon and
(ii) the unaudited Consolidated and consolidating balance sheet of PW Pipe as of
June 27, 1999 and the related consolidated statements of income and cash flows
for the six-month period then ended, in each case have been prepared in
accordance with GAAP, applied on a consistent basis, subject in the case of the
financial statements described in clause (ii) (x) to normal year-end,
non-material adjustments and (y) the absence of footnotes, and present fairly,
in all material respects, the financial position of at PW Pipe such dates and
the results of PW Pipe's operations for such periods. Since December 27, 1998,
there has been no material change in the condition, financial or otherwise, of
PW Pipe as shown on the balance sheet as of such date and no change in the
aggregate value of equipment and real property owned by PW Pipe, except changes
in the ordinary course of business, none of which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect. PW Pipe has no Subsidiaries.
<PAGE>
(c) The pro forma unaudited balance sheet of the Company and its
Subsidiaries delivered to the Investors on or prior to the Closing Date has been
prepared on a basis in conformity with GAAP (except for the omission of
footnotes and prior period comparative data required by GAAP and for variations
from GAAP which in the aggregate are not material and for reallocations of
values with respect to categories of assets acquired in connection with, and
adjustment of actual fees, expenses and transaction costs incurred in connection
with the Acquisition) and presents fairly the financial condition of the Company
and its Subsidiaries, assuming consummation of the Acquisition.
(d) The Projections provided to the Investors pursuant to Section 7.8
have been prepared on the basis of the assumptions which are set forth therein.
Such projections have been prepared in good faith and represent, on the date of
this Agreement, the good faith opinion of the Company's management as to the
most probable course of business of the Company on the basis of the assumptions
which are set forth therein.
4.8 Full Disclosure.
The financial statements referred to in Section 4.7 hereof do not, nor
does the Confidential Information Memorandum or this Agreement or any other
written statement of any Obligor to any Investor, contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which any Obligor
has failed to disclose to the Investors in writing which materially affects
adversely or, so far as any Obligor can now foresee, will materially affect
adversely the Properties, business, prospects, profits or condition (financial
or otherwise) of such Obligor or any of its Subsidiaries or the ability of such
Obligor or its Subsidiaries to perform this Agreement or the other Transaction
Documents.
4.9 Solvent Financial Condition.
Each Obligor and each of its Subsidiaries is now and, after giving
effect to the consummation of the Acquisition, the issuance of the Notes and
Warrants and incurrence of the loans on the Closing Date under the Senior credit
Agreement and the application of the proceeds from the issuance of the Notes and
Warrants at all times will be, Solvent.
4.10 Surety Obligations.
No Obligor nor any of its Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into any agreement to assure payment, performance or completion of performance
of any undertaking or obligation of any Person.
4.11 Taxes.
The Company's federal tax identification number is 41-1642846. The
federal tax identification number of each other Obligor is shown on Schedule
4.11 hereto. Each Obligor and each of its Subsidiaries have filed all federal,
state and local tax returns and other reports any of them is required by law to
file (and all such returns were complete and correct in all material respects)
and has paid, or made provision for the payment of, all taxes, assessments,
fees, levies and other governmental charges upon any of them, any of their
<PAGE>
income and Properties as and when such taxes, assessments, fees, levies and
charges that are due and payable, unless and to the extent any thereof are being
actively contested in good faith and by appropriate proceedings and each Obligor
maintains reasonable reserves on its books therefor. The provision for taxes on
the books of each Obligor and its Subsidiaries are adequate for all years not
closed by applicable statutes, and for its current fiscal year.
4.12 Brokers.
There are no claims for brokerage commissions, finder's fees or
investment banking fees in connection with the transactions contemplated by this
Agreement or any other Transaction document, except Donaldson Lufkin & Jenrette
Securities Corporation.
4.13 Patents, Trademarks, Copyrights and Licenses.
Each Obligor and each of its Subsidiaries owns or possesses all the
patents, trademarks, service marks, trade names, copyrights and licenses
necessary for the present and planned future conduct of its business without any
known conflict with the rights of others. All such patents, trademarks, service
marks, tradenames, copyrights, licenses and other similar rights are listed on
Schedule 4.13 hereto.
4.14 Governmental Consents.
Each Obligor and each of its Subsidiaries has, and is in good standing
with respect to, all governmental consents, approvals, licenses, authorizations,
permits, certificates, inspections and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it except for such
failures that could not reasonably be expect have either individually or in the
aggregate a Material Adverse Effect.
4.15 Compliance with Laws.
Each Obligor and each of its Subsidiaries has duly complied with, and
its Properties, business operations and leaseholds are in compliance, with, the
provisions of all Applicable Laws applicable to such Obligor or such Subsidiary,
as applicable, its Properties or the conduct of its business and there have been
no citations, notices or orders of noncompliance issued to such Obligor or any
of its Subsidiaries under any such law, rule or regulation, except for such
noncompliance which could not reasonably be expected to have either individually
or in the aggregate a Material Adverse Effect. Each Obligor and each of its
Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance in all material respects with all
Applicable Laws applicable to it. No Inventory has been produced in violation of
the Fair Labor Standards Act (29 U.S.C. ss.201 et seq.) as amended.
4.16 Environmental Matters.
(a) Except for such environmental matters which could not reasonably be
expected to have either individually or in the aggregate a Material Adverse
Effect,
<PAGE>
(i) each Obligor, its Subsidiaries, and their respective
predecessors and Affiliates has complied and is in compliance with all
Environmental Laws;
(ii) without limiting the generality of the foregoing clause
(i), each Obligor, its Subsidiaries and their respective predecessors
and affiliates has obtained and complied with, and is in compliance
with, all clearances, consents, permits, approvals, licenses and other
authorizations that are required pursuant to Environmental Laws for the
occupation of its facilities and the operation of its business;
(iii) no Obligor, its Subsidiaries, nor their respective
predecessors or Affiliates has received any written or oral notice,
report or other information regarding any actual or alleged violation
of any Environmental Law, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations,
relating to any of them or its facilities arising under any
Environmental Law;
(iv) no Obligor, its Subsidiaries, nor their respective
predecessors or Affiliates has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to any liability, including any liability for
response costs, corrective action costs, personal injury, property
damage, natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental Law;
(v) neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer"
Environmental Laws;
(vi) the Obligors have provided Investors with true and
correct copies of all material environmental and occupational health
and safety, reports, assessments, audits, and documents in their
possession, custody or control that relate to the Company, its
Subsidiaries, their respective predecessors or Affiliates, or their
facilities or business;
(vii) no Obligor, its Subsidiaries, nor their respective
predecessors, or Affiliates has assumed, undertaken, or otherwise
become subject to any liability, including without limitation any
obligation for corrective or remedial action, of any other Person
relating to any Environmental Law; and
(viii) no facts, events or conditions relating to the
facilities, properties or operations of any Obligor, its Subsidiaries,
or, their respective predecessors or Affiliates will prevent, hinder or
limit continued compliance with Environmental Laws, give rise to any
investigatory, remedial or corrective obligations pursuant to
Environmental Laws, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental Laws, including without limitation any relating to onsite
or offsite releases or threatened releases of hazardous materials,
substances or wastes, personal injury, property damage or natural
resources damage.
<PAGE>
(b) All material filings with, or applications or notifications to, any
Governmental Authority required by all Applicable Law to be made in connection
with the Acquisition have been made or will be made as soon as practicable after
the Closing Date.
4.17 Insurance.
Schedule 4.17 sets forth a complete and correct description of all
insurance maintained by the Company and its Subsidiaries or by the Company for
its Subsidiaries as of the Closing Date. All such insurance is in full force and
effect and all premiums that are due and payable have been duly paid.
4.18 Restrictions.
No Obligor nor any of its Subsidiaries is a party or subject to any
contract, agreement, or charter or other corporate restriction, which materially
and adversely affects its business or the use or ownership of any of its
Properties. No Obligor nor any of its Subsidiaries is a party or subject to any
contract or agreement which restricts its right or ability to incur
Indebtedness, other than as set forth on Schedule 4.18 hereto, none of which
prohibit the execution of or compliance with this Agreement or the other
Transaction Documents by such Obligor or any of its Subsidiaries, as applicable.
4.19 Litigation.
Except as set forth on Schedule 4.19 hereto, there are no actions,
suits, proceedings or investigations pending, or to the knowledge of any
Obligor, threatened, against or affecting any Obligor or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of such Obligor or any of its Subsidiaries, except for those that
could not be reasonably expected to have either individually or in the aggregate
a Material Adverse Effect. No Obligor nor any of its Subsidiaries is in default
with respect to any order, writ, injunction, judgment, decree or rule of any
Governmental Authority, except for such defaults that could not reasonably be
expected to have either individually or in the aggregate a Material Adverse
Effect.
4.20 No Defaults.
No event has occurred and no condition exists which would, upon or
after the execution and delivery of this Agreement, or any other Transaction
Document or the performance of any Obligor's obligations hereunder or thereunder
or the consummation of the transactions contemplated herein or therein,
constitute a Default or an Event of Default. No Obligor nor any of its
Subsidiaries are or is in default, and no event has occurred and no condition
exists which constitutes, or which with the passage of time or the giving of
notice or both would constitute, a default in the payment of any Indebtedness
for borrowed money to any Person.
<PAGE>
4.21 Leases.
Schedule 4.21(a) hereto is a complete listing of all capitalized leases
of each Obligor and its Subsidiaries and Schedule 4.21(b) hereto is a complete
listing of all operating leases of each obligor and its Subsidiaries. Each
Obligor and each of its Subsidiaries is in compliance with all of the terms of
each of its respective capitalized and operating leases, except for such
failures that could not reasonably be expected to have either individually or in
the aggregate a Material Adverse Effect.
4.22 Pension Plans.
Except as disclosed on Schedule 4.22 hereto, no Obligor nor any of its
Subsidiaries has any Plan. Each Obligor and each of its Subsidiaries is in full
compliance with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan. No fact or situation that could result in
a material adverse change in the financial condition of any Obligor or any of
its Subsidiaries exists in connection with any Plan. No Obligor nor any of its
Subsidiaries has any withdrawal liability in connection with a Multiemployer
Plan.
4.23 Trade Relations.
There exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship
between any Obligor or any of its Subsidiaries and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of such Obligor or any of its Subsidiaries, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely such Obligor or any of its
Subsidiaries or prevent such Obligor or any of its Subsidiaries from conducting
such business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
4.24 Labor Relations.
Except as described on Schedule 4.24 hereto, no Obligor nor any of its
Subsidiaries is a party to any collective bargaining agreement. There are no
material grievances, disputes or controversies with any union or any other
organization of any Obligor's or any of its Subsidiaries' employees, or threats
of strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization.
4.25 Private Offering.
Assuming the accuracy of the representations of the Investors in
Section 5.1, the issuance and sale of the Notes to the Investors hereunder are
exempt from the registration and prospectus delivery requirements of the
Securities Act. Neither the Company nor any Person acting on its behalf has
offered or will offer the Notes or any part thereof or any similar securities
for issuance or sale to, or has solicited or will solicit any offer to acquire
any of the same from, any Person so as to bring the issuance and sale of the
Notes within the provisions of the registration and prospectus delivery
requirements of the Securities Act.
<PAGE>
4.26 Year 2000.
Take all action necessary to assure that at all times the computerbased
systems utilized by Company and each of its Subsidiaries are able to effectively
interpret, process and manipulate data, including dates before, on and after
December 31, 1999, except to the extent that failure to do so would not be
likely to have a Material Adverse Effect. At request of the Investors, the
Company shall provide to the Investors assurance reasonably satisfactory to the
Investors that the computer-based systems utilized by the Company and each of
its Subsidiaries are able to recognize and perform without error functions
involving dates before, on and after December 31, 1999, except to the extent
that the failure to do so would not be likely to have a Material Adverse Effect.
4.27 SEC Reports.
The Company has filed all reports required to be filed by it pursuant
to Section 13 or Section 15(d) of the Exchange Act within the last 12 months on
a timely basis or has received a valid extension of time of filing; the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, the Company's Quarterly Report on Form 10-Q for the fiscal quarters ended
March 31, 1999 and June 30, 1999 and the Company's Current Reports on Form 8-K
dated April 30, 1999 and Current Reports on Form 8-K dated September 2, 1999
(collectively, the "Reports"), complied as to form in all material respects with
the rules and regulations of the Commission under the Exchange Act on the dates
of filing and as of such dates did not contain any untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Except as otherwise provided to the Investors, the Company has not
filed any Current Reports on Form 8-K since September 2, 1999.
4.28 Incorporation of Representations and Warranties.
(a) The Company hereby makes to the Investors each of the
representations and warranties contained in Section 2.4 of the Warrant
Agreement, and such representations and warranties, as so made by the Company,
shall be incorporated into this Agreement by reference as if set forth in full
herein.
(b) All representations and warranties made by the Company in any of
the Purchase Documents or in the certificates delivered in connection therewith
are true and correct in all material respects as of the date hereof with the
same force and effect as though made on and as of the date hereof, and such
representations and warranties of the Company are hereby confirmed to the
Investors and made representations and warranties of the Company hereunder as
fully as if set forth herein. The Company has no knowledge that any of the
representations and warranties made in Purchase Documents by or on behalf of any
party thereto other than Company are untrue or incorrect.
4.29 Survival of Representations and Warranties.
All representations and warranties of each Obligor contained in this
Agreement or any of the other Transaction Documents shall survive the execution,
delivery and acceptance thereof by the Investors and the closing of the
transactions described therein or related thereto.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF INVESTORS
5.1 Representations and Warranties of Each Investor.
Each Investor represents and warrants to the Company, severally and not
jointly, as of the date hereof as follows:
(a) Purchase for its Own Account. Such Investor is purchasing the Notes
for its own account, without a view to the distribution thereof in violation of
the Securities Act, all without prejudice, however, to the right of such
Investor at any time, in accordance with this Agreement or the Transaction
Documents, lawfully to sell or otherwise to dispose of all or any part of the
Notes held by it.
(b) Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Regulation D under the Securities Act.
(c) Authority, Etc. Such Investor has the power and authority to enter
into and perform this Agreement and the execution and performance hereof have
been duly authorized by all proper and necessary action; this Agreement
constitutes the valid and legally binding obligation of such Investor,
enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights and the application of equitable
principles.
(d) Securities Act Compliance. Such Investor understands that the
Company has not registered the Notes under the Securities Act, and each Investor
agrees that the Notes may not be sold or transferred or offered for sale or
transfer by it without registration under the Securities Act or the availability
of an exemption therefrom, all as more fully provided in Article X hereof.
ARTICLE VI
CONDITIONS TO PURCHASE
6.1 Conditions to Obligations of Investors on the Closing Date.
The obligations of the Investors to purchase the Notes hereunder is
subject to the satisfaction of the following conditions:
(a) Securities Purchase Agreement. The Investors shall have received,
in form and substance satisfactory to them and their counsel, a duly executed
copy of this Agreement and the other Transaction Documents, together with such
additional documents, instruments, certificates as the Investors and their
counsel shall require in connection therewith, including those listed in the
Schedule of Documents attached hereto as Annex A and incorporated herein, each
in form and substance satisfactory to the Investors and their counsel.
(b) No Default. No Default or Event of Default shall exist.
<PAGE>
(c) No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
(d) Acquisition. The Acquisition shall have been consummated, or will
be consummated simultaneously with the closing of the transactions contemplated
hereby, substantially in accordance with the terms of the Purchase Documents,
the terms and conditions of which shall be acceptable to the Investors. PW Pipe
shall have been merged with and into the Company.
(e) Environmental Assessments. The results of the Phase I Environmental
Assessments (and, if applicable Phase II Environmental Assessments) related to
the Company, its Subsidiaries, PW Pipe and the real property to be acquired by
the Company pursuant to the Acquisition, shall be acceptable to the Investors.
(f) Senior Facility. The Investors shall have received evidence
satisfactory to it that the Company shall have received at least $75,596,917
from borrowings under the Senior Credit Agreement. The terms and conditions of
the Senior Credit Documents shall be acceptable to the Investors.
(g) Transaction Fees. The Investors shall have determined to its
satisfaction that the amount of transaction fees payable in connection with the
transactions contemplated hereby shall not exceed $7,000,000.
(h) Payment of Fees and Expenses. All fees and expenses owing by the
Company to the Investors (including the fees and expenses of O'Sullivan Graev &
Karabell, LLP) under the terms of this Agreement, any Transaction Document or
any other document executed in connection herewith or therewith shall have been
paid.
(i) Requisite Approvals. The Obligors shall have obtained copies of all
required governmental and other consents, licenses, permits and approvals
relating to the transactions contemplated by this Agreement and the other
Transaction Documents, which consents, licenses, permits and approvals shall be
in form and substance acceptable to Investors and its counsel.
(j) Representations and Warranties; Performance of Covenants. The
representations and warranties of the Obligors contained herein and in any other
Transaction Document and in any certificate or other instrument delivered
pursuant to any of the foregoing shall be correct in all material respects as
though made on and as of the Closing Date. The Obligors shall have satisfied
each of the conditions precedent set forth herein on and as of the Closing Date.
(k) Legal Matters. All matters relating to the Acquisition, this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby shall be satisfactory to the Investors and their counsel.
<PAGE>
(l) Such other conditions precedent deemed appropriate by the Investors
and their counsel.
ARTICLE VII
AFFIRMATIVE COVENANTS
During the term of this Agreement, and thereafter for so long
as there are any Obligations under any Note Document outstanding, each Obligor
covenants that, unless the Required Investors have first consented thereto in
writing, it shall:
7.1 Corporate Existence.
(a) Preserve, renew and keep in full force and effect its corporate
existence, except as otherwise provided in Section 8.1, and any necessary state
or other qualifications (other than any qualifications the absence of which, in
the aggregate, would not result in a Material Adverse Effect).
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of the Subject Business; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated; and at all times maintain and preserve all Property material to the
conduct of such business and keep such Property in good repair (subject to
ordinary wear and tear), working order and condition and from time to time make,
or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
7.2 Payment of Obligations.
Pay its obligations promptly and in accordance with their terms and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials, supplies and services or otherwise that, if
unpaid, might give rise to a Lien upon such properties or any part thereof;
provided, however, that such payment and discharge shall not be required with
respect to any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Company shall have set aside on its books adequate reserves
with respect thereto in accordance with GAAP and such contest operates to
suspend collection of the contested, tax, assessment or charge and enforcement
of a Lien.
7.3 Visits and Inspections.
Permit representatives of any Investor, from time to time, as often as
may be reasonably requested, but only during normal business hours, to visit and
inspect the Properties of each Obligor and each of its Subsidiaries, inspect,
audit and make extracts from its books and records, and discuss with such
Obligor's or such Subsidiary's officers, employees and independent accountants,
such Obligor's or such Subsidiaries business, assets, liabilities, financial
condition, business prospects and results of operations.
<PAGE>
7.4 Litigation and Other Notices.
Upon any Responsible Officer of the Company obtaining knowledge
thereof, furnish to each Investor prompt written notice of the following:
(i) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to
be taken with respect thereto
(ii) the filing or commencement of, or any written threat or
written notice of intention of any person to file or commence, any
action, suit or proceeding, whether at law or in equity or by or before
any Governmental Authority, against the Company or any Affiliate
thereof that if adversely determined could result in a Material Adverse
Effect;
(iii) any notices of a default or event of default under any
agreement or instrument evidencing Senior Indebtedness; and
(iv) any development that has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.
7.5 Compliance with Laws; Environmental Matters.
(a) Comply with all Applicable Laws and maintain and comply in all
material respects with all required clearances, consents, permits, approvals,
licenses and other authorizations of Governmental Authorities, except for such
noncompliance which could not reasonably be expected to have either individually
or in the aggregate a Material Adverse Effect.
(b) Comply in all material respects with all Environmental Laws and all
clearances, consents, permits, approvals, licenses and other authorizations
issued thereunder. Respond immediately to any release or threatened release of
any hazardous materials in a manner which complies in all material respects with
all Environmental Laws and reasonably mitigates any risk to human health or the
environment. Provide such documents or information, or conduct at its own cost
such studies or assessments, relating to material matters arising under
Environmental Laws, as any Investor may reasonably request.
(c) Promptly provide the Investors with copies of any notice, report or
other information regarding any actual or alleged violation of Environmental
Laws, or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, arising under Environmental Laws, unless the subject
matter of such notice, report, or information could not reasonably be expected
to result in a Material Adverse Effect.
<PAGE>
7.6 Further Assurances.
Duly execute and deliver, or cause to be duly executed and delivered,
at its own cost and expense, such further instruments and documents and to take
all such action, in each case as may be necessary or proper in the reasonable
judgment of the Investors to carry out the provisions and purposes of this
Agreement and the other Transaction Documents and to better assure and confirm
unto each of the Investors, its rights and remedies under this Agreement and the
other Transaction Documents.
7.7 Maintenance of Books and Records; Financial Statements; Reports; Etc.
Keep, and cause each of its Subsidiaries to keep, adequate records and
books of account with respect to its business activities in which proper entries
are made in accordance with GAAP reflecting all its financial transactions; and
cause to be prepared and furnished to Agent and Lenders the following (all to be
prepared in accordance with GAAP applied on a consistent basis, unless the
Company's certified public accountants concur in any change therein and such
change is disclosed to Lender and is consistent with GAAP):
(i) not later than 90 days after the close of each fiscal year
of the Company, unqualified audited (in respect to the Consolidated
financial statements only) financial statements of the Company and its
Subsidiaries and operating divisions as of the end of such year, on a
Consolidated and consolidating basis, certified (in respect to the
Consolidated financial statements only) by a firm of independent
certified public accountants of recognized standing selected by the
Company but acceptable to the Investors (except for a qualification for
a change in accounting principles with which the accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of the Company's fiscal year,
unaudited interim financial statements of the Company and its
Subsidiaries and operating divisions as of the end of such month and of
the portion of the Company's financial year then elapsed, on a
Consolidated and consolidating basis, certified by the Financial
Officer of the Company as prepared in accordance with GAAP and fairly
presenting the Consolidated financial position and results of
operations of the Company and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments and
except that such statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which the Company has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which the Company files with the Securities and Exchange
Commission or any Governmental Authority which may be substituted
therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan;
<PAGE>
(v) promptly deliver copies of all waivers, amendments or
supplements to (A) any agreement or instrument evidencing Senior
Indebtedness, including, without limitation, the Senior Credit
Documents and (B) the Purchase Documents.
(vi) as soon as available but in any event no later than 30
days after the commencement of each fiscal year, copies of the annual
plan for the Company and its Subsidiaries for such fiscal year;
(vii) concurrently with delivery thereof, copies of all
information (financial or otherwise) provided to the Board;
(viii) The foregoing notwithstanding, the Investors agree that
in respect to operating divisions, the Company shall only be required
to deliver income statements pursuant to clauses (i) and (ii) above.
(ix) Concurrently with the delivery of the financial
statements described in clause (i) of this Section 7.7, the Company
shall forward to the Investors a copy of the accountants' letter to the
Company's management that is prepared in connection with such financial
statements and also shall cause to be prepared and shall furnish to the
Investors a certificate of the aforesaid certified public accountants
certifying to the Investors that, based upon their examination of the
financial statements of the Company and its Subsidiaries performed in
connection with their examination of said financial statements, they
are not aware of any Default or Event of Default relating to accounting
matters, or, if they are aware of such Default or Event of Default,
specifying the nature thereof, and acknowledging, in a manner
satisfactory to the Investors, that they are aware that the Investors
are relying on such financial statements in making its decisions with
respect to the Notes. Concurrently with the delivery of the financial
statements described in clauses (i) and (ii) of this Section 7.7, or
more frequently if requested by the Investors, the Company shall cause
to be prepared and furnished to the Investors a Compliance Certificate
in the form of Exhibit D hereto executed by the Financial Officer of
the Company.
(x) The Company authorizes the Investors or their designated
representatives to communicate directly with its independent certified
public accountants and authorize those accountants to disclose to the
Investors (or such representative) any and all financial statements and
other supporting financial documents and schedules. Further within five
(5) days after the earlier of the last day of each fiscal year of the
Company and the date the Company engaged independent certified public
accountants to audit the Company's financial statements, the Company
shall deliver to such independent certified public accountants a letter
from the Company addressed to such independent certified public
accountants indicating that it is a primary intention of the Company in
engaging such accountants that the Investors relies upon such financial
statements of the Company and its Subsidiaries.
<PAGE>
7.8 Projections.
No later than 30 days prior to the end of each fiscal year of the
Company, deliver to the Investors Projections of the Company, each Subsidiary of
the Company and each of its operating divisions on a Consolidated and
unconsolidated basis for the forthcoming fiscal year, month by month, except
that for the fiscal year ending 2000, the Company shall be permitted to deliver
such projections not later than January 10, 2000. The foregoing notwithstanding,
the Investors agree that, in respect to operating divisions, the Company shall
only be required to deliver projected profit and loss statements pursuant to
this Section.
7.9 Insurance.
At all times, maintain with financially sound and reputable insurers
insurance with respect to its Properties and businesses against loss or damage
of the kind customarily insured against by companies of established reputation
engaged in the same or similar businesses and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such companies.
7.10 Benefit and Pension Plans.
Comply in all material respects with the applicable provisions of ERISA
and the Code and (b) furnish to the Investors (i) as soon as possible after, and
in any event within 10 days after any Responsible Officer of the Company or any
ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred
that, alone or together with any other ERISA Event could reasonably be expected
to result in liability of the Company in an aggregate amount exceeding $500,000
or requiring payments exceeding $100,000 in any year, a statement of a Financial
Officer of the Company setting forth details as to such ERISA Event and the
action, if any, that the Company proposes to take with respect thereto.
7.11 Proceeds.
Use the proceeds of the sale of the Notes and the Warrants solely for
purposes set forth in the recitals to this Agreement. No portion of the proceeds
of any Note will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board of Governors of the Federal Reserve System of the United States,
including Regulations U or X.
7.12 Additional Subsidiaries.
Promptly inform the Investors of the creation or acquisition after the
date hereof of any direct or indirect Subsidiary of any Obligor and shall cause
each such direct or indirect Subsidiary not in existence on the date hereof to
execute and deliver to the Investors an instrument substantially in the form of
Annex I to the Subsidiary Guaranty pursuant to which such Subsidiary shall
become a party to the Subsidiary Guaranty.
<PAGE>
7.13 Board Observation Rights.
So long as any Investor holds a Note, the Company will permit one
representative of each Investor (each an "Observer") to attend all meetings of
the Board and the board of directors of each Subsidiary of the Company and all
formal meetings of any committees thereof (whether in person, telephonic or
other) in a non-voting, observer capacity and shall provide to each Observer
concurrently with the members of its Board, and in the same manner, notice of
such meeting and a copy of all materials provided to such Board members. The
Company agrees to pay all out-of-pocket expenses reasonably incurred by each
Observer associated with attending such meetings.
ARTICLE VIII
NEGATIVE COVENANTS
During the term of this Agreement, and thereafter for so long
as there are any Obligations under any Note Document outstanding, each Obligor
covenants that, unless the Required Investors have first consented thereto in
writing, it shall not:
8.1 Mergers; Consolidations.
Merge or consolidate, or permit any of such Obligor's Subsidiaries to
merge or consolidate, with any Person; except (i) the Acquisition, (ii) any
Subsidiary of the Company may merge with and into the Company or any other
Obligor and (iii) the Company may merge with another Person provided that the
Company is the surviving entity of such merger and no Default or Event of
Default shall have occurred and be continuing or would result therefrom.
8.2 Indebtedness.
Create, incur, assume, or suffer to exist, or permit any Subsidiary of
such Obligor to create, incur or suffer to exist, any Indebtedness, except:
(i) Indebtedness for borrowed money existing on the Closing
Date and set forth on Schedule 8.2 hereto and any refinancing of such
Indebtedness to the extent that such refinancing (A) does not have the
effect of increasing the principal amount of such Indebtedness, (B)
does not result in such Indebtedness maturing earlier than the stated
maturity date of such Indebtedness as of the date of such refinancing,
(C) does not have the effect of decreasing the average weighted-life to
maturity of such Indebtedness from that in effect on the date hereof,
(D) does not result in such Indebtedness being senior in right of
payment to such Indebtedness being refinanced and (E) does not provide
for an annual rate of interest above the prevailing market rate of
interest for similar types of financings at the time of such
refinancing;
(ii) Indebtedness under this Agreement and the other Note
Documents;
(iii) the Senior Indebtedness;
<PAGE>
(iv) in the case of the Company, Indebtedness arising under
interest rate protection agreements entered into in accordance with the
Senior Credit Agreement;
(v) Indebtedness under Capitalized Lease Obligations provided
that the aggregate amount of Indebtedness incurred pursuant to this
clause (v) shall not exceed $2,000,000 at any one time outstanding;
(vi) Indebtedness arising under any performance bond or letter
of credit or reimbursement obligations in respect thereof entered into
in the ordinary course of business consistent with past practice;
(vii) Indebtedness incurred under any letter of credit
facility related to any worker's compensation, health, disability or
other employee benefits;
(viii) Indebtedness arising out of, endorsements of checks or
other negotiable instruments for deposit or collection in the ordinary
course of business or any Indebtedness incurred under any bank
overdrafts provided that such Indebtedness is repaid within three (3)
Business Days of the date of incurrence thereof;
(ix) in the case of the Company, additional unsecured
Indebtedness not included in clauses (i) through (viii) above which
Indebtedness does not exceed, in the aggregate, at any one time
outstanding $3,000,000 provided that such Indebtedness shall be
subordinated in right of payment to, or be pari passu with, the Notes;
(x) in addition to the Indebtedness permitted to be incurred
in clauses (i) through (ix) above, other unsecured Indebtedness
provided that at the time such Indebtedness is incurred, and after
giving effect to the incurrence thereof (x) no Default or Event of
Default has occurred and is continuing or would result from such
incurrence and (y) the Leverage Ratio as of the last day of the four
(4) consecutive fiscal quarter period ending immediately prior to the
date of incurrence of such Indebtedness (on a pro forma basis after
giving effect to the incurrence of such Indebtedness) is less than or
equal to 3.5 to 1.0; and
(xi) accounts payable to trade creditors and current operating
expenses (other than for borrowed money) which are not aged more than
30 days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are being
actively contested in good faith and by appropriate and lawful
proceedings; and the Company or such Subsidiary shall have set aside
such reserves, if any, with respect thereto as are required by GAAP and
deemed adequate by the Company or such Subsidiary and its independent
accountants.
(xii) obligations to make all payments which such Obligor or
any of its Subsidiaries is required to make as lessee under the terms
of any operating lease provided that the aggregate amounts payable
under all operating leases to which such Obligor or any of its
Subsidiaries are party as lessee during any consecutive 12 month period
shall not exceed $1,000,000.
<PAGE>
8.3 Affiliate Transactions.
Enter into, or be a party to, or permit any Subsidiary of such Obligor
to enter into or be a party to, any transaction with any Affiliate of, such
Obligor or such Subsidiary or stockholder, except in the ordinary course of and
pursuant to the reasonable requirements of such Obligor's or such Subsidiary's,
business and upon fair and reasonable terms which are fully disclosed to the
Investors and the terms thereof are no less favorable to such Obligor or such
Subsidiary than what would be obtainable in a comparable arm's length
transaction with a Person not an Affiliate or stockholder of such Obligor or
such Subsidiary.
8.4 Limitation on Liens.
Create or suffer to exist, or permit any Subsidiary of such Obligor to
create or suffer to exist, any Lien upon any of its Property, income or profits,
whether now owned or hereafter acquired, except:
(i) Liens incurred and arising out of surety bonds, appeal
bonds, statutory obligations, bids, performance and return of money and
similar obligations and pledges or deposits made in the ordinary course
of business in connection with worker compensation, unemployment
insurance, old age pensions and other social security benefits;
(ii) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of Indebtedness for borrowed
money), statutory obligations, surety and appeal bonds and other
obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(iii) Liens imposed by law, including carriers',
warehousemen's, mechanics', materialmen's and vendors' Liens incurred
in the ordinary course of business and securing obligations which are
not yet due or which are being contested in good faith by appropriate
proceedings, and in any such case as to which it shall have set aside
adequate cash reserves in accordance with GAAP;
(iv) Liens securing the payment of taxes, assessments and
governmental charges or levies, either not yet due and payable or being
contested in good faith by appropriate legal or administrative
proceedings, and in any such case as to which it shall have set aside
adequate cash reserves in accordance with GAAP;
(v) Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title (and with respect to
leasehold interest, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased
Property, with or without consent of the lessee) which do not in the
aggregate impair the use of any Property material to the operation of
the business of the Company or the value of such Property for the
purpose of the business of such Obligor and its Subsidiaries;
<PAGE>
(vi) Purchase money liens or purchase money security interests
upon or in any Property acquired or held by such Obligor or any of its
Subsidiaries in the ordinary course of business to secure the purchase
price of such Property or to secure Indebtedness incurred solely for
the purpose of financing the acquisition of such Property, and Liens
existing on such Property at the time of its acquisition (other than
any such Lien created in contemplated of such acquisition), provided
that the incurrence of the aggregate principal amount of the
Indebtedness secured by the Liens referred to in this clause (vi) shall
be permitted to be incurred under Section 8.2;
(vii) Liens securing Senior Indebtedness;
(viii) Liens securing Indebtedness arising under interest rate
protection agreements permitted to be incurred under Section 8.2(iv);
(ix) Liens existing on the date hereof and specified on
Schedule 8.4;
(x) Liens securing Capitalized Lease Obligations if the
incurrence of such Indebtedness is permitted to be incurred under
Section 8.2(v) provided that (A) such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including without limitation, the cost
of construction) of the Property subject thereto, (B) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of
such cost and (C) such Lien does not extend to or cover any other
Property other than such item of Property and any improvements on such
item;
(xi) Extensions and renewals of Liens permitted in clauses (i)
through (ix) hereunder, provided that (A) any such extension, renewal
or replacement Lien shall be limited to the Property or assets covered
by the Lien so extended, renewed or replaced and (B) the obligations
secured by any such extension, renewal or replacement Lien shall not
exceed the amount of the Indebtedness secured by the Lien so extended,
renewed or replaced; and
(xii) Judgment Liens (other than any judgment Lien that is
described in Section 11.1(k) that constitutes an Event of Default
thereunder), provided that (A) the execution or other enforcement of
any such Lien is effectively stayed and the claims secured thereby
shall, within 30 days after attachment of such claims, be contested in
good faith and by appropriate and timely proceedings diligently
conducted and (B) such Obligor shall have set aside adequate cash
reserves in accordance with GAAP.
8.5 Investments; Restricted Payments; Etc.
(a) Declare or make, or permit any Subsidiary of such Obligor to
declare or make, any Restricted Payment at any time a Default or an Event of
Default shall have occurred and be continuing or would result from the
declaration or making of such Restricted Payment.
(b) Notwithstanding the foregoing, the Company shall be permitted to
declare and pay dividends in the form of cash to the holders of Series A Stock
in accordance with the terms of the certificate of designation relating to the
Series A Preferred Stock in effect on the Closing Date, provided that with
respect to the payment of dividends, the Leverage Ratio as of the last day of
<PAGE>
the four (4) consecutive fiscal quarter period ending immediately prior to the
date of payment of such dividend, on a pro forma basis after giving effect to
the payment of any such dividends, shall not exceed 3.0 to 1.0.
(c) Permit any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Company or any other Subsidiary,
except for such encumbrances or restrictions existing under or by reason of (A)
any restriction applicable to such Subsidiary by Applicable Laws, (B) any
restriction existing under any agreement creating or evidencing Indebtedness
outstanding on the Closing Date, including, without limitation, the Senior
Credit Documents, or any agreement refinancing such Indebtedness to the extent
the restriction contained in any such refinancing agreement is no more
restrictive than the restrictions contained in the agreement governing the
Indebtedness being refinanced, (C) any encumbrances or restriction that
restricts in a customary manner the subletting, assignment or transfer of any
Property that is subject to a lease governing a leasehold interest of such
Obligor or any of its Subsidiaries and (D) any encumbrance or restriction
pursuant to customary provisions restricting disposition of real property
interest set forth in reciprocal easement agreements of such Obligor or any of
its Subsidiaries.
8.6 Disposition of Assets.
Sell, lease or otherwise dispose of any of, or permit any Subsidiary of
such Obligor to sell, lease or otherwise dispose any of, its Properties,
including any disposition of Property as part of a sale and leaseback
transaction, to or in favor of any Person, except (i) sales of inventory in the
ordinary course of business, (ii) replacements of equipment that is
substantially worn, damaged or obsolete with equipment of like kind, function or
value, provided that the replacement equipment shall be acquired prior to or
concurrently with any disposition of the equipment that is to be replaced, the
replacement equipment shall be free of Liens (other than Permitted Liens), (iii)
sales or other dispositions of Property by such Obligor or such Subsidiary,
provided that (A) no Default or Event of Default has occurred and is continuing
or would result therefrom, (B) the purchase price (x) consists of at least 75%
cash consideration, (y) is payable on the date of consummation of such sale and
(z) is equal to the fair market value of the Property sold, as determined in
good faith by the Board or the board of directors of such Subsidiary, as the
case may be and (C) the aggregate net book value of all Property sold pursuant
to this subclause (iii) during any fiscal year shall not exceed $1,000,000 and
(iv) other sales or dispositions of Property of such Obligor or such Subsidiary
to the extent that the net proceeds realized therefrom are used, within 180 days
after the date of consummation of such disposition, to (A) purchase capital
assets used or useful by such Obligor or such Subsidiary in the ordinary course
of such Obligor's or such Subsidiary's business, (B) are applied to outstanding
Senior Indebtedness in accordance with the terms thereof or (C) to the extent
not used to prepay Senior Indebtedness in permanent reduction thereof or to
permanently reduce the commitments thereunder, to prepay the Notes in the manner
set forth in Section 3.6.
<PAGE>
8.7 Nature of Business.
Engage at anytime in any business or business activity other than the
Subject Business as conducted on the date hereof, and any other business
activities reasonably related to the Subject Business.
8.8 Inconsistent Agreements.
Enter into, or permit any Subsidiary of such Obligor to enter into, any
agreement containing any provision, nor shall it amend any agreement to include
any provision, which would (a) be violated or breached by the exercise or
performance by such Obligor or any of its Subsidiaries of any of their
respective rights or obligations under this Agreement or any other Transaction
Document or (b) impair in any material respect the ability of such Obligor or
any of its Subsidiaries to comply with the terms of this Agreement or any other
Transaction Document.
8.9 Financial Covenants.
(a) Leverage Ratio.
Permit the Leverage Ratio for any period set forth below to be
greater than the ratio set forth opposite such period below:
Period Ratio
October 1, 1999 through December 31, 1999 4.50 to 1.00
October 1, 1999 through March 31, 2000 4.00 to 1.00
October 1, 1999 through June 30, 2000 4.00 to 1.00
For 12 months ending September 30, 2000 3.75 to 1.00
For 12 months ending December 31, 2000 3.75 to 1.00
Trailing 12 month periods ending on March 31, 2001,
June 30, 2001, September 30, 2001 and December 31, 3.50 to 1.00
2001
Trailing 12 month periods ending on each March 31,
June 30, September 30 and December 31 thereafter 3.00 to 1.00
For purposes of calculating the Leverage Ratio (i) for the period from October
1, 1999 through December 31, 1999, EBITDA for such period shall be actual EBITDA
for such period multiplied by four (4); (ii) for the period from October 1, 1999
through March 31, 2000, EBITDA for such period shall be actual EBITDA for such
period multiplied by two (2); (iii) for the period from October 1, 1999 through
September 30, 2000, EBITDA for such period shall be actual EBITDA for such
period multiplied by four-thirds (4/3).
<PAGE>
(b) Interest Coverage Ratio.
Permit the Interest Coverage Ratio for any period set forth
below to be less than the ratio set forth opposite such period below:
Ratio
Period
October 1, 1999 through December 31, 1999 2.00 to 1.00
October 1, 1999 through March 31, 2000 2.50 to 1.00
October 1, 1999 through June 30, 2000 2.50 to 1.00
For 12 months ending September 30, 2000 2.50 to 1.00
For 12 months ending December 31, 2000 2.75 to 1.00
Trailing 12 month periods ending on March 31, 2001,
June 30, 2001, September 30, 2001 and December 31, 2.65 to 1.00
2001
Trailing 12 month periods ending on each March 31,
June 30, September 30 and December 31 thereafter 3.25 to 1.00
(c) Capital Expenditures.
Make Capital Expenditures (including, without limitation, by
way of Capitalized Leases) which, in the aggregate as to the Company and its
Subsidiaries during any period set forth below exceeds the amount set forth
opposite such period in the following schedule:
Period Ending Permitted Capital Expenditures
Four months ending December 31, 1999 $2,750,000
$7,000,000
Twelve months ending December 31, 2000 plus the Carryover Amount
$6,000,000
Twelve months ending December 31, 2001 plus the Carryover Amount
$5,000,000
Each 12-month period ending December 31 thereafter plus the Carryover Amount
For any fiscal year, the Carryover Amount shall be the lesser of $1,000,000 or
the amount of permitted Capital Expenditures for the previous year without
giving effect to any Carryover Amount minus the actual amount of Capital
Expenditures made within such fiscal year.
8.10 Limitation on Changes in Fiscal Periods.
Permit the fiscal year to end on a day other than December 31 or change
the method of determining fiscal quarters.
8.11 Certain Documents and Agreements.
(a) Permit any amendment or modification that is adverse in any
material respect to the Investors to (i) the articles or certificate of
incorporation or analogous document of such Obligor or any of its Subsidiaries,
<PAGE>
(ii) the certificate of designation or any other documents establishing and
setting forth the rights and terms of the Series A Preferred Stock or any other
class or series of preferred stock or common stock of such Obligor or any of its
Subsidiaries, (iii) the By-laws or analogous document of such Obligor or any of
its Subsidiaries or (iv) the Purchase Documents.
(b) Permit any waiver, supplement, modification, amendment, termination
or release of any indenture, instrument or agreement pursuant to which any
Indebtedness (other than Senior Indebtedness) is outstanding in an aggregate
amount of more than $2,500,000, to the extent that any such waiver, supplement,
modification, amendment, termination or release would be adverse to the
Investors in any material respect.
(c) Permit any change, amendment, supplement or other modification of
any terms of the Senior Credit Agreement, or refinance, replace or refund the
same (any agreement under which such refinancing, replacement or refunding is
incurred being referred to as a "Senior Refinancing Agreement"), without the
prior consent of the Required Investors, if the effect of such amendment or such
refunding or refinancing is to: (i) increase any applicable margin with respect
to the interest rate in effect on the extensions of credit under the Senior
Credit Agreement or any Senior Refinancing Agreement by more than a rate equal
to 2% per annum from those provided for in the Senior Credit Agreement as in
effect on the date hereof, or otherwise change the basis for the calculation of
the interest rate thereunder which has the effect of increasing the interest
rate charged thereunder by more than 2% per annum from those provided for in the
Senior Credit Agreement as in effect on the date hereof (provided that nothing
herein shall preclude the imposition of a post-default rate of interest in the
amount and circumstances provided in the Senior Credit Agreement as in effect on
the date hereof); (ii) shorten or extend the scheduled maturity of any payment
of any principal amount of the term loans or acquisition loans under the Senior
Credit Agreement or Senior Refinancing Agreement from the scheduled maturity
thereof as in effect on the date hereof, except (x) shortening such scheduled
maturity of such term loans or acquisition loans by no more than six months, (y)
shortening the payment schedule of such term loans or acquisition loans so as to
cause the average life to maturity of such term loans or acquisition loans to be
not more than one year shorter than the average life to maturity of such term
loans as of the date hereof or (z) altering or modifying the payment schedule of
such term loans so as to cause the final maturity of such term loans to fall on
or before the day prior to the date of the first payment required to be made to
the Investors by the Company pursuant to the provisions of Section 3.5(a)
hereof; (iii) permit the principal amount of Senior Indebtedness owed by the
Company at any time under the Senior Credit Agreement or any Senior Refinancing
Agreement to exceed the limitation contained in the definition of Senior
Indebtedness; or (iv) make more restrictive any one or more of the financial
covenants under the Senior Credit Agreement (or related definitions) as in
effect on the date hereof (or any comparable provisions of any Senior
Refinancing Agreement) or add any new financial covenant unless simultaneously
with such amendment of the Senior Credit Agreement or any Senior Refinancing
Agreement, this Agreement shall be deemed to be automatically amended in such a
manner (including adding new financial covenants or revising existing financial
covenants preserving in each case the current percentage set back) as shall make
the provisions hereof similarly more restrictive on the Company and its
Subsidiaries and each Investor and the Obligors agree to promptly thereafter
execute and deliver an amendment hereto that incorporates each such deemed
amendment.
ARTICLE IX
SUBORDINATION OF NOTES
9.1 Notes Subordinate to Senior Indebtedness.
Each Obligor hereby covenants and agrees, and the Investors by their
acceptance of the Notes, likewise covenant and agree, that, to the extent and in
the manner hereinafter set forth in this Article IX, the Indebtedness
represented by the Notes, the payment of the principal of (and premium, if any)
and interest on the Notes and any other Obligations of such Obligor under any of
the Note Documents (collectively all such amounts being hereinafter referred to
as the "Subordinated Obligations") are hereby expressly made subordinate and
subject in right of payment to the prior payment of all Senior Indebtedness as
set forth below.
9.2 Payment Over of Proceeds Upon Dissolution, Etc.
(a) In the event of (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to an Obligor, or to its
assets, or (ii) any proceeding for liquidation, dissolution or other winding up
of an Obligor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of an Obligor, then and in
any such event specified in (i), (ii) or (iii) above (each such event, if any,
herein sometimes referred to as a "Proceeding") the holders of Senior
Indebtedness shall be entitled to receive payment in full in cash or Cash
Equivalents or otherwise to the satisfaction of the holders of Senior
Indebtedness of all amounts due or to become due on or in respect of all Senior
Indebtedness, or provision shall be made for such payment, before the holders of
the Subordinated Obligations are entitled to receive any payment on account of
principal of (or premium, if any) or interest on the Subordinated Obligations,
and to that end the holders of Senior Indebtedness shall be entitled to receive,
for application to the payment thereof, any payment or distribution of any kind
or character, whether in cash, property or securities (including any such
payment or distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of an Obligor being subordinated to the
payment of the Notes) which may be payable or deliverable in respect of the
Subordinated Obligations in any such Proceeding.
(b) In the event that, notwithstanding the foregoing provisions of this
Section 9.2, any holder of the Subordinated Obligations shall have received any
payment or distribution of assets of an Obligor of any kind or character,
whether in cash, property or securities (including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of an Obligor being subordinated to the payment of the
Subordinated Obligations), in violation of this Article IX, and if such
violation shall, at or prior to the time of such payment or distribution, have
been made known to such holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the Senior Bank Agent
or such other Person who is agent for the holders of Senior Indebtedness for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all Senior Indebtedness in full, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
<PAGE>
(c) For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include securities of an Obligor as
reorganized or readjusted, or securities of an Obligor or any other Person
provided for by a plan of reorganization or readjustment authorized by an order
or decree of a court of competent jurisdiction in a Proceeding under any
applicable bankruptcy law that does not adversely alter the rights of holders of
Senior Indebtedness which are subordinated in right of payment to all Senior
Indebtedness which may at the time be outstanding to substantially the same
extent as, or to a greater extent than, the Subordinated Obligations are so
subordinated as provided in this Article IX.
9.3 No Payment When Senior Indebtedness in Default.
(a) In the event that any Senior Payment Default shall have occurred
and be continuing, then, no payment (including any payment which may be payable
by reason of the payment of any other indebtedness of any Obligor being
subordinated to the payment of the Subordinated Obligations) shall be made by
any Obligor on account of principal of (or premium, if any) or interest on the
Subordinated Obligations unless and until (i) such Senior Payment Default shall
have been cured or waived or shall have ceased to exist or (ii) the holders of
such Senior Indebtedness or their duly authorized agents have waived the benefit
of this Section 9.3(a) or (iii) all amounts then due and payable in respect of
Senior Indebtedness shall have been paid in full in cash or Cash Equivalents or
otherwise to the satisfaction of the holders of Senior Indebtedness, or
provision shall have been made for such payment and all commitments to make
further loans, advances and other credit accommodations under the Senior Credit
Agreement have been terminated (such period during which a Senior Payment
Default continues being, a "Payment Blockage Period").
(b) In the event that any Senior Nonmonetary Default shall have
occurred and be continuing, then, upon the receipt by the Company and the
Investors of written notice of such Senior Nonmonetary Default (a "Senior
Nonmonetary Default Notice") from the Senior Bank Agent, no payment (including
any payment which may be payable by reason of the payment of any other
indebtedness of an Obligor being subordinated to the payment of the Subordinated
Obligations) shall be made by an Obligor on account of principal of (or premium,
if any) or interest on the Subordinated Obligations during the period (the
"Nonmonetary Default Blockage Period") commencing on the date of receipt of such
Senior Nonmonetary Default Notice and ending on the earlier of (a) the date on
which such Senior Nonmonetary Default shall have been cured or waived or shall
have ceased to exist and any acceleration of Senior Indebtedness shall have been
rescinded or annulled or the Senior Indebtedness to which such Senior
Nonmonetary Default relates shall have been discharged or (b) or the holders of
such Senior Indebtedness or their agents have waived the benefits of this
Section 9.3(b) or (c) the 181st day after the date of receipt of such written
notice; provided, however, that not more than one Senior Nonmonetary Default
Notice shall be given during any period of 360 consecutive days, regardless of
the number of defaults with respect to Senior Indebtedness during such 360-day
period. For all purposes of this Section 9.3(b), no event of default which
existed or was continuing on the date of commencement of any Nonmonetary Default
Blockage Period with respect to any Senior Indebtedness shall be, or be made,
the basis for the commencement of a another Nonmonetary Default Blockage Period
by the holders (or any agent or other representative thereof) of such Senior
Indebtedness whether or not within a period of 360 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
<PAGE>
90 consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Nonmonetary Default Blockage Period that, in either case,
would give rise to an event of default pursuant to any provisions under which an
event of default previously existed or was continuing shall constitute a new
event of default for this purpose).
(c) In the event that, notwithstanding the foregoing, an Obligor shall
make any payment to the holders of Subordinated Obligations prohibited by the
foregoing provisions of this Section 9.3, and if such fact shall, at or prior to
the time of such payment, have been made known to the Investors, then and in
such event such payment shall be paid over and delivered forthwith to the Senior
Bank Agent or such other Person who is agent for the holders of Senior
Indebtedness.
(d) The provisions of this Section shall not apply to any payment with
respect to which Section 9.2 would be applicable.
(e) Notwithstanding anything to the contrary contained herein, the
Notes shall continue to accrue interest during any Payment Blockage Period or
Nonmonetary Default Blockage Period at the rates provided hereunder or under the
Notes.
(f) If an Event of Default shall occur and be continuing at any time
during the continuance of a Payment Blockage Period or a Nonmonetary Default
Blockage Period, no holder of Subordinated Obligations shall ask, demand or sue
for any payment or distribution or seek any other remedy (except as otherwise
provided in paragraph (g) below) in respect of the Subordinated Obligations or
commence or join in with any other creditor (other than the agent for the
holders of Senior Indebtedness) in commencing any Proceeding prior to the
earliest to occur of (i) acceleration of any Senior Indebtedness or any other
exercise of remedies by the Senior Bank Agent or the Senior Lenders, including
without limitation, any realization on collateral (other than realization on
collateral consisting of any repayment of loans with the proceeds of account
receivables or disposition of Property in the ordinary course as currently
provided in the Senior Credit Agreement in effect on the date hereof) or any
reduction of commitments as a result of the occurrence and continuance of any
event of default under the Senior Credit Agreement, (ii) the occurrence of an
Event of Default specified in Sections 11.1(f) or (g) hereof or (iii) the
earlier to occur of (x) 120 days after the commencement of such Payment Blockage
Period or Nonmonetary Blockage Period or (y) the expiration of such Payment
Blockage Period or Nonmonetary Default Blockage Period.
(g) Nothing in this Section 9.3 shall limit the rights of holders of
Subordinated Obligations to accelerate the maturity of the Subordinated
Obligations during a Payment Blockage Period or Nonmonetary Default Blockage
Period; provided, however, that if, at the termination or expiration of such
Payment Blockage Period or Nonmonetary Default Blockage Period, as the case may
be, all existing Defaults and Events of Default, except non-payment of principal
or interest that has become due solely because of acceleration (the "Accelerated
Amount"), have been cured or waived, then the holders of Subordinated
Obligations shall not take any action to collect, or exercise any remedies in
respect of, the Accelerated Amount and, absent subsequent Defaults or Events of
Defaults, the Accelerated Amount shall be paid in accordance with the original
scheduled terms.
<PAGE>
9.4 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Agreement or in
any other Note Document shall prevent an Obligor, at any time except during any
Proceeding referred to in Section 9.2 hereof or under the conditions described
in Section 9.3 hereof, from making payments (including any payment which may be
payable by reason of the payment of any other Indebtedness of an Obligor being
subordinated to payment of the Subordinated Obligations at any time on account
of principal of (and premium, if any) or interest on the Subordinated
Obligations or on account of the purchase or other acquisition of the
Subordinated Obligations.
9.5 Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the holders
of the Subordinated Obligations shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all Indebtedness of an Obligor which by its express terms is subordinated to
indebtedness of an Obligor to substantially the same extent as the Subordinated
Obligations are subordinated and is entitled to like rights or subrogation) to
the rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Subordinated Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Subordinated Obligations would be entitled except for the provisions of this
Article to the holders of Senior Indebtedness by the holders of the Subordinated
Obligations, shall, as among an Obligor, its creditors other than holders of
Senior Indebtedness and the holders of the Subordinated Obligations, be deemed
to be a payment or distribution by an Obligor to or on account of the Senior
Indebtedness.
9.6 Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the holders of the Subordinated
Obligations on the one hand and the holders of Senior Indebtedness on the other
hand. Nothing contained in this Article or elsewhere in this Agreement or in any
other Note Document is intended to or shall (a) impair, as among any Obligor,
its creditors other than holders of Senior Indebtedness and the holders of the
Subordinated Obligations, the obligation of each Obligor, which is absolute and
unconditional, to pay to the holders of the Subordinated Obligations the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with its terms and the terms of
this Agreement; or (b) affect the relative rights against any Obligor to the
holders of the Subordinated Obligations and creditors of any Obligor other than
the holders of Senior Indebtedness; or (c) prevent the holders of the
Subordinated Obligations from exercising all remedies otherwise permitted by
Applicable Law upon default under this Agreement, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness and subject further to
the provisions of Sections 9.3(f) and (g).
<PAGE>
9.7 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Obligor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Obligor with the terms, provisions and covenants of this
Agreement, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the holders of the Subordinated
Obligations, without incurring responsibility to the holders of the Subordinated
Obligations and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the holders of the Subordinated
Obligations to the holders of Senior Indebtedness, do any one or more of the
following: (a) except as otherwise provided in Section 8.11(c), change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness, or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against any Obligor and any other Person.
9.8 Notice to Investors.
(a) The Company shall give prompt written notice to the holders of
Subordinated Obligations of any fact known to any Obligor which would prohibit
the making of any payment to the holders of Subordinated Obligations in respect
of the Subordinated Obligations. Notwithstanding the provisions of this Article
or any other provision of this Agreement, the holders of Subordinated
Obligations shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to the holders of Subordinated
Obligations in respect of the Subordinated Obligations, unless and until the
holders of Subordinated Obligations shall have received written notice thereof
from the Company or a holder of Senior Indebtedness or from any trustee
therefor; and, prior to the receipt of any such written notice, the holders of
Subordinated Obligations, shall be entitled in all respects to assume that no
such facts exist.
(b) The holders of Subordinated Obligations shall be entitled to rely
on the delivery to them of any written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee or agent therefor) to
establish that such notice has been given by a holders of Senior Indebtedness
(or a trustee or agent therefor) entitled to deliver any notice under this
Article. In the event that the holders of Subordinated Obligations determine in
good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the holders of Subordinated Obligations
may request such Person to furnish evidence to the reasonable satisfaction of
the holders of Subordinated Obligations as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
<PAGE>
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
holders of Subordinated Obligations may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
9.9 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of any Obligor referred to
in this Article, the holders of Subordinated Obligations shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such Proceeding, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the payment or distribution,
delivered to the Investors, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of any Obligor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
ARTICLE X
TRANSFER OF SECURITIES
10.1 Restriction on Transfer.
The Restricted Securities shall not be transferable except a holder of
Restricted Securities may transfer such Restricted Securities to (i) any
Affiliate of such holder or (ii) upon the conditions specified in this Article
X, which conditions are intended to insure compliance with the provisions of the
Securities Act in respect of the transfer thereof.
10.2 Restrictive Legends.
Each certificate for the Restricted Securities, and each certificate
for any such securities issued to subsequent transferees of any such certificate
shall (unless otherwise permitted by the provisions of Section 10.3 hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO
CERTAIN SENIOR INDEBTEDNESS TO THE EXTENT PROVIDED IN THE
SECURITIES PURCHASE AGREEMENT REFERRED TO BELOW. THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN
ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN ARTICLE X OF THE SECURITIES PURCHASE
AGREEMENT REFERRED TO BELOW. NO TRANSFER OF THIS NOTE SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
A COPY OF THE SECURITIES PURCHASE AGREEMENT IS ON FILE AND MAY
BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE
SECURITIES PURCHASE AGREEMENT."
<PAGE>
10.3 Notice of Transfer.
(a) Each holder shall, prior to any Transfer of any Restricted
Securities (other than a Transfer referenced in clause (i) of Section 10.1
above), give written notice to the Company of such holder's intention to effect
such Transfer and to comply in all other respects with the provisions of this
Section 10.3 in making such proposed Transfer. Each such notice shall describe
the manner and circumstances of the proposed Transfer. Upon request by the
Company, the holder delivering such notice shall deliver a written opinion,
addressed to the Company, of counsel for such holder (which may be one of its
internal counsels), stating that in the opinion of such counsel (which opinion
shall be reasonably satisfactory to the Company) such proposed Transfer does not
involve a transaction requiring registration of such Restricted Securities under
the Securities Act. Such holder shall thereupon be entitled to Transfer the
Restricted Securities in accordance with the terms of the notice delivered to
the Company, if the Company does not reasonably object to such Transfer and
request such opinion, within five days after delivery of such notice or, if the
Company does request such opinion, upon its receipt thereof. Each certificate or
other instrument evidencing the securities issued upon the Transfer of any
Restricted Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 10.2 above unless (i) such opinion of counsel is to the effect
that registration of any future Transfer is not required by the applicable
provisions of the Securities Act or (ii) the Company shall have waived the
requirement of such legend.
(b) Notwithstanding the foregoing provisions of this Section 10.3, the
restrictions imposed by this Section 10.3 upon the transferability of any
Restricted Securities shall cease and terminate when (i) any such Restricted
Securities are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise contemplated by
paragraph (a) above in a manner that does not require that the Restricted
Securities so transferred continue to bear the legend set forth in Section 10.2
above or (ii) the holder of such Restricted Securities has met the requirements
for Transfer of such Restricted Securities under Rule 144(k). Whenever the
restrictions imposed by this Section shall terminate, upon the written request
of the holder of any Restricted Securities as to which such restrictions have
terminated, as promptly as practicable but in any event within ten (10) Business
Days of receipt of such request, the Company shall, without charge, issue,
register and deliver a new instrument not bearing the restrictive legend set
forth in Section 10.3 above and not containing any other reference to the
restrictions imposed by this Section.
<PAGE>
ARTICLE XI
EVENTS OF DEFAULT
11.1 Defaults.
The occurrence of one or more of the following events shall constitute
an "Event of Default:
(a) Payment of Principal. The Company shall fail to make any payment of
principal on the Notes when and as the same shall become due and payable
including at the due date thereof, by acceleration or otherwise.
(b) Payment of Interest and Fees. The Company shall fail to make any
payment of interest on any Note, or any fee or any other amount payable
hereunder or under the Notes when and as the same shall become due and payable
including at the due date thereof, by acceleration or otherwise, and such
failure shall continue unremedied for five (5) Business Days after the due date
thereof.
(c) Covenant Defaults. Any Obligor or any of its Subsidiaries shall
default in the due observance or performance of any covenant or agreement to be
observed or performed under this Agreement or any other Note Document (other
than a covenant which is dealt with specifically elsewhere in this Section 11.1)
and such default shall continue unremedied for thirty (30) days after the
occurrence of such default.
(d) Misrepresentations. Any representation, warranty or other statement
made or furnished to the Investors by or on behalf of any Obligor or any
Subsidiary of such Obligor in this Agreement, any of the other Transaction
Documents or any instrument, certificate or financial statement furnished (in
compliance with or in reference thereto) proves to have been false or misleading
in any material respect when made or furnished.
(e) Other Defaults. Any Obligor or any of its Subsidiaries shall be in
payment default on any Indebtedness which is outstanding in a principal amount
in excess of $2,500,000 in the aggregate beyond any applicable period of grace,
or if any event shall occur or condition shall exist in respect of any
Indebtedness which is outstanding in a principal amount in excess of $2,500,000
or under any evidence of any such Indebtedness or of any mortgage, indenture or
other agreement relating thereto, which shall have caused the acceleration of
the payment of such Indebtedness and such Indebtedness shall not have been paid
in full within two (2) Business Days of the date of such acceleration.
(f) Voluntary Insolvency and Related Proceedings. Any Obligor or any of
its Subsidiaries shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code, or any other
federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to
the institution of, or fail to controvert in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (iii) apply for, consent
to the appointment of, or a court of competent jurisdiction shall enter an order
appointing, a receiver, trustee, custodian, sequestrator or officer with similar
powers of itself or for any substantial part of its property or assets, (iv)
file an answer admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) fail generally to pay its debts as they become due (vii) shall
be adjudicated insolvent or (viii) take any corporate or stockholder action in
furtherance of any of the foregoing.
<PAGE>
(g) Involuntary Insolvency and Related Proceedings. (i) An involuntary
proceeding shall be commenced or an involuntary petition shall be filed in a
court of competent jurisdiction seeking (x) relief in respect of any Obligor or
of any substantial part of the property or assets thereof, under Title 11 of the
United States Code or any other federal, state or foreign bankruptcy, insolvency
or similar law, (y) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any such Person or for any substantial part
of its property or (z) the winding-up or liquidation of any such Person, and any
such proceeding, petition or order shall continue unstayed and in effect for a
period of sixty (60) consecutive days or (ii) a warrant of attachment, execution
or similar process shall be issued against any substantial part of the Property
of the Company or any of its Subsidiaries and the enforcement of such
attachment, execution or similar process is not stayed pending appeal.
(h) Business Disruption: Condemnation. There shall occur a cessation of
a substantial part of the business of any Obligor or any of its Subsidiaries for
a period which significantly affects such Obligor's capacity to continue its
business, on a profitable basis; or any Obligor or any of its Subsidiaries shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by or such Subsidiaries which is necessary to the continued or lawful
operation of its business; or such Obligor or such Subsidiaries shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which such Obligor or
such Subsidiary leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any material portion
of any Property of the Company or any Subsidiary of the Company shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
(i) ERISA. A Reportable Event shall occur which the Requisite
Investors, in its or their sole discretion, shall determine in good faith
constitutes grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United States
district court of a trustee for any Plan, or if any Plan shall be terminated or
any such trustee shall be requested or appointed, or if an Obligor or any of its
Subsidiaries is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from Obligor's or such
Subsidiary's complete or partial withdrawal from such Plan.
(j) Challenge to Agreement. This Agreement or any other Note Document
shall cease to be in full force and effect and enforceable in accordance with
its terms, or any Obligor or any of its Subsidiaries shall assert the invalidity
of any of the foregoing.
(k) Judgments. A judgment or judgments for the payment of money in
excess of $2,500,000 in the aggregate shall be rendered against any Obligor and
the same shall not (i) be fully covered by insurance or other comparable bond,
or (ii) within sixty (60) days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within sixty (60) days (60) after the expiration of any such stay.
<PAGE>
then, and in any such event (other than an event described in
paragraphs (f) or (g) above), and at any time thereafter during the continuance
of such event, the Required Investors may, take any of the following actions and
at the same or different times declare the Notes (if outstanding) to be
forthwith due and payable, whereupon the entire unpaid principal of the Notes,
together with accrued but unpaid interest thereon, the then Applicable
Prepayment Premium, if any, and all other Obligations, shall become forthwith
due and payable in full in cash, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the
Company, anything contained herein or in any Note or other Note Document to the
contrary notwithstanding, exercise any and all other remedies provided under any
other Note Document upon the occurrence and continuance of an Event of Default;
provided, however, that with respect to the occurrence of an Event of Default
described in paragraphs (f) or (g) above, the principal of the Notes, together
with accrued but unpaid interest and fees thereon and any other liabilities of
the Obligors and any of their Subsidiaries accrued hereunder or any other Note
Document, shall automatically become due and payable in full in cash, including
the then Applicable Prepayment Premium, if any, all without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
each Obligor, anything contained herein or in the Notes or other Note Document
to the contrary notwithstanding.
ARTICLE XII
MISCELLANEOUS
12.1 Notices.
All notices, demands and requests of any kind to be delivered to any
party hereto in connection with this Agreement shall be (a) delivered
personally, (b) sent by nationally-recognized overnight courier, (c) sent by
first class, registered or certified mail, return receipt requested or (d) sent
by facsimile, in each case to such party at its address as follows:
(i) if to any Obligor, to:
Eagle Pacific Industries, Inc.
333 South Seventh Street
2430 Metropolitan Centre
Minneapolis, Minnesota 55402
Attention: William H. Spell
Telephone No.: (612) 305-0339
Telecopier No.: (612) 371-9651
<PAGE>
with a copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3397
Attention: Dobson West, Esq.
Telephone No.: (612) 347-7000
Telecopier No.: (612) 347-7077
(ii) if to any Investor, to such Investor's address set forth
in Schedule 1.1 hereto:
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Frederick M. Bachman, Esq.
Telephone No.: (212) 408-2400
Telecopier No.: (212) 728-5950
Any notice, demand or request so delivered shall constitute
valid notice under this Agreement and shall be deemed to have been received (A)
on the day of actual delivery in the case of personal delivery, (B) on the next
Business Day after the date when sent in the case of delivery by
nationally-recognized overnight courier, (C) on the fifth Business Day after the
date of deposit in the U.S. mail in the case of mailing or (D) upon receipt in
the case of a facsimile transmission. Any party hereto may from time to time by
notice in writing served upon the other as aforesaid designate a different
mailing address or a different person to which all such notices, demands or
requests thereafter are to be addressed.
12.2 Survival of Agreement.
All agreements, representations and warranties contained herein or made
in writing by or on behalf of an Obligor in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement
and the other Transaction Documents. No termination or cancellation (regardless
of cause or procedure) of this Agreement shall in any way affect or impair the
powers, obligations, duties, rights and liabilities of the parties hereto in any
way with respect to any transaction or event occurring prior to such termination
or cancellation, or any of the representations contained in this Agreement and
the other Transaction Documents and all such undertakings, agreements,
covenants, warranties and representations shall survive such termination or
cancellation until payment in full of the Notes and all other monetary amounts
due under this Agreement. Each Obligor further agrees that to the extent such
Obligor makes a payment or payments to the Investors under this Agreement or any
other Transaction Document, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or similar state or United States federal law, common law
<PAGE>
or equitable cause, then, to the extent of such payment or repayment, the
Obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received by
the Investors. The Investors shall be entitled to rely upon, and shall be deemed
to have relied upon, all representations, warranties and covenants to be
performed prior to the Closing Date contained in any Transaction Document,
notwithstanding any knowledge of the Investors to the contrary, or any contrary
information delivered to the Investors by any Obligor or any other Person.
12.3 Successors and Assigns.
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party, and all covenants, promises and agreements by or on behalf of the
Obligors or the Investors that are contained in this Agreement or any other
Transaction Document shall bind and inure to the benefit of their respective
successors and permitted assigns except that no Obligor shall assign its rights
or obligations hereunder without the consent of the Required Investors. Each
Investor shall have the right, subject to the provisions of Article X hereof, to
assign or otherwise transfer its rights under this Agreement or any Notes held
by it.
12.4 Expenses of the Investors.
The Company agrees to pay all out-of-pocket expenses reasonably
incurred by the Investors associated with the preparation, execution and
delivery of this Agreement and the other Transaction Documents or reasonably
incurred by the Investors in connection with the purchase of the Notes and
Warrants hereunder or any other Transaction Document (other than attorney fees
and expenses except to the extent expressly provided herein), all filings with
any Governmental Authority, compliance with any Applicable Law, enforcement or
protection of its rights under the provisions of this Agreement or any other
Transaction Document or otherwise in connection with this Agreement, any other
Transaction Document or the Notes issued hereunder. The Company agrees to pay
the fees and disbursements of O'Sullivan Graev & Karabell, LLP, counsel for CB
Capital Investors, L.P.
12.5 Indemnification.
(a) In addition to all rights and remedies available to the Investors
at law or in equity, the Obligors shall indemnify the Investors, each subsequent
holder of the Notes and the Warrants and their respective affiliates,
stockholders, officer, directors, employees, agents, representatives, counsel,
successors and permitted assigns (collectively, the "Indemnified Persons") and
save and hold each of them harmless against and pay on behalf of or reimburse
such party as and when incurred for any loss (including, without limitation,
diminutions in value and consequential damages), liability, demand, claim,
action, cause of action, cost, damage, deficiency, tax (including any taxes
imposed with respect to such indemnity payments), penalty, fine or expense,
whether or not arising out of any claims by or on behalf of the Company or any
third party, including interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Losses") which any such party may suffer, sustain
or become subject to, as a result of, in connection with, relating or incidental
to or by virtue of:
<PAGE>
(i) any misrepresentation or breach of a representation or
warranty on the part of any Obligor under Article IV of this Agreement;
(ii) without duplication of subsection (a)(i) above, any
misrepresentation in or omission from any of the representations,
warranties, statements, schedules and exhibits hereto, certificates or
other instruments or documents furnished to the Investors by or on
behalf of any Obligor made in or pursuant to this Agreement;
(iii) any nonfulfillment or breach of any covenant or
agreement on the part of any Obligor under this Agreement or any other
Transaction Document;
(iv) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, governmental agencies)
against or affecting any Obligor which, if successful, would give rise
to or evidence the existence of or relate to a breach of any of the
representations, warranties or covenants of such Obligor; and
(v) any action, demand, proceeding, investigation, claim, by a
third party, relating to or arising from Environmental Laws (including
without limitation relating to or arising from any hazardous substance,
hazardous waste, or hazardous material) by an Obligor.
(b) Notwithstanding the foregoing, and subject to the following part of
this sentence, upon judicial determination, which is final and no longer
appealable, that the act or omission giving rise to the indemnification
hereinabove provided resulted primarily out of or was based primarily upon the
Indemnified Person's gross negligence, fraud, willful misconduct, or acts or
omissions constituting legal malpractice (unless such action was based upon the
Indemnified Person's reliance in good faith upon any of the representations,
warranties, covenants or promises made by the Obligors herein, or in the
Transaction Documents) by the Indemnified Person, no Obligor shall be
responsible for any Losses sought to be indemnified in connection therewith, and
the Obligors shall be entitled to recover from the Indemnified Person all
amounts previously paid in full or partial satisfaction of such indemnity with
interest thereon at the rate of interest borne by the Notes, together with all
costs and expenses of the Obligors reasonably incurred in effecting such
recovery, if any.
(c) All indemnification rights hereunder shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby indefinitely, regardless of any investigation, inquiry or
examination made for or on behalf of, or any knowledge of the Investors and/or
any of the Indemnified Persons or the acceptance by the Investors of any
certificate or opinion.
(d) The indemnity obligations that the Company have under this Section
12.5 shall be in addition to any liability that the Company may otherwise have.
Each Obligor further agrees that the indemnification commitment set forth in
this Agreement shall apply whether or not the Indemnified Person is a formal
party to any such lawsuits, claims or other proceedings.
(e) Any indemnification of the Investors or any other Indemnified
Person by the Company pursuant to this Section 12.5 shall be effected by wire
transfer of immediately available funds from the company to an account
designated by the Investors or any other Indemnified Person within fifteen (15)
days after the determination thereof.
<PAGE>
12.6 GOVERNING LAW.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN
ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL
EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF NEW YORK.
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO IRREVOCABLY AGREE THAT
VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH
COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.
(c) THE COMPANY HEREBY AGREES THAT SERVICE UPON THEM BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE INVESTORS TO BRING PROCEEDINGS
AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(d) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT, THE TRANSACTION DOCUMENTS OR ANY DOCUMENTS RELATED HERETO.
12.7 Waivers; Amendments.
(a) No failure or delay of the Investors in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
<PAGE>
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Investors hereunder are cumulative and not exclusive of any
rights or remedies which they would otherwise have. No waiver of any provision
of this Agreement or any other Transaction Document or consent to any departure
by the Obligors therefrom shall in any event be effective unless the same shall
be authorized as provided in paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice or demand on the Obligors in any case shall entitle the
Obligors to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Company and the Required Investors; provided that no such
amendment, waiver or modification shall (i) reduce the principal amount of any
Note or reduce the rate of interest thereon, or reduce any other amounts payable
hereunder, without the written consent of each Investor affected thereby, (ii)
postpone the scheduled date of payment of the principal amount of any Note, or
any interest thereon, or any other amounts payable hereunder, or reduce the
amount of, waive or excuse any such payment, without the written consent of each
Investor affected thereby, (iii) change Section 3.2(e) hereof in a manner that
would alter the pro rata sharing of payments required thereby, without the
written consent of each Investor, (iv) change any of the provisions of this
Section 12.7 or the definition of "Required Investors" or any other provision
hereof specifying the number or percentage of Investors required to waive, amend
or modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Investor or (v) increase the
obligations of any Investor or otherwise disproportionately adversely affect any
of the rights of any Investor under this Agreement, without the written consent
of each Investor affected thereby.
12.8 Independence of Covenants.
All covenants hereunder shall be given in any jurisdiction independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
12.9 No Fiduciary Relationship.
No provision in this Agreement or in any of the other Transaction
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by the Investors to any Obligor.
12.10 No Duty.
All attorneys, accountants, appraisers, and other professional Persons
and consultants retained by the Investors shall have the right to act
exclusively in the interest of the Investors and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to any Obligor or any of it's shareholders or any
other Person.
<PAGE>
12.11 Construction.
The Obligors and the Investors acknowledge that each of them has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Transaction Documents with
its legal counsel and that this Agreement and the other Transaction Documents
shall be construed as if jointly drafted by the Investors and the Obligors.
12.12 Severability.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, and such invalid, void or otherwise unenforceable
provisions shall be null and void. It is the intent of the parties, however,
that any invalid, void or otherwise unenforceable provisions be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions but are valid and
enforceable to the fullest extent permitted by law.
12.13 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract.
12.14 Headings.
Article and Section headings and the Table of Contents used herein are
for convenience of reference only and are not to affect the construction of, or
to be taken into consideration in interpreting, this Agreement.
12.15 Entire Agreement.
This Agreement and the agreements and documents referred to herein
contain the entire agreement of the parties and supersede any and all prior
agreements among the parties with respect to the subject matter hereof.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their authorized officers, all as of the day
and year first above written.
OBLIGORS
EAGLE PACIFIC INDUSTRIES INC.
By: /s/ William H. Spell
Name: William H. Spell
Title: Chief Executive Officer
INVESTORS
CB CAPITAL INVESTORS, L.P.
By: CB Capital Investors, Inc.,
its General Partner
By: /s/ John O'Connor
Name: John O'Connor
Title: General Partner
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: Massachusetts Mutual Life
Insurance Company, as Investment
Manager
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
<PAGE>
CONFORMED COPY
================================================================================
14% SUBORDINATED NOTES DUE 2007
SECURITIES PURCHASE AGREEMENT
among
EAGLE PACIFIC INDUSTRIES, INC.,
as ISSUER,
and
The Investors listed on Schedule 1.1 Hereto
September 20, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Article I DEFINITIONS..........................................................2
1.1 Defined Terms........................................................2
1.2 Terms Generally.....................................................14
1.3 Use of Defined Terms................................................14
1.4 Cross-References....................................................14
1.5 Currency............................................................14
1.6 Accounting Terms; GAAP..............................................14
Article II PURCHASE AND SALE OF THE NOTES.....................................15
2.1 Authorization and Issuance of the Notes ............................15
2.2 Closing.............................................................16
Article III PROVISIONS OF THE NOTES AND THE WARRANTS..........................16
3.1 The Notes...........................................................16
3.2 General Provisions As To Payments...................................16
3.3 Interest............................................................17
3.4 Interest on Overdue Amounts.........................................18
3.5 Mandatory Prepayment................................................18
3.6 Optional Prepayments................................................19
3.7 Securities Register.................................................19
3.8 Lost, Etc. Securities...............................................20
3.9 Several Obligations; Remedies Independent...........................20
Article IV REPRESENTATIONS AND WARRANTIES.....................................20
4.1 Organization and Qualification......................................20
4.2 Corporate Power and Authority; Consent..............................21
4.3 Legally Enforceable Agreement.......................................21
4.4 Corporate Names.....................................................21
4.5 Business Locations; Agent for Process...............................21
4.6 Title to Properties.................................................22
4.7 Financial Statements; Fiscal Year...................................22
4.8 Full Disclosure.....................................................23
4.9 Solvent Financial Condition.........................................23
4.10 Surety Obligations..................................................23
4.11 Taxes...............................................................23
4.12 Brokers.............................................................24
4.13 Patents, Trademarks, Copyrights and Licenses........................24
4.14 Governmental Consents...............................................24
4.15 Compliance with Laws................................................24
4.16 Environmental Matters...............................................24
4.17 Insurance...........................................................26
4.18 Restrictions........................................................26
4.19 Litigation..........................................................26
4.20 No Defaults.........................................................26
4.21 Leases..............................................................27
4.22 Pension Plans.......................................................27
4.23 Trade Relations.....................................................27
4.24 Labor Relations.....................................................27
4.25 Private Offering....................................................27
4.26 Year 2000...........................................................28
4.27 SEC Reports.........................................................28
4.28 Incorporation of Representations and Warranties.....................28
4.29 Survival of Representations and Warranties..........................28
Article V REPRESENTATIONS AND WARRANTIES OF INVESTORS.........................29
5.1 Representations and Warranties of Each Investor.....................29
Article VI CONDITIONS TO PURCHASE.............................................29
6.1 Conditions to Obligations of Investors on the Closing Date..........29
Article VII AFFIRMATIVE COVENANTS.............................................31
7.1 Corporate Existence.................................................31
7.2 Payment of Obligations..............................................31
7.3 Visits and Inspections..............................................31
7.4 Litigation and Other Notices........................................32
7.5 Compliance with Laws; Environmental Matters.........................32
7.6 Further Assurances..................................................33
7.7 Maintenance of Books and Records; Financial Statements; Reports;
Etc.................................................................33
7.8 Projections.........................................................35
7.9 Insurance...........................................................35
7.10 Benefit and Pension Plans...........................................35
7.11 Proceeds............................................................35
7.12 Additional Subsidiaries.............................................35
7.13 Board Observation Rights............................................36
Article VIII NEGATIVE COVENANTS...............................................36
8.1 Mergers; Consolidations.............................................36
8.2 Indebtedness........................................................36
8.3 Affiliate Transactions..............................................38
8.4 Limitation on Liens.................................................38
8.5 Investments; Restricted Payments; Etc...............................39
8.6 Disposition of Assets...............................................40
8.7 Nature of Business..................................................41
8.8 Inconsistent Agreements.............................................41
8.9 Financial Covenants.................................................41
8.10 Limitation on Changes in Fiscal Periods.............................42
8.11 Certain Documents and Agreements....................................42
Article IX SUBORDINATION OF NOTES.............................................44
9.1 Notes Subordinate to Senior Indebtedness............................44
9.2 Payment Over of Proceeds Upon Dissolution, Etc......................44
9.3 No Payment When Senior Indebtedness in Default......................45
9.4 Payment Permitted If No Default.....................................47
9.5 Subrogation to Rights of Holders of Senior Indebtedness.............47
9.6 Provisions Solely to Define Relative Rights.........................47
9.7 No Waiver of Subordination Provisions...............................48
9.8 Notice to Investors.................................................48
9.9 Reliance on Judicial Order or Certificate of Liquidating Agent......49
Article X TRANSFER OF SECURITIES..............................................49
10.1 Restriction on Transfer.............................................49
10.2 Restrictive Legends.................................................49
10.3 Notice of Transfer..................................................50
Article XI EVENTS OF DEFAULT..................................................51
11.1 Defaults............................................................51
Article XII MISCELLANEOUS.....................................................53
12.1 Notices.............................................................53
12.2 Survival of Agreement...............................................54
12.3 Successors and Assigns..............................................55
12.4 Expenses of the Investors...........................................55
12.5 Indemnification.....................................................55
12.6 GOVERNING LAW.......................................................57
12.7 Waivers; Amendments.................................................57
12.8 Independence of Covenants...........................................58
12.9 No Fiduciary Relationship...........................................58
12.10 No Duty.............................................................58
12.11 Construction........................................................59
12.12 Severability........................................................59
12.13 Counterparts........................................................59
12.14 Headings............................................................59
12.15 Entire Agreement....................................................59
<PAGE>
EXHIBITS
EXHIBIT A - Form of Note
EXHIBIT B - Form of Subsidiary Guaranty
EXHIBIT C - Form of Warrant Agreement
EXHIBIT D - Form of Compliance Certificate
EXHIBIT E - Form of Solvency Certificate
EXHIBIT F - Form of Payment Direction Letter
EXHIBIT G - Form of Compliance Sideletter
ANNEXES
ANNEX A - Schedule of Documents
SCHEDULES
SCHEDULE 1.1 - Investors
SCHEDULE 4.1 - Foreign Qualifications
SCHEDULE 4.2(b) - Consents
SCHEDULE 4.4 - Trade Names
SCHEDULE 4.5 - Business Locations
SCHEDULE 4.11 - Tax Identification Numbers
SCHEDULE 4.13 - Patents and Trademarks
SCHEDULE 4.17 - Insurance
SCHEDULE 4.18 - Contractual Restrictions
SCHEDULE 4.19 - Litigation
SCHEDULE 4.21(a) - Capitalized Leases
SCHEDULE 4.21(b) - Operations Leases
SCHEDULE 4.22 - Pension Plans
SCHEDULE 4.24 - Labor Relations
SCHEDULE 8.2 - Existing Indebtedness
SCHEDULE 8.4 - Existing Liens
<PAGE>
SCHEDULE 1.1
INVESTORS AND ADDRESSES FOR NOTICES
NUMBER OF SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
INVESTORS NOTES PURCHASED PREFERRED STOCK
CB Capital Investors, L.P. $22,500,000 - -
380 Madison Avenue
12th Floor
New York, NY 10017
Attention: Richard D. Waters, Jr.
Telephone: (212) 622-9036
Telecopier: (212) 622-3101
<PAGE>
NUMBER OF
SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
NOTES PURCHASED PREFERRED STOCK
INVESTORS
Massachusetts Mutual Life Insurance
Company (LTP) $3,200,000 3,200
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Note shall be
made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as __________, interest
and principal), to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For MassMutual Long-Term Pool
Account No. 4067-3488
Re: Description of security, principal and
interest split
With telephone advise of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No.: 04-1590850
<PAGE>
NUMBER OF
SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
NOTES PURCHASED PREFERRED STOCK
INVESTORS
Massachusetts Mutual Life Insurance
Company (IFM) $800,000 800
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Note shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer
and description of Note] interest and
principal), to:
Chase Manhattan Bank, N.A.
4 Chase Metro Tech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Non-Traditional
Account No. 910-2509073
Re: Description of security, principal and interest
split
With telephone advise of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-1590850
<PAGE>
NUMBER OF
SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
NOTES PURCHASED PREFERRED STOCK
INVESTORS
MassMutual Corporate Investors $3,300,000 3,300
c/o Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Note shall be
made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Note], interest and
principal) to:
Chase/NYC/Cust
ABA No. 021000021
A/C *900-9-000200 for F/C/T MassMutual Corporate
Investors
A/C #G06109
Attn: Bond Interest
Re: Description of security (principal and interest
split, if applicable)
With telephone advise of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Instruction for mailing checks
Mass Mutual Corporate Investors
(or Cudd & Co., if securities are registered in the
nominee name)
c/o Chase Manhattan Bank, N.A.
Attn: Income Processing, Level 4B
P.O. Box 1508, Church Street Station
New York, NY 10008
Please include a/c #G06109 on the check
Instructions for delivery of securities
All securities should be delivered to the following address:
Chase Manhattan Bank
4 New York Plaza
Ground Floor Window
New York, NY 10004
Attn: Larry Zimmer
Re: #G06109
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-2483041
<PAGE>
NUMBER OF
SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
NOTES PURCHASED PREFERRED STOCK
INVESTORS
MassMutual Participation Investors $1,700,000 1,700
c/o Massachusetts Mutual Life Insurance Company
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Note shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Note], interest and
principal), to:
Chase/NYC/Cust
ABA No. 021000021
A/C #900-9-000200 for F/C/T MassMutual Participation
Investors
A/C #G06110
Attn: Bond Interest
Re: Description of security (principal and interest
split, if applicable)
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Instructions for mailing checks
MassMutual Participation Investors
(or Cudd & Co., if the securities are registered in
nominee name)
c/o Chase Manhattan Bank, N.A.
Attn: Income Processing, Level 4B
P.O. Box 1508, Church Street Station
New York, NY 10008
Please include a/c #G06110 on the check.
Instructions for delivery of securities
All securities should be delivered to the following address:
Chase Manhattan Bank
4 New York Plaza
Ground Floor Window
New York, NY 10004
Attn: Larry Zimmer
Re: #G06110
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-3025730
<PAGE>
NUMBER OF
SHARES OF
PRINCIPAL AMOUNT OF CONVERTIBLE
NOTES PURCHASED PREFERRED STOCK
INVESTORS
MassMutual Corporate Value Partners Limited $1,000,000 1,000
(certificates registered in the name of
Gerlach & Co.)
c/o Bank of America Trust and Banking Corporation
(Cayman) Limited
P.O. Box 1092
George Town
Grand Cayman
Cayman Island, B.W.I.
Payments
All payments on account of the Note shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Note], interest and
principal), to:
Gerlach & Co.
c/o Citibank, N.A.
ABA Number 021000089
Concentration Account 36112805
Re: MassMutual Corporate Value Partners Limited
Name of Security/CUSIP
With telephone advice of payment to the
Securities Custody and Collection
Document of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Registration of Securities
All securities should be registered in Citibank's
nominee name of Gerlach & Co. and sent to the
following address:
Citibank
20 Exchange Place - Level C
New York, New York 10005
Attn: Danny Reyes
Acct. #794309
Notices
All notices and communications to be addressed as first provided above.
with a copy to the Investment Manager at:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111-0001 USA
Attn: Roger Crandall
Wallace Rodger
<PAGE>
ANNEX A
SCHEDULE OF DOCUMENTS
1. Insurance. Satisfactory evidence that the insurance policies required
by Section 7.9 of the Agreement are in full force and effect.;
2. Certified Charter. A copy of the Certificate or Articles of
Incorporation of the Company and each Subsidiary Guarantor, and all
amendments thereto, certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation;
3. Good Standing Certificates. Good standing certificates for the Company
and each Subsidiary Guarantor issued by the Secretary of State or other
appropriate official of the jurisdiction of incorporation of such
Person and each jurisdiction where the conduct of such Obligor's
business activities or the ownership of its Properties necessitates
qualification;
4. Solvency Certificate. A certificate from the Financial Officer of the
Company, substantially in the form of Exhibit E to the Agreement.
5. Financial Statements. True and complete copies of the financial
statements referred to in Section 4.7 of the Agreement and the
Projections.
6. Officer's Certificate. A certificate of a Responsible Officer of the
Company certifying as to the matters set forth in Section 6.1(b) and
(d) of the Agreement.
7. Secretary Certificates. A Certificate of the Secretary of each Obligor,
together with true and correct copies of the Certificate or Articles of
Incorporation and Bylaws of such Obligor, and all amendments thereto,
true and correct copies of the resolutions of the Board of Directors of
such Obligor authorizing or ratifying the execution, delivery and
performance of this Agreement, the other Transaction Documents and the
documents, agreements and contracts evidencing or effecting the
Acquisition and the names of the officer or officers of each Obligor
authorized to sign this Agreement, the other Transaction Documents (or
amendments thereto), the Other Agreements and the documents, agreements
and contracts evidencing or effecting the Acquisition together with a
sample of the true signature of each such officer;
8. Legal Opinions. The favorable, written opinion of Fredrikson & Byron,
P.A., counsel to the Obligors, as to the transactions contemplated by
this Agreement and any of the other Transaction Documents;
9. Pay-off Letters. Pay-off statements, releases and UCC-3 termination
statements, evidencing repayment in full of all Indebtedness being
repaid with the proceeds from the issuance of the Notes or borrowings
under the Senior Credit Agreement;
<PAGE>
10. Accountant's Letter. A letter authorizing the independent certified
public accountants of the Obligors to communicate with the Investors or
their designated representatives in accordance with Section 7.7(vii).
11. Lien Searches. Satisfactory results of (i) a Uniform Commercial Code
lien search and other filings and registrations of Liens against
Properties of the Obligors and (ii) pending litigation and judgment
searches, in each such jurisdiction as the Investors shall reasonably
require;
12. Acquisition. True and complete copies of the duly executed Purchase
Documents. Each of the conditions precedent to the Company's
obligations to consummate the Acquisition shall have been satisfied or
waived with the consent of the Investors and the Acquisition shall have
been consummated in accordance with all Applicable Law. Copies of the
legal opinions referred to in 6.2(a)(iii) and 6.2(b)(v) of the Purchase
Documents, together with letters from the counsel rendering such
opinions permitting the Investors to rely thereon;
13. Environmental. Phase I environmental assessments (and, if applicable
Phase II environmental assessments) in respect to each location owned
and/or operated by the Company or any of its Subsidiaries and copies of
all other reports or assessments commissioned by the Company, together
with reliance letters permitting the Investors to rely on such
environmental reports;
14. Senior Loan Documents. True and complete copies of the executed Senior
Loan Documents. Copies of all legal opinions required to be delivered
thereunder, together with letters from counsel rendering such opinions
permitting the Investors to rely thereon. All conditions precedent to
the initial borrowings thereunder shall have been satisfied;
15. Payment Direction Letter. Duly executed originals of a letter of
direction, in substantially the form of Exhibit F to the Agreement.
16. Small Business Concern Documents. (i) Deliver to CB Capital Investors,
L.P. a Size Status Declaration on SBA Form 480 and an Assurance of
Compliance on SBA Form 652 and (ii) provide to CB Capital Investors,
L.P. the information necessary for the preparation of CB Capital
Investors, L.P. of a Portfolio Financing Report on SBA Form 1031.
17. Termination of Equity Documents. Evidence in form and substance
satisfactory to the Investors that each of the (i) MassMutal Stock
Purchase Agreement and (ii) the Rights Agreement dated as of May 1,
1997, as amended, by and among the Company and the other parties
thereto, shall have been terminated and be of no further force and
effect.
18. Other Documents. Such other documents, instruments and agreement as the
Investors shall reasonably require.
REGISTRATION
RIGHTS AGREEMENT dated as
of September 20, 1999,
among EAGLE PACIFIC
INDUSTRIES, INC., a
Minnesota corporation (the
"Company"), and the
entities listed on Schedule
I hereto (the "Investors").
The Company and the Investors are party to (i) that certain
Securities Purchase Agreement dated as of September 20, 1999 (the "Securities
Purchase Agreement"), pursuant to the which the Investors purchased $32,500,000
of senior subordinated notes from the Company in accordance with the terms
thereof and (ii) that certain Warrant Agreement dated as of September 20, 1999
(the "Purchase Agreement"), pursuant to which the Investors acquired from the
Company warrants to purchase shares of the Company's common stock par value $.01
per share. The Company and the Investors deem it to be in their respective best
interests to set forth the rights of the Investors in connection with public
offerings and sales of the capital stock of the Company
ACCORDINGLY, in consideration of the mutual covenants and
agreements contained in this Agreement, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
1.1 Definitions.
Capitalized terms used in this Agreement and not defined herein shall
have the meanings ascribed to them in the Purchase Agreement. The following
capitalized terms used in this Agreement have the meanings ascribed to them
below:
"Affiliate" has the meaning ascribed to it in Rule 12b-2
promulgated under the Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday,
legal holiday or other day on which banks are required to be closed in New York,
New York.
"Chase Holders" means, collectively, CB Capital Investors,
L.P. or its transferees who hold Registrable Shares.
"Commission" shall mean the Securities and Exchange Commission
or any other Governmental Authority at the time administering the Securities
Act.
"Common Stock" means, collectively, all of the Common Stock,
$.01 par value, of the Company, of any class and any other class of capital
stock of the Company hereafter authorized that is not limited to a fixed sum or
percentage of par or stated value with respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
<PAGE>
"Common Stock Equivalents" means all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all Securities of the Company that are convertible, exchangeable or
exercisable for Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934
or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"MassMutual Holders" means, collectively, Massachusetts Mutual
Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation
Investors, MassMutual Corporate Value Partners Limited or any of their
respective transferees who hold Registrable Shares.
"Material Transaction" shall mean any material transaction in
which the Company or any of its Subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction that would require
disclosure pursuant to the Exchange Act, and with respect to which the Board of
Directors of the Company reasonably has determined in good faith that compliance
with this Agreement may reasonably be expected to either materially interfere
with the Company's or such Subsidiary's ability to consummate such transaction
in a timely fashion or require the Company to disclose material, non-public
information prior to such time as it would otherwise be required to be
disclosed.
"Other Shares" shall mean at any time those Shares of Common
Stock which do not constitute Primary Shares or Registrable Shares.
"Primary Shares" shall mean, at any time, the authorized but
unissued shares of Common Stock or Common Stock held by the Company in its
treasury.
"Prospectus" shall mean any prospectus included in a
Registration Statement, including any prospectus subject to completion, and any
such prospectus as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable Shares
and, in each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein.
"Public Offering" shall mean the closing of a public offering
of Common Stock pursuant to a Registration Statement declared effective under
the Securities Act, except that a Public Offering shall not include an offering
of securities to be issued as consideration in connection with a business
acquisition or an offering of securities issuable pursuant to an employee
benefit plan.
"Public Sale" means any sale, occurring simultaneously with or
after a Public Offering, of Securities to the public pursuant to an offering
registered under the Securities Act or to the public through a broker, dealer or
market maker (pursuant to the provisions of Rule 144 or otherwise).
<PAGE>
"Registrable Shares" shall mean all Common Stock Equivalents
held by any Investor which constitute Restricted Securities.
"Registration Date" shall mean the date upon which the
Registration Statement pursuant to which the Company shall have initially
registered shares of Common Stock under the Securities Act for sale to the
public shall have been declared effective.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Registrable Shares, and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Requisite Chase Holders" means those Chase Holders who hold
in the aggregate in excess of 50% of the outstanding Restricted Securities held
by all Chase Holders at any date of determination.
"Requisite MassMutual Holders" means those MassMutual Holders
who hold in the aggregate in excess of 50% of the outstanding Restricted
Securities held by all MassMutual Holders at any date of determination
"Requisite Investors" means those Investors who hold in the
aggregate in excess of 50% of the outstanding Restricted Securities held by all
Investors at any date of determination.
"Restricted Securities" means at any time, with respect to any
Investor, all Common Stock Equivalents, and other Securities of the Company held
by such Investor, in each case which have not theretofore been Transferred in a
Public Sale.
"Rule 144" means Rule 144 promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar or successor rule then in force.
"Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity or
equity-linked interests, including phantom stock and stock appreciation rights.
Whenever a reference herein to Securities is referring to any derivative
Securities, the rights of an Investor shall apply to such derivative Securities
and all underlying Securities directly or indirectly issuable upon conversion,
exchange or exercise of such derivative securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
<PAGE>
ARTICLE II
REGISTRATION RIGHTS
2.1 Chase Holders Required Registration.
(a) If at any time the Company shall be requested by the Requisite
Chase Holders to effect a registration under the Securities Act of Registrable
Shares, it shall promptly give written notice of such proposed registration to
all Chase Holders of Registrable Shares and shall offer to include in such
proposed registration any Registrable Shares requested to be included in such
proposed registration by such holders who respond in writing to the Company's
notice within 15 days after delivery of such notice (which response shall
specify the number of Registrable Shares proposed to be included in such
registration). The Company shall, subject to Section 2.1(b) below, promptly use
its best efforts to effect such registration on an appropriate form under the
Securities Act of the Registrable Shares which the Company has been so requested
to register.
(b) Anything contained in Section 2.1(a) to the contrary
notwithstanding, the Company shall not be obligated to effect pursuant to
Section 2.1(a) any registration under the Securities Act except in accordance
with the following provisions:
(i) the Company shall not be obligated to use its best efforts
to file and cause to become effective (A) more than two Registration
Statements, provided, that a registration shall not count as a
Registration Statement initiated pursuant to Section 2.1(a) unless it
became effective and the participating Investors were able to sell all
of the Registrable Shares sought to be included in any such
Registration Statement or (B) any Registration Statement during any
period in which any other registration statement (other than on Form
S-4 or Form S-8 promulgated under the Securities Act or any successor
forms thereto) pursuant to which Primary Securities are to be or were
sold has been filed and not withdrawn or has been declared effective
within the prior 60 days;
(ii) the Company may delay the filing or effectiveness of any
Registration Statement for a period of up to 90 days after the date of
a request for registration pursuant to Section 2.1(a) if at the time of
such request the Company is engaged in a Material Transaction; provided
that the Company may only delay the filing or effectiveness of a
Registration Statement pursuant to this Section 2.1(b)(ii) on one
occasion during any twelve-month period; and
(iii) with respect to any registration pursuant to Section
2.1(a), the Company may include in such registration any Primary Shares
or Other Shares; provided, however, that if the managing underwriter
advises the Company that the inclusion of all Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of all such Securities, then the number of Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
<PAGE>
(A) first, the Registrable Shares held by the Chase
Holders requesting that their Registrable Shares be included
in such registration pursuant to Section 2.1(a), pro rata
based upon the number of Registrable Shares owned by each such
Chase Holder at the time of such registration;
(B) second, the Primary Shares; and
(C) third, the Other Shares.
(c) A requested registration under Section 2.1(a) may be rescinded by
written notice to the Company by the Requisite Chase Holders to be included in
such registration at any time (i) prior to the filing date of a Registration
Statement and such rescinded registration shall not count as a registration
initiated pursuant to Section 2.1(a) above and (ii) after the filing date but
prior to such registration being declared effective by the Commission; provided,
however, that such rescinded registration shall not count as a registration
initiated pursuant to this Section 2.1 for purposes of subclause (A) of clause
(i) of subsection (b) above if the participating Investors (x) have reimbursed
the Company for all out-of-pocket expenses incurred by the Company in connection
with such rescinded registration or (y) (1) reasonably believed that the
Registration Statement contained an untrue statement of material fact or omitted
to sate a material fact required to be stated therein or necessary to make the
statements therein not misleading, (2) notified the Company of such fact and
required that the Company correct such alleged misstatement or omission and (3)
the Company has refused to correct such alleged misstatement or omission.
2.2 MassMutual Holders Demand Registration.
(a) If at any time the Company shall be requested by a Requisite
MassMutual Holder to effect a registration under the Securities Act of
Registrable Shares, it shall promptly give written notice of such proposed
registration to all MassMutual Holders and shall offer to include in such
proposed registration any Registrable Shares requested to be included in such
proposed registration by such holders who respond in writing to the Company's
notice within 15 days after delivery of such notice (which response shall
specify the number of Registrable Shares proposed to be included in such
registration). The Company shall, subject to Section 2.2(b) below, promptly use
its best efforts to effect such registration on an appropriate form under the
Securities Act of the Registrable Shares which the Company has been so requested
to register.
(b) Anything contained in Section 2.2(a) to the contrary
notwithstanding, the Company shall not be obligated to effect pursuant to
Section 2.2(a) any registration under the Securities Act except in accordance
with the following provisions:
(i) the Company shall not be obligated to use its best efforts
to file and cause to become effective (A) more than one Registration
Statement, provided, that a registration shall not count as a
Registration Statement initiated pursuant to Section 2.2(a) unless it
became effective and the participating Investors were able to sell all
of the Registrable Shares sought to be included in any such
Registration Statement or (B) any Registration Statement during any
period in which any other registration statement (other than on Form
S-4 or Form S-8 promulgated under the Securities Act or any successor
forms thereto) pursuant to which Primary Securities are to be or were
sold has been filed and not withdrawn or has been declared effective
within the prior 60 days;
<PAGE>
(ii) the Company may delay the filing or effectiveness of any
Registration Statement for a period of up to 90 days after the date of
a request for registration pursuant to Section 2.2(a) if at the time of
such request the Company is engaged in a Material Transaction; provided
that the Company may only delay the filing or effectiveness of a
Registration Statement pursuant to this Section 2.2(b)(ii) on one
occasion during any twelve-month period; and
(iii) with respect to any registration pursuant to Section
2.2(a), the Company may include in such registration any Primary Shares
or Other Shares; provided, however, that if the managing underwriter
advises the Company that the inclusion of all Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of all such Securities, then the number of Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(A) first, the Registrable Shares held by the
MassMutual Holders requesting that their Registrable Shares be
included in such registration pursuant to Section 2.2(a), pro
rata based upon the number of Registrable Shares owned by each
such Investor at the time of such registration;
(B) second, the Primary Shares; and
(C) third, the Other Shares.
A requested registration under Section 2.2(a) may be rescinded by
written notice to the Company by the Requisite MassMutual Holders to be included
in such registration at any time (i) prior to the filing date of a Registration
Statement and such rescinded registration shall not count as a registration
initiated pursuant to Section 2.2(a) above and (ii) after the filing date but
prior to such registration being declared effective by the Commission; provided,
however, that such rescinded registration shall not count as a registration
initiated pursuant to this Section 2.2 for purposes of subclause (A) of clause
(i) of subsection (b) above if the participating Investors (x) have reimbursed
the Company for all out-of-pocket expenses incurred by the Company in connection
with such rescinded registration or (y) (1) reasonably believed that the
Registration Statement contained an untrue statement of material fact or omitted
to sate a material fact required to be stated therein or necessary to make the
statements therein not misleading, (2) notified the Company of such fact and
required that the Company correct such alleged misstatement or omission and (3)
the Company has refused to correct such alleged misstatement or omission.
2.3 Piggyback Registration.
If the Company at any time proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms thereto), it
shall promptly give written notice to each Investor of its intention to so
register Primary Shares or Other Shares and, upon the written request, given
<PAGE>
within 20 days after delivery of any such notice by the Company, of any such
Investor to include in such registration Registrable Shares (which request shall
specify the number of Registrable Shares proposed to be included in such
registration), the Company shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the Securities otherwise being sold in such registration;
provided, however, that if the managing underwriter advises the Company that the
inclusion of all Registrable Shares or Other Shares proposed to be included in
such registration would interfere with the successful marketing (including
pricing) of the Primary Shares proposed to be registered by the Company, then
the number of Primary Shares, Registrable Shares and Other Shares proposed to be
included in such registration shall be included in the following order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Shares held by the Investors
requesting their Registrable Shares be included in such registration
pursuant to the terms of this Section 2.3 and the Other Shares, pro
rata based upon the number of shares of Common Stock (and Common Stock
Equivalents) owned by each such seller at the time of such
registration.
2.4 Registrations on Form S-3.
Anything contained in this Section 2.4 to the contrary notwithstanding,
at such time as the Company shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, the
Requisite Chase Holders and the Requisite MassMutual Holders shall have the
right to request in writing an unlimited number of registrations on Form S-3, or
such successor form, of Registrable Shares, and upon receipt of such request,
the Company shall use its best efforts promptly to effect the registration under
the Securities Act of the Registrable Shares so requested to be registered. A
requested registration on Form S-3 or any such successor form in compliance with
this Section shall not count as a registration statement demanded pursuant to
Sections 2.1(a) or 2.2(a), but shall otherwise be treated as a registration
initiated pursuant to and shall, except as otherwise expressly provided in this
Section, be subject to Sections 2.1(b) and 2.2(b).
2.5 Holdback Agreement.
(a) If the Company at any time shall register shares of Common Stock
under the Securities Act in an underwritten offering pursuant to any other
registration, the Investors shall not, if requested by the managing underwriter,
sell, make any short sale of, grant any option for the purchase of, or otherwise
dispose of any Common Stock or Securities convertible into or exercisable or
exchangeable for Common Stock (other than those Registrable Shares included in
such registration pursuant to Sections 2.1, 2.2, 2.3 or 2.4) without the prior
written consent of the Company for a period as shall be determined by the
managing underwriters, which period cannot begin more than 7 days prior to the
effectiveness of such Registration Statement and cannot last more than 180 days
after the effective date of such Registration Statement.
(b) If the Company at any time pursuant to Sections 2.1, 2.2, 2.3 or
2.4 of this Agreement shall register under the Securities Act Registrable Shares
held by Investors for sale to the public pursuant to an underwritten offering,
<PAGE>
the Company shall not, without the prior written consent of the Requisite
Investors, effect any public sale or distribution of Securities similar to those
being registered, or any Securities convertible into or exercisable or
exchangeable for such Securities, for such period as shall be determined by the
managing underwriters, which period shall not begin more than 7 days prior to
the effectiveness of the Registration Statement pursuant to which such Public
Offering shall be made and shall not last more than 180 days after the effective
date of such Registration Statement (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form).
2.6 Preparation and Filing.
If and whenever the Company is under an obligation pursuant to the
provisions of this Article II to use its best efforts to effect the registration
of any Registrable Shares, the Company shall, as expeditiously as practicable:
(i) use its best efforts to cause a Registration Statement
that registers such Registrable Shares to become and remain effective
for a period of 180 days or until all of such Registrable Shares have
been disposed of (if earlier);
(ii) furnish, at least five business days before filing a
Registration Statement that registers such Registrable Shares, a
Prospectus relating thereto and any amendments or supplements relating
to such Registration Statement or Prospectus, to one counsel selected
by, in the case of a Registration initiated pursuant to Sections
2.1(a), 2.2(a) or 2.3, the Requisite Investors (the "Stockholders'
Counsel"), copies of all such documents proposed to be filed (it being
understood that such five business day period need not apply to
successive drafts of the same document proposed to be filed so long as
such successive drafts are supplied to the Stockholder's Counsel in
advance of the proposed filing by a period of time that is customary
and reasonable under the circumstances);
(iii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for at least the periods set forth in clause (i)
above or until all of such Registrable Shares have been disposed of (if
earlier) and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of such Registrable Shares;
(iv) notify the Stockholders' Counsel promptly in writing (A)
of any comments by the Commission with respect to such Registration
Statement or Prospectus, or any request by the Commission for the
amending or supplementing thereof or for additional information with
respect thereto, (B) of the issuance by the Commission of any stop
order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation of
any proceedings for that purpose and (C) of the receipt by the Company
of any notification with respect to the suspension of the qualification
of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
<PAGE>
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Shares reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller of Registrable Shares to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such seller; provided, however, that the Company will
not be required to (i) qualify or register such Registrable Shares in
more than five (5) jurisdictions or (ii) qualify generally to do
business, subject itself to general taxation or consent to general
service of process in any jurisdiction where it would not otherwise be
required so to do but for this clause (v);
(vi) furnish to each seller of such Registrable Shares such
number of copies of a summary Prospectus or other Prospectus, including
a preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such seller of Registrable
Shares may reasonably request in order to facilitate the public sale or
other disposition of such Registrable Shares;
(vii) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable Shares;
(viii) notify on a timely basis each seller of such
Registrable Shares at any time when a Prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (i) of this Section
2.6 of the happening of any event as a result of which the Prospectus
included in such Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and,
at the request of such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
offerees of such shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and each seller
of Registrable Shares agrees not to offer or sell such Registrable
Shares until receipt of timely notice from the Company that such
supplement or amendment is effective;
(ix) make available for inspection by any seller of such
Registrable Shares, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or
other agent retained by any such seller or underwriter (collectively,
the "Inspectors"), all pertinent financial, business and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such Registration
Statement (and any of the Information which the Company determines in
good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be used by such seller or such
Inspector for any purpose other than exercise of such due diligence
<PAGE>
responsibility and shall not be disclosed by the Inspectors unless (A)
the disclosure of such Information is necessary to avoid or correct a
material misstatement or omission in the Registration Statement, (B)
the release of such Information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction, (C) such
Information has been made generally available to the public or (D) the
seller of Registrable Shares agrees that it will, upon learning that
disclosure of such Information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential);
(x) use its best efforts to obtain from its independent
certified public accountants a "cold comfort" letter in customary form
and covering such matters of the type customarily covered by cold
comfort letters;
(xi) use its best efforts to obtain, from its counsel, an
opinion or opinions in customary form (which shall also be addressed to
the Investors selling Registrable Shares in such registration);
(xii) provide a transfer agent and registrar (which may be the
same entity and which may be the Company) for such Registrable Shares;
(xiii) issue to any underwriter to which any seller of
Registrable Shares may sell Securities in such offering certificates
evidencing such Registrable Shares;
(xiv) list such Registrable Shares on the Nasdaq Small-Cap
Market or any national securities exchange on which any securities of
the Common Stock are listed or, if the Common Stock is not listed on a
national securities exchange, use its best efforts to qualify such
Registrable Shares for inclusion on such national securities exchange
or Nasdaq as the Requisite Investors shall request;
(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, earnings
statements, which need not be audited, covering a period of 12 months
beginning within three months after the effective date of the
Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(xvi) use its best efforts to take all other steps necessary
to effect the registration of such Registrable Shares contemplated
hereby.
2.7 Expenses.
All expenses incurred by the Company in complying with Section 2.6,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees and expenses of the
Company's counsel and accountants and fees and expenses of the Stockholders'
Counsel up to $30,000, shall be paid by the Company; provided, however, that all
underwriting discounts or broker discounts or commissions applicable to the
<PAGE>
Registrable Shares and all fees and expenses of counsel for the seller or
sellers other than the Stockholders' Counsel, shall not be borne by the Company
but shall be borne by the seller or sellers thereof, in proportion to the number
of Registrable Shares sold by such seller or sellers.
2.8 Indemnification.
(a) In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Article II, the Company shall indemnify and
hold harmless the seller of such Registrable Shares, each underwriter, broker or
any other Person acting on behalf of such seller, each other Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
and each Representative of any of the foregoing Persons, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
Persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement under which such
Registrable Shares were registered, any preliminary Prospectus or final
Prospectus contained therein, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any Prospectus, necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, or any violation by the Company of the Securities Act
or state securities or blue sky laws applicable to the Company and relating to
action or inaction required of the Company in connection with such registration
or qualification under such state securities or blue sky laws, and the Company
shall promptly reimburse such seller, such underwriter, such broker, such
controlling Person or such Representatives for any legal or other expenses
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable to any such Person 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 said
Registration Statement, preliminary Prospectus, amendment, supplement or
document incident to registration or qualification of any Registrable Shares in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Person, or a Person duly
acting on their behalf, specifically for use in the preparation thereof;
provided further, however, that the foregoing indemnity agreement is subject to
the condition that, insofar as it relates to any untrue statement, allegedly
untrue statement, omission or alleged omission made in any preliminary
Prospectus but eliminated or remedied in the final Prospectus (filed pursuant to
Rule 424 of the Securities Act), such indemnity agreement shall not inure to the
benefit of any indemnified party from whom the Person asserting any loss, claim,
damage, liability or expense purchased the Registrable Shares which are the
subject thereof, if a copy of such final Prospectus had been timely made
available to such Indemnified Person and such final Prospectus was not delivered
to such Person with or prior to the written confirmation of the sale of such
Registrable Shares to such Person.
<PAGE>
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Article II, each seller of Registrable Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the paragraph (a) of this Section 2.8) the Company, each
underwriter or broker involved in such offering, each other seller of
Registrable Shares under such Registration Statement, each Person who controls
any of the foregoing Persons within the meaning of the Securities Act and any
Representative of the foregoing Persons with respect to any statement or
omission from such Registration Statement, any preliminary Prospectus or final
Prospectus contained therein, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company or such underwriter through an
instrument duly executed by such seller or a Person duly acting on their behalf
specifically for use in connection with the preparation of such Registration
Statement, preliminary Prospectus, final Prospectus, amendment or supplement;
provided, however, that the maximum amount of liability in respect of such
indemnification shall be limited, in the case of each seller of Registrable
Shares, to an amount equal to the proceeds actually received by such seller from
the sale of Registrable Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 2.8, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action (provided however, that an
indemnified party's failure to give such notice in a timely manner shall only
relieve the indemnification obligations of an indemnifying party to the extent
such indemnifying party is prejudiced by such failure). In case any such action
is brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel 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 shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal or
equitable defenses available to such indemnified party which are in addition to
or conflict with those available to the indemnifying party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 2.8, the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such indemnified
party and any Person controlling such indemnified party for that portion of the
reasonable fees and expenses of any one lead counsel (plus appropriate special
and local counsel) retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 2.8. Notwithstanding the foregoing, the indemnity agreement set forth in
Section 2.8(a) shall not apply to amounts paid in settlement if such settlement
is effected without the written consent of the Company (which consent shall not
be unreasonably withheld).
(d) If the indemnification provided for in this Section 2.8 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage or liability referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
<PAGE>
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other hand in connection with the
statements or omissions which resulted in such loss, claim, damage or liability
as well as any other relevant equitable considerations; provided, however, that
the maximum amount of liability in respect of such contribution shall be
limited, in the case of each seller of Registrable Shares, to an amount equal to
the proceeds actually received by such seller from the sale of Registrable
Shares effected pursuant to such registration. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The indemnification and contribution provided for under this
Article II will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
Securities.
2.9 Underwriting Agreement.
(a) Notwithstanding the provisions of Sections 2.6 and 2.8, to the
extent that the sellers of Registrable Shares in a proposed registration shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such sections of this
Article II, the provisions contained in such sections of this Article II
addressing such issue or issues shall be of no force or effect with respect to
such registration, but this provision shall not apply to the Company if the
Company is not a party to the underwriting or similar agreement.
(b) If any registration pursuant to Sections 2.1, 2.2 or 2.3 is
requested to be an underwritten offering, the Company shall negotiate in good
faith to enter into a reasonable and customary underwriting agreement with the
underwriters thereof. The Company shall be entitled to receive indemnities from
lead institutions, underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Prospectus or Registration
Statement and to the extent customary given their role in such distribution.
2.10 Information by Holder.
Each holder of Registrable Shares to be included in any registration
shall furnish to the Company and the managing underwriter such written
information regarding such holder and the distribution proposed by such holder
as the Company or the managing underwriter may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Article II.
<PAGE>
2.11 Exchange Act Compliance.
The Company shall comply with all of the reporting requirements of the
Exchange Act and shall comply with all other public information reporting
requirements of the Commission which are conditions to the availability of Rule
144 for the sale of the Common Stock. The Company shall cooperate with each
holder of Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
2.12 No Conflict of Rights.
The Company represents and warrants to the Investors that the
registration rights granted to such Investors hereby do not conflict with any
other registration rights granted by the Company. The Company shall not, after
the date hereof, grant any registration rights which conflict with or impair, or
have any priority over, the registration rights granted hereby. In any
underwritten public offering, the managing underwriter shall be an investment
banking firm selected by the Company, and reasonably acceptable to the Requisite
Investors.
ARTICLE III
MISCELLANEOUS
3.1 Amendments and Waivers.
(a) Written Document. Any provision of this Agreement may be amended or
waived, but only pursuant to a written agreement signed by the Company and the
Requisite Investors, provided that no such amendment or modification shall
affect the rights and benefits of less than all of the Investors without the
prior written consent of each Investor materially and adversely affected
thereby.
(b) No Waiver; Cumulative Remedies. No failure on the part of any
Investor to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
3.2 Severability.
It is the desire and intent of the parties hereto that the provisions
of this Agreement be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
<PAGE>
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
3.3 Entire Agreement.
This Agreement and the other agreements referred to herein and to be
executed and delivered in connection herewith embody the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and thereof and supersede and preempt any and all prior and contemporaneous
understandings, agreements, arrangements or representations by or among the
parties, written or oral, which may relate to the subject matter hereof or
thereof in any way. Other than this Agreement, the Transaction Documents (as
defined in the Purchase Agreement) and the other agreements referred to herein
and therein to be executed and delivered in connection herewith and therewith,
there are no other agreements continuing in effect relating to the subject
matter hereof.
3.4 Successors and Assigns.
Except as otherwise provided herein, this Agreement will bind and inure
to the benefit of and be enforceable by the Company and its successors and
assigns and the Investors and any subsequent holders of Registrable Shares and
the respective successors and assigns of each of them, so long as they hold
Registrable Shares. None of the provisions hereof shall create, or be construed
or deemed to create, any right to employment in favor of any Person by the
Company or any of its Subsidiaries. This Agreement is not intended to create any
third party beneficiaries.
3.5 Counterparts; Facsimile Signatures.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable and binding.
3.6 Notices.
All notices, demands and requests of any kind to be delivered to any
party hereto in connection with this Agreement shall be in writing (i) delivered
personally, (ii) sent by nationally-recognized overnight courier, (iii) sent by
first class, registered or certified mail, return receipt requested or (iv) sent
by facsimile, in each case to such party at its address as follows:
(a) if to the Company, to:
Eagle Pacific Industries, Inc.
333 South Seventh Street
2430 Metropolitan Centre
Minneapolis, Minnesota 55402
Attention: William H. Spell
Telephone No.: (612) 305-0339
Telecopier No.: (612) 371-9651
<PAGE>
with a copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3397
Attention: Dobson West, Esq.
Telephone No.: (612) 347-7000
Telecopier No.: (612) 347-7077
(b) if to any Investor, to such Investor's address as set forth in
Schedule I hereto.
Any notice, demand or request so delivered shall constitute valid notice under
this Agreement and shall be deemed to have been received (i) on the day of
actual delivery in the case of personal delivery, if delivered on a Business Day
(otherwise on the next Business Day), (ii) on the next Business Day after the
date when sent in the case of delivery by nationally-recognized overnight
courier, (iii) on the fifth Business Day after the date of deposit in the U.S.
mail in the case of mailing or (iv) upon receipt in the case of a facsimile
transmission. Any party hereto may from time to time by notice in writing served
upon the other as aforesaid designate a different mailing address or a different
Person to which all such notices, demands or requests thereafter are to be
addressed.
3.7 Governing Law; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to principles of
conflicts of laws), except to the extent that the New York conflicts of laws
principles would apply the Minnesota Business Corporation Act to matters
relating to corporations organized thereunder.
3.8 Further Assurances.
Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the provisions of this
Agreement and the consummation of the transactions contemplated hereby.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Registration Rights Agreement as of the date first written above.
COMPANY:
EAGLE PACIFIC INDUSTRIES, Inc.
By: /s/ William H. Spell
Name: William H. Spell
Title: Chief Executive Officer
INVESTORS:
CB CAPITAL INVESTORS, L.P.
By: CB Capital Investors, Inc.,
its General Partner
By: /s/ John O'Connor
Name: John O'Connor
Title: General Partner
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: Massachusetts Mutual Life
Insurance Company, as Investment
Manager
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
<PAGE>
SCHEDULE I
Investors
CB Capital Investors, L.P.
380 Madison Avenue
12th Floor
New York, NY 10017
Attention: Richard D. Waters, Jr.
Telephone: (212) 622-9036
Telecopier: (212) 622-3101
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza - 24th Floor
New York, New York 10112
Attention: Frederick M. Bachman, Esq.
Tel: (212) 408-2400
Fax: (212) 728-5950
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
MassMutual Corporate Investors
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
MassMutual Participation Investors
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
MassMutual Corporate Value Partners Limited
(certificates registered in the name
of Gerlach & Co.)
c/o Bank of America Trust and Banking
P.O. Box 1092
George Town, Grand Cayman
Cayman Island, B.W.I.
with a copy to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Roger Crandall
Wallace Rodger
<PAGE>
TABLE OF CONTENTS
Page
Article I Definitions; Rules of Construction.................................1
1.1 Definitions........................................................1
Article II REGISTRATION RIGHTS...............................................4
2.1 Chase Holders Required Registration................................4
2.2 MassMutual Holders Demand Registration.............................5
2.3 Piggyback Registration.............................................6
2.4 Registrations on Form S-3..........................................7
2.5 Holdback Agreement.................................................7
2.6 Preparation and Filing.............................................8
2.7 Expenses..........................................................10
2.8 Indemnification...................................................11
2.9 Underwriting Agreement............................................13
2.10 Information by Holder.............................................13
2.11 Exchange Act Compliance...........................................14
2.12 No Conflict of Rights.............................................14
Article III MISCELLANEOUS...................................................14
3.1 Amendments and Waivers............................................14
3.2 Severability......................................................14
3.3 Entire Agreement..................................................15
3.4 Successors and Assigns............................................15
3.5 Counterparts; Facsimile Signatures................................15
3.6 Notices...........................................................15
3.7 Governing Law; Waiver of Jury Trial...............................16
3.8 Further Assurances................................................16
<PAGE>
CONFORMED COPY
================================================================================
EAGLE PACIFIC INDUSTRIES, INC.
(a Minnesota corporation)
REGISTRATION RIGHTS AGREEMENT
Dated as of September 20, 1999
================================================================================
WARRANT
AGREEMENT dated as of
September 20, 1999, among
EAGLE PACIFIC INDUSTRIES,
INC., a Minnesota
corporation (the
"Company"), and the initial
warrant holders listed on
Schedule I hereto (the
"Initial Holders").
Preamble
The Company is entering into a Securities Purchase Agreement
dated as of the date hereof with the Initial Holders (the "Securities Purchase
Agreement") pursuant to which the Company is issuing to the Initial Holders
$32.5 million aggregate principal amount of its Senior Subordinated Notes due
2007 (the "Notes"). In order to induce the Initial Holders to enter into the
Securities Purchase Agreement and to purchase the Notes, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company is willing to issue the Warrants (as defined below) to
the Initial Holders. This Agreement sets forth terms and conditions applicable
to the Warrants.
NOW, THEREFORE, the parties to this Agreement hereby agree as
follows:
Article I
DEFINITIONS
1.1 Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Accruing Liability" has the meaning, given to such term in
Section 6.4.
"Affiliate" means, with respect to any specified Person, any
other Person that directly or indirectly through one or more intermediaries
Controls, is Controlled by or is under common Control with such Person.
"Allocable Number" has the meaning given to such term in
Section 4.2.
"Applicable Law" means all provisions of laws, statutes,
ordinances, rules, regulations, permits, certificates or orders of any
Governmental Authority applicable to the Person in question or any of its assets
or property, and all judgments, injunctions, orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party or by which any of its assets or properties are bound.
"Assignment Form" means the assignment form attached as Annex
C to a Warrant.
"Board" means the board of directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or
a day on which banks are authorized or required to be closed in New York, New
York; provided, however, that any determination of a Business Day relating to a
securities exchange or other securities market means a Business Day on which
such exchange is open for trading.
<PAGE>
"Change of Control" means the occurrence of any of the
following events: (i) all or substantially all of the Company's assets, on a
consolidated basis, are sold as an entirety to any Person or related group of
Persons or there shall be consummated any consolidation or merger of the Company
(A) in which the Company is not the continuing or surviving company (other than
a consolidation or merger with a wholly-owned Subsidiary in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
any case, other than a sale of assets or consolidation or merger of the Company
in which the holders of the Common Stock immediately prior to the sale of assets
or consolidation or merger have, directly or indirectly, at least a majority of
the Common Stock of the transferee or continuing or surviving company
immediately after such sale of assets or consolidation or merger, (ii) any
"person" (as such term is used in Sections 13(d) and 14 (d) of the Exchange Act)
other than the Spell Group, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 of the Exchange Act provided that such person shall be
deemed to have "beneficial ownership" of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the outstanding voting securities of the Company; or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (together with any new directors whose
election by such members of the Board or whose nomination for election by the
shareholders of the Company, as the case may be, was approved by a vote of at
least a majority of the directors of the Company then still in office) cease for
any reason to constitute a majority of the Board then in office.
"Chase Holders" means, collectively, CB Capital Investors,
L.P. or its transferees who hold Warrants or Warrant Shares.
"Class B Common Stock" means the Class B Common Stock, $.01
par value, of the Company.
"Closing Date" has the meaning given to such term in the
Securities Purchase Agreement.
"Commission" means the Securities and Exchange Commission (or
a successor thereto).
"Common Stock" means (i) the Common Stock, $.01 par value of
the Company, (ii) the Class B Common Stock and (iii) any other class of capital
stock of the Company hereafter authorized that is not limited to a fixed sum or
percentage of par or stated or liquidation value with respect to the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon any liquidation, dissolution or winding up of the Company.
"Company" has the meaning given to such term in the Preamble.
"Company Notice Date" has the meaning given to such term in
Section 6.4.
"Compliance Sideletter" has the meaning given to such term in
the Securities Purchase Agreement.
<PAGE>
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Convertible Securities" has the meaning given to such term in
Section 5.3(b)(i).
"Delivery Date" has the meaning given to such term in Section
4.3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Form" means the exchange form attached as Annex B to
a Warrant.
"Excluded Securities" means:
(i) shares of capital stock issued pursuant to a stock
dividend or a stock split or other subdivision of shares;
(ii) Common Stock issued upon exercise of any Warrant;
(iii) Common Stock obtained upon conversion of Class B Common
Stock;
(iv) securities issued by the Company in a Public Offering;
(v) securities issued upon exercise of conversion or exchange
rights, options or subscription calls, warrants, commitments or claims,
provided that the foregoing are issued and outstanding on the date
hereof and are listed on Schedule 2.4(g) or are issued hereafter in
compliance with Section 5.3; and
(vi) Common Stock or Options to purchase Common Stock issued
to employees, officers or, directors of the Company or any Subsidiary
or the issuance of Common Stock upon the exercise of any such Options;
provided, however, that the aggregate amount of all such Common Stock
or Common Stock which may be acquired upon the exercise of such Options
shall not exceed an aggregate of 5% of the Common Stock outstanding on
the date of issuance of such Common Stock or Options, as the case may
be.
"Excluded Transaction" means, with respect to any member of
the Spell Group, any sale or pursuant to a Public Offering or any sale or other
transfer to a majority-controlled Affiliate of such member of the Spell Group
(other than the Company or any Subsidiary) or to a member of the Family Group of
such member of the Spell Group.
"Exercise Form" means the exercise form attached as Annex A
to a Warrant.
"Exercise Price" means $.01 per Warrant Share, subject to
adjustment from time to time in the manner provided in Article V.
<PAGE>
"Expiration Time" means 5:00 p.m., Eastern time, on September
20, 2009.
"Family Group" means an individual's spouse and descendants
(whether natural or adopted) and any trust established solely for the benefit of
such individual or such individual's spouse and descendants (whether natural or
adopted) for estate planning purposes and any partnership in which all of the
partners consist of the such individual and/or such individual's spouse and/or
such individuals descendants (whether natural or adopted).
"Financing" means the borrowing of money by the Company
(including in connection with any refinancing of existing Indebtedness of the
Company), the sale or issuance of capital stock, a recapitalization of the
Company, a revaluation of the Company's assets (to the extent permitted under
applicable law and GAAP), transfers by the Company from its capital to its
surplus accounts, effecting the sale of the Warrants and/or the Warrant Shares
required to be purchased by the Company under Section 6.4 to one or more third
parties or any other transaction (other than a sale of a majority of the assets
of the Company) pursuant to which the Company makes available funds in an amount
sufficient to satisfy in cash all its obligations under Section 6.4.
"Fiscal Year" means, with respect to the Company, the one-year
period ending on December 31 of any year; provided, however, that with respect
to the fiscal period ending on December 31, 1999 the Fiscal Year of the Company
shall be the fiscal period commencing on the Closing Date and ending on December
31, 1999.
"Fully Diluted Basis" means, with respect to the Common Stock
at any time of determination, the number of shares of Common Stock that would be
issued and outstanding at such time, assuming full conversion, exercise and
exchange of all issued and outstanding Convertible Securities and Options that
shall be (or may become) exchangeable for, or exercisable or convertible into,
Common Stock, including the Warrants, except that the number of shares of Common
Stock outstanding on a Fully Diluted Basis shall not include the number of
shares of Common Stock issuable upon exercise, conversion or exchange of Options
or Convertible Securities that, at the time of determination, are Out of the
Money.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" means any federal, state, municipal
or other government, governmental department, commission, board, bureau, agency
or instrumentality, or any court, in each case whether of the United States of
America or any political subdivision thereof, or of any other country.
"Holder" means with respect to any Warrant, the holder of such
Warrant as set forth in the Warrant Register.
"Indebtedness" has the meaning given to such term in the
Securities Purchase Agreement.
"IRC" has the meaning given to such term in Section 2.2(b).
<PAGE>
"Market Price" means, for any security as of any date of
determination:
(a) if such security is Publicly Traded as of the date of
determination, the price determined by computing the average, over a period
consisting of the most recent twenty-one (21) Business Days occurring on or
prior to the date of determination, of the applicable price set forth below (but
excluding any trades or quotations that are not bona fide, arm's length
transactions):
(i) the average of the closing prices for such security on
such Business Day on all domestic securities exchanges on which such
security may be listed, or
(ii) if there have been no sales on any such exchange on such
Business Day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such Business Day, or
(iii) if on any Business Day such security is not so listed,
the average of the representative bid and asked prices quoted on the
Nasdaq National Market or Nasdaq Small-Cap Market as of 4:00 P.M., New
York time, on such Business Day, or
(iv) if on any Business Day such security is not quoted in the
Nasdaq National Market or Nasdaq Small-Cap Market, the average of the
highest bid and lowest asked prices on such Business Day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization.
(b) if such security is not Publicly Traded as of the date of
determination, (i) in the case of the Common Stock, the Market Value Per Share,
determined in accordance with the Valuation Procedure, and (ii) in the case of
any other security, the fair market value of one share or other applicable unit
of such security, determined in accordance with the Valuation Procedure, except
that if the Market Price of the Common Stock is being determined for purposes of
Section 4.3(c), such determination shall be made in good faith by the Board
exercising reasonable business judgment.
"Market Value" means the highest price that would be paid for
the entire common equity interest in the Company on a going-concern basis in a
single arm's-length transaction between a willing buyer and a willing seller
(neither acting under compulsion), using valuation techniques then prevailing in
the securities industry and assuming full disclosure of all relevant information
and a reasonable period of time for effectuating such sale. For the purposes of
determining the Market Value, (i) the exercise price of Options to acquire
Common Stock that are not Out of the Money shall be deemed to have been received
by the Company and (ii) the liquidation preference or indebtedness, as the case
may be, represented by Convertible Securities that are not Out of the Money
shall be deemed to have been eliminated or cancelled.
"Market Value Per Share" means the price per share of Common
Stock obtained by dividing (A) the Market Value by (B) the number of shares of
Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"MassMutual Holders" means, collectively, Massachusetts Mutual
Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation
Investors, MassMutual Corporate Value Partners Limited or any of their
respective transferees who hold Warrants or Warrant Shares.
<PAGE>
"Notes" has the meaning given to such term in the Preamble.
"Options" has the meaning given to such term in Section
5.3(b)(i).
"Organizational Documents" means, with respect to any Person,
each instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority, or (b) governs the internal affairs
of such Person, including its by-laws, in each case as amended, supplemented or
restated.
"Other Equity Documents" means the Team Agreement dated as of
February 23, 1998 by and among William Spell, Harry Spell, Bruce Richard and
Richard Perkins.
"Out of the Money" means, at any date of determination (a) in
the case of an Option, that the aggregate fair market value as of such date of
the shares of Common Stock issuable upon the exercise of such Option is less
than the aggregate exercise price payable upon such exercise and (b) in the case
of a Convertible Security, that the quotient resulting from dividing the fair
market value as of such date of such Convertible Security by the number of
shares issuable as of such date upon conversion or exchange of such Convertible
Security is greater than the fair market value of a share of Common Stock.
"Own" means, with respect to any security, to own, hold or
Control. Owns and Ownership shall have correlative meanings.
"Person" shall be construed as broadly as possible and
includes natural person, corporation, limited liability company, partnership,
joint venture, trust, unincorporated association or other organization and a
Governmental Authority.
"Proportionate Percentage" means, with respect to any Holder
at any time, the quotient obtained by dividing (a) the aggregate number of
Warrant Shares then held by such Holder by (b) the total number of shares of
Common Stock then outstanding (on a Fully-Diluted Basis).
"Publicly Traded" means, with respect to any security, that
such security is (a) listed on a domestic securities exchange, (b) quoted on
Nasdaq Small-Cap Market or (c) traded in the domestic over-the-counter market,
which trades are reported by the National Quotation Bureau, Incorporated.
"Public Offering" means an offering of Common Stock under an
effective registration statement under the Securities Act.
"Put Closing Date" has the meaning given to such term in
Section 6.4.
"Put Notice" has the meaning given to such term in Section 6.4
"Put Notice Date" has the meaning given to such term in
Section 6.4
"Put Postponement" has the meaning given to such term in
Section 6.4.
<PAGE>
"Put Price Per Share" means, as at any date, the Market Price
for a share of Common Stock.
"Put Reactivation Date" has the meaning given to such term in
6.4.
"Put Response Notice" has the meaning given to such term in
Section 6.4 .
"Put Right" means the right of a Holder to require the Company
to purchase Warrants and Warrant Shares pursuant to, and in accordance with,
Section 6.4.
"Put Withdrawal Notice" has the meaning given to such term in
Section 6.4.
"Refused Securities" has the meaning given to such term in
Section 6.2(c).
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof, substantially in the form of Exhibit A
hereto.
"Requisite Holders" means, as of any date of determination,
Holders holding Warrants or Warrant Shares representing at least 75% of the
Warrant Shares (i) previously issued or (ii) issuable upon exercise of Warrants
then outstanding.
"Section 6.2 Notice of Acceptance" has the meaning given to
such term in Section 6.2.
"Section 6.2 Offer" has the meaning given to such term in
Section 6.2.
"Section 6.2 Offer Notice" has the meaning given to such term
in Section 6.2.
"Section 6.2 Securities" has the meaning given to such term in
Section 6.2(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" has the meaning given to such
term in the Preamble.
"Senior Debt" has the meaning given to such term in the
Securities Purchase Agreement.
"Spell Group" means William H. Spell, Harry W. Spell, Bruce A.
Richard and Richard W. Perkins.
"Subsidiary" means, with respect to any Person, any other
Person of which more than fifty percent (50%) of the shares of stock or other
interests entitled to vote in the election of directors or comparable Persons
performing similar functions (excluding shares or other interests entitled to
vote only upon the failure to pay dividends thereon or other contingencies) are
at the time owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person.
<PAGE>
"Transfer" means any sale, transfer, assignment, or other
disposition of any interest in, with or without consideration, any security,
including any disposition of any security or of any interest therein which would
constitute a sale thereof within the meaning of the Securities Act.
"Valuation Procedure" means, with respect to the determination
of any amount or value required to be determined in accordance with such
procedure (the "valuation amount"), a determination (which shall be final and
binding on the Company and the Holders) made (i) by agreement among the Company
and the Requisite Holders within thirty (30) days following the event requiring
such determination or (ii) in the absence of such an agreement, by an Appraiser
(as defined below) selected in accordance with the further provisions of this
definition. If the Board and the Requisite Holders are unable to agree upon an
acceptable Appraiser within ten (10) days after the date either party proposed
that one be selected, the Appraiser will be selected by an arbitrator located in
New York City, New York, selected by the American Arbitration Association (or if
such organization ceases to exist, the arbitrator shall be chosen by a court of
competent jurisdiction). The arbitrator shall select the Appraiser (within ten
(10) days of his appointment) from a list, jointly prepared by the Board and the
Requisite Holders, of not more than six Appraisers of national standing in the
United States, of which no more than three may be named by the Board and no more
than three may be named by the Requisite Holders. The arbitrator may consider,
within the ten-day period allotted, arguments from the parties regarding which
Appraiser to choose, but the selection by the arbitrator shall be made in its
sole discretion from the list of six. The Board and the Requisite Holders shall
submit to the Appraiser their respective determinations of the valuation amount,
and any supporting arguments and other data as they may desire, within ten (10)
days of the appointment of the Appraiser, and the Appraiser shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the Appraiser, from among
the valuation amounts submitted by the Board and the Requisite Holders and the
valuation amount calculated by the Appraiser. The Company shall pay the fees and
expenses of the Appraiser and arbitrator (if any) used to determine the
valuation amount. If required by any Appraiser or arbitrator, the Company shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such
Company or arbitrator and its officers, directors, partners, employees, agents
and Affiliates. As used herein, "Appraiser" means (a) with respect to a
determination of Market Value or the fair market value of any security, an
investment banking firm and (b) with respect to a determination of other
valuation required hereunder, a firm of the type generally considered to be
qualified in making determinations of the type required.
"Warrant" has the meaning given to such term in Section
3.1(a).
"Warrant Register" has the meaning given to such term in
Section 3.1(b).
"Warrant Shares" means (a) the shares of Common Stock issued
or issuable upon exercise of a Warrant in accordance with Section 4.1 or upon
exchange of a Warrant in accordance with Section 4.2, (b) all other securities
or other property issued or issuable upon any such exercise or exchange in
accordance with this Agreement and (c) any securities of the Company distributed
with respect to the securities referred to in the preceding clauses (a) and (b).
<PAGE>
As used in this Agreement, the phrase "Warrant Shares then held" by any Holder
or Holders means Warrant Shares held at the time of determination by such Holder
or Holders and Warrant Shares issuable upon exercise of Warrants held at the
time of determination by such Holder or Holders.
1.2 Accounting Terms and Determinations.
Except as otherwise may be expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Holders hereunder and under the Warrants shall be prepared, in accordance with
GAAP. All calculations made for the purposes of determining compliance with the
terms of this Agreement and the Warrants shall (except as otherwise may be
expressly provided herein) be made by application of GAAP.
ARTICLE II
PURCHASE AND SALE OF WARRANTS
2.1 Authorization and Issuance of Shares and Warrants.
The Company has authorized (i) the issuance of the Warrants to the
Initial Holders pursuant to this Agreement and (ii) the issuance of such number
of shares of Common Stock as shall be necessary to permit the Company to comply
with its obligations, as of the date hereof, to issue Warrant Shares pursuant to
the Warrants.
2.2 Issuance of the Warrants.
(a) Issuance. On the Closing Date, the Company shall (i) issue to each
Initial Holder Warrants representing the right to acquire the number of shares
of Common Stock set forth opposite such Initial Holder's name on Schedule I
hereto against delivery by such Initial Holders of the consideration provided in
Section 2.1(b) of the Securities Purchase Agreement, (ii) deliver to each
Initial Holder a single certificate for the Warrants to be acquired by such
Initial Holder hereunder, registered in the name of such Initial Holder, except
that, if an Initial Holder shall notify the Company in writing prior to such
issuance that it desires certificates for Warrants to be issued in other
denominations or registered in the name or names of any Affiliate, nominee or
nominees of such Initial Holder for its or their benefit, then the certificates
for Warrants for such Initial Holder shall be issued to such Initial Holder in
the denominations and registered in the name or names specified in such notice,
(iii) deliver to each Initial Holder a legal opinion from counsel to the Company
in form and substance satisfactory to the Initial Holders and (iv) deliver to
each Initial Holder the additional documents listed on the Schedule of Documents
attached to the Securities Purchase Agreement.
(b) Allocation of Price. The Initial Holders and the Company hereby
acknowledge and agree that the Warrants are part of an "investment unit" within
the meaning of Section 1273(c)(2) of the Internal Revenue Code of 1986, as
amended ("IRC"), which includes the Notes. Notwithstanding anything to the
contrary contained herein or in the Securities Purchase Agreement, the Initial
Holders and the Company hereby further acknowledge and agree that for United
<PAGE>
States federal income tax purposes the aggregate "issue price" of the Warrants
and the Notes under Section 1273(b) of the IRC (and for purposes of comparable
state and local income tax laws) shall equal $3,500,000 and $29,000,000,
respectively. The Initial Holders and the Company agree to use the foregoing
issue prices for all income tax purposes with respect to this transaction.
2.3 Representations by Initial Holders.
Each Initial Holder, annually as to itself only, represents and
warrants to the Company as follows:
(a) Purchase for its Own Account. Such Initial Holder is purchasing the
Warrants for its own account, without a view to the distribution thereof in
violation of the Securities Act, all without prejudice, however, to the right of
such Initial Holder at any time, in accordance with this Agreement or the
Registration Rights Agreement, lawfully to sell or otherwise to dispose of all
or any part of the Warrants or the Warrant Shares held by it.
(b) Accredited Investor. Such Initial Holder is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(c) Authority, Etc. Such Initial Holder has the power and authority to
enter into and perform this Warrant Agreement and the execution and performance
hereof have been duly authorized by all proper and necessary action; this
Warrant Agreement constitutes the valid and legally binding obligation of such
Initial Holder, enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights and the application of
equitable principles.
(d) Securities Act Compliance. Such Initial Holder understands that the
Company has not registered the Warrants or the Warrant Shares under the
Securities Act, and each Initial Holder agrees that neither the Warrants nor the
Warrant Shares shall be sold or transferred or offered for sale or transfer by
it without registration under the Securities Act or the availability of an
exemption therefrom, all as more fully provided in Section 3.3.
2.4 Representations and Warranties of the Company.
As a material inducement to the Initial Holders to accept the Warrants
as additional consideration therefor, the Company represents and warrants as
follows:
(a) Existence; Qualification. Each of the Company and the Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Each of the Company and the
Subsidiaries is duly qualified, licensed or admitted to do business and is in
good standing as a foreign corporation in every jurisdiction where the failure
to be so qualified would have a material adverse effect on the business,
financial condition, operations, assets, liabilities or capitalization of the
Company and the Subsidiaries taken as a whole and has all requisite corporate
power and authority to transact its business in all such jurisdictions.
(b) No Breach. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company and
the consummation by it of the transactions contemplated hereby and thereby will
not (a) violate the articles of incorporation or by-laws of the Company, (b)
violate, or result in a breach of or default under, any other instrument or
agreement to which the Company is a party or is bound, (c) violate any judgment,
<PAGE>
order, injunction, decree or award against or binding upon the Company, (d)
result in the creation of any Lien upon any of the properties or assets of the
Company, or (e) violate any law, rule or regulation relating to the Company.
(c) Corporate Action. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
the Warrants and the Registration Rights Agreement; the execution, delivery and
performance by the Company of this Agreement, the Warrants and the Registration
Rights Agreement have been duly authorized by all necessary corporate action
(including any stockholder action) on the part of the Company; this Agreement,
the Warrants and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms subject to the effects of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (regardless of
whether enforcement is sought in equity or at law); the shares of Common Stock
constituting the Warrant Shares initially covered by the Warrants have been duly
and validly authorized and reserved for issuance and will, when paid for and
issued and delivered in accordance with the Warrants, be duly and validly
issued, fully paid and nonassessable and free and clear of any Liens; and none
of the Warrant Shares issued pursuant to the terms hereof will be in violation
of any preemptive or similar rights of any Person.
(d) Approvals. Except in connection with the registration of the
Warrant Shares pursuant to the Registration Rights Agreement and relevant
securities law filings, no authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any other Person
are necessary for the execution, delivery or performance by the Company of this
Agreement, the Warrants or the Registration Rights Agreement or for the validity
or enforceability thereof. Any such action required to be taken as a condition
to the execution and delivery of this Agreement and the Registration Rights
Agreement, or the execution, issuance and delivery of the Warrants, has been
duly (or will be) taken by all such Governmental Authorities or other Persons,
as the case may be.
(e) Investment Company Act. The Company is not an "investment company,"
or a company "controlled by" an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(f) Public Utility Holding Company Act. The Company is not a "holding
company," or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(g) Capitalization.
(i) Schedule 2.4(g) hereto correctly sets forth the
authorized, issued and outstanding capital stock of the Company. Upon
the issuance of the Warrants under this Agreement, other than (x) the
Warrants to be issued pursuant to this Agreement, and (y) as described
on Schedule 2.4(g), the Company shall not have outstanding any
<PAGE>
Convertible Securities or Options or any warrants, options, other
securities or other rights exercisable or convertible into or
exchangeable for any shares of capital stock of the Company, nor shall
it have outstanding any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, any capital stock or any warrants, options,
other securities or other rights exercisable or convertible into or
exchangeable for any capital stock of the Company.
(ii) Except as set forth on Schedule 2.4(g), there is not in
effect on the date hereof any agreement by the Company pursuant to
which any holders of securities of the Company have a right to cause
the Company to register such securities under the Securities Act, other
than the Registration Rights Agreement, or any agreement to which the
Company or (to its knowledge) any of its stockholders is a party
relating to the voting, transfer or sale of such securities.
(h) Private Offering. Assuming the truth and accuracy of each Initial
Holder's representations and warranties contained in Section 2.3 hereof, the
issuance and sale of the Warrants to such Initial Holder hereunder are exempt
from the registration and prospectus delivery requirements of the Securities
Act. The Company agrees that neither the Company nor any Person acting on its
behalf has offered or will offer the Warrants or Warrant Shares or any part
thereof or any similar securities for issuance or sale to, or has solicited or
will solicit any offer to acquire any of the same from, any Person so as to
bring the issuance and sale of the Warrants or Warrant Shares within the
provisions of the registration and prospectus delivery requirements of the
Securities Act.
(i) No Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge after due
inquiry, threatened against the Company or any of its Subsidiaries before any
Governmental Authority with respect to or seeking to enjoin the transactions
contemplated by this Agreement, the Warrants or the Registration Rights
Agreement.
ARTICLE III
FORM; REGISTER; EXCHANGE FOR WARRANTS; TRANSFER
3.1 Form of Warrant; Register.
(a) Form. Each Warrant issued hereunder shall be in the form of Exhibit
B (each, a "Warrant") and shall be executed on behalf of the Company by its
Chairman or its Chief Executive Officer and by its Chief Financial Officer, its
Treasurer or its Assistant Treasurer, except that a Warrant need not bear any
legend appearing on the first page of such form from and after such time as all
the restrictions to which such legend relates no longer apply. Upon initial
issuance, each Warrant shall be dated as of the date of signature thereof by the
Company.
(b) Register. Each Warrant issued, exchanged or transferred hereunder
shall be registered in a warrant register (the "Warrant Register"). The Warrant
Register shall set forth the number of each Warrant, the name and address of the
Holder thereof and the original number of Warrant Shares purchasable upon the
exercise thereof. The Warrant Register will be maintained by the Company and
will be available for inspection by any Holder at the principal office of the
<PAGE>
Company or such other location as the Company may designate to the Holders in
the manner set forth in Section 8.1. The Company shall be entitled to treat the
Holder of any Warrant as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other Person.
3.2 Exchange of Warrants for Warrants.
(a) Exchange. The Holder may exchange any Warrant or Warrants issued
hereunder for another Warrant or Warrants of like kind and tenor representing in
the aggregate the right to purchase the same number of Warrant Shares that could
be purchased pursuant to the Warrant or Warrants being so exchanged. In order to
effect an exchange permitted by this Section 3.2, the Holder shall deliver to
the Company such Warrant or Warrants accompanied by a written request signed by
the Holder thereof specifying the number and denominations of Warrants to be
issued in such exchange and the names in which such Warrants are to be issued.
As promptly as practicable but in any event within ten (10) Business Days of
receipt of such a request, the Company shall, without charge, issue, register
and deliver to the Holder thereof each Warrant to be issued in such exchange.
(b) Replacement. Upon receipt of evidence reasonably satisfactory to
the Company (an affidavit of the Holder being satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any Warrant, and in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company (if the Holder is a financial institution or other
institutional investor, its own agreement being satisfactory) or, in the case of
any such mutilation, upon surrender of such Warrant, the Company shall, without
charge, issue register and deliver in lieu of such Warrant a new Warrant of like
kind representing the same rights represented by and dated the date of such
lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by any Person.
(c) Expenses. The Company shall pay all expenses and taxes (other than
any applicable income or similar taxes payable by a Holder of a Warrant)
attributable to an exchange of a Warrant pursuant to this Section 3.2; provided,
however, that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance of any Warrant in a
name other than that of the Holder of the Warrant being exchanged.
3.3 Transfer of Warrant.
(a) Transfer. Subject to the further provisions of this Section 3.3
(which are intended to ensure compliance with the Securities Act), each Warrant
may be transferred, in whole or in part, by the Holder thereof by delivering to
the Company such Warrant accompanied by a properly completed, duly executed,
Assignment Form. As promptly as practicable but in any event within ten (10)
Business Days of receipt of such Assignment Form, the Company shall, without
charge, issue, register and deliver to the Holder thereof a new Warrant or
Warrants of like kind and tenor representing in the aggregate the right to
purchase the same number of Warrant Shares that could be purchased pursuant to
the Warrant being transferred. In all cases of transfer by an attorney, the
<PAGE>
original power of attorney, duly approved, or a copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced and may be required
to be deposited and remain with the Company in its discretion. The Company shall
not be liable for complying with a request by a fiduciary or nominee of a
fiduciary to register a transfer of any Warrant which is registered in the name
of such fiduciary or nominee, unless made with the actual knowledge that such
fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with knowledge of such facts that the Company's
participation therein amounts to bad faith.
(b) Legend. Each certificate for Warrants or Warrant Shares shall
(unless otherwise permitted by the further provisions of this Section 3.3) be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO
THE CONDITIONS SPECIFIED IN SECTION 3.3 OF THE WARRANT AGREEMENT DATED AS OF
SEPTEMBER 20, 1999, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AMONG THE
ISSUER OF THESE SECURITIES AND THE INITIAL HOLDERS NAMED THEREIN. NO TRANSFER OF
THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. A COPY OF THE WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT
THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE
WARRANT AGREEMENT."
(c) Opinion. Each Holder shall, prior to any Transfer of any Warrants
or Warrant Shares, give written notice to the Company of such Holder's intention
to effect such Transfer and to comply in all other respects with the provisions
of this Section in making such proposed Transfer. Each such notice shall
describe the manner and circumstances of the proposed Transfer. Upon request by
the Company, the Holder delivering such notice shall deliver a written opinion,
addressed to the Company, of counsel for such Holder (which may be one of its
internal counsels), stating that in the opinion of such counsel (which opinion
shall be reasonably satisfactory to the Company) such proposed Transfer does not
involve a transaction requiring registration of such Warrants or Warrant Shares
under the Securities Act. Such Holder shall thereupon be entitled to Transfer
Warrants or Warrant Shares, as the case may be, in accordance with the terms of
the notice delivered to the Company, if the Company does not reasonably object
to such Transfer and request such opinion, within ten (10) days after delivery
of such notice or, if the Company does request such opinion, upon its receipt
thereof. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any Warrants or Warrant Shares (and each certificate or
other instrument evidencing any untransferred balance of such Warrants or
Warrant Shares) shall bear the legend set forth in Section 3.3(b) above unless
(i) such opinion of counsel is to the effect that registration of any future
Transfer is not required by the applicable provisions of the Securities Act or
(ii) the Company shall have waived the requirement of such legend.
<PAGE>
(d) Removal of Restrictions. Notwithstanding the foregoing provisions
of this Section 3.3, the restrictions imposed by this Section 3.3 upon the
transferability of any Warrants or Warrant Shares shall cease and terminate when
(i) any such Warrants or Warrant Shares are sold or otherwise disposed of
pursuant to an effective registration statement under the Securities Act or as
otherwise contemplated by paragraph (c) above in a manner that does not require
that the Warrants or Warrant Shares so transferred continue to bear the legend
set forth in Section 3.3(b) above or (ii) the holder of such Warrants or Warrant
Shares has met the requirements for Transfer of such Warrants or Warrant Shares
under Rule 144(k). Whenever the restrictions imposed by this Section shall
terminate, upon the written request of the holder of any Warrants or Warrant
Shares as to which such restrictions have terminated, as promptly as practicable
but in any event within ten (10) Business Days of receipt of such request, the
Company shall, without charge, issue, register and deliver a new certificate not
bearing the restrictive legend set forth in Section 3.3(b) above and not
containing any other reference to the restrictions imposed by this Section.
(e) Financial Information. The Company shall provide (and authorize any
Holder to provide) any readily-available financial and other information
concerning the Company to any prospective purchaser of the Warrants or Warrant
Shares owned by such Holder as such purchaser may reasonably request; provided
that, upon request of the Company, such purchaser shall enter into a
confidentiality agreement, in a form reasonably requested by the Company, with
respect to any such information that is non-public.
ARTICLE IV
EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES
4.1 Exercise of Warrants.
On any Business Day on or prior to the Expiration Time, a Holder may
exercise a Warrant, in whole or in part, by delivering to the Company such
Warrant accompanied by a properly completed Exercise Form and a check or wire
transfer in an aggregate amount equal to the product obtained by multiplying (a)
the Exercise Price times (b) the number of Warrant Shares being purchased. Any
partial exercise of a Warrant shall be for a whole number of Warrant Shares
only.
4.2 Exchange for Warrant Shares.
On any Business Day on or prior to the Expiration Time, a Holder may
exchange a Warrant, in whole or in part, for Warrant Shares by delivering to the
Company such Warrant accompanied by a properly completed Exchange Form. The
number of shares of Common Stock to be received by a Holder upon such exchange
shall be equal to (a) the number of Warrant Shares allocable to the portion of
the Warrant being exchanged (the "Allocable Number"), as specified by such
Holder in the Exchange Form less (b) the number of shares equal to the quotient
obtained by dividing (i) the product obtained by multiplying (A) the Exercise
Price times (B) the Allocable Number by (ii) the Market Price as of the Delivery
Date (as defined below). The Allocable Number need not be a whole number, but in
the case of any partial exchange of a Warrant under this Section 4.2, the
Allocable Number shall be determined so that the number of Warrant Shares to be
issued in such exchange shall be a whole number only.
<PAGE>
4.3 Issuance of Common Stock.
(a) Issuance of Common Stock. As promptly as practicable but in any
event within ten (10) Business Days following the delivery date (the "Delivery
Date") of (i) an Exercise Form or Exchange Form in accordance with Section 4.1
or 4.2, (ii) the related Warrant and (iii) any required payment of the Exercise
Price, the Company shall, without charge, issue, register and deliver one or
more stock certificates representing the aggregate number of shares of Common
Stock to which the Holder of such Warrant is entitled and transfer to such
Holder appropriate evidence of ownership of other securities or property
(including any cash) to which such Holder is entitled, in such denominations,
and registered or otherwise placed in, or payable to the order of, such name or
names, as may be directed in writing by such Holder. The Company shall deliver
such stock certificates, evidence of ownership and any other securities or
property (including any cash) to the Person or Persons entitled to receive the
same, together with an amount in cash in lieu of any fraction of a share (or
fractional interest in any other security), as hereinafter provided.
(b) Partial Exercise or Exchange. If a Holder shall exercise or
exchange a Warrant for less than all of the Warrant Shares that could be
purchased or received thereunder, the Company shall issue, register and deliver
to the Holder, as promptly as practicable but in any event within ten (10)
Business Days of the Delivery Date, a new Warrant evidencing the right to
purchase the remaining Warrant Shares. In the case of an exchange pursuant to
Section 4.2, the number of remaining Warrant Shares shall be the original number
of Warrant Shares subject to the Warrant so exchanged reduced by the Allocable
Number. Each Warrant surrendered pursuant to Section 4.1 or 4.2 shall be
canceled.
(c) Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock or fractional units of any other security upon
the exercise or exchange of a Warrant. If any fraction of a share of Common
Stock or fractional unit of any other security would be issuable on the exercise
or exchange of any Warrant, the Company may, in lieu of issuing such fractional
share or unit, pay to such Holder for any such fraction an amount in cash equal
to the product obtained by multiplying (i) such fraction times (ii) the Market
Price for the Common Stock or for a unit of such other security, as the case may
be, as of the Delivery Date.
(d) Expenses. The Company shall pay all expenses and taxes (other than
any applicable income or similar taxes payable by a Holder of a Warrant)
attributable to the initial issuance of Warrant Shares upon the exercise or
exchange of a Warrant; provided, however, that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance of any Warrant or any certificate for, or any other evidence of
ownership of, Warrant Shares in a name other than that of the Holder of the
Warrant being exercised or exchanged.
(e) Record Ownership. To the extent permitted by Applicable Law, the
Person in whose name any certificate for shares of Common Stock or other
evidence of ownership of any other security is issued upon exercise or exchange
of a Warrant shall for all purposes be deemed to have become the holder of
record of such shares or other security on the Delivery Date, irrespective of
the date of delivery of such certificate or other evidence of ownership
(subject, in the case of any exercise to which Section 4.3(g) applies, to the
consummation of a transaction upon which such exercise is conditioned),
notwithstanding that the transfer books of the Company shall then be closed or
that such certificates or other evidence of ownership shall not then actually
have been delivered to such Person.
<PAGE>
(f) Approvals. If any securities constituting Warrant Shares or any
portion thereof to be issued upon exercise or exchange of a Warrant require
registration or approval under any Applicable Law, or require listing on any
national securities exchange or national market system before such securities
may be so issued, the Company will as expeditiously as possible cause such
securities to be registered, approved or listed, as applicable. The Company may
suspend the exercise of any Warrant so affected for the period during which such
registration, approval or listing is required but not in effect.
(g) Conditional Exercise or Exchange. Any Exercise Form or Exchange
Form delivered under Section 4.1 or 4.2 may condition the exercise or exchange
of any Warrant on the consummation of a transaction being undertaken by the
Company or the Holder of such Warrant, and such exercise or exchange shall not
be deemed to have occurred except concurrently with the consummation of such
transaction, except that, for purposes of determining whether such exercise or
exchange is timely it shall be deemed to have occurred on the Delivery Date. If
any exercise of a Warrant is so conditioned, then, subject to delivery of the
items required by Section 4.3(a), the Company shall deliver the certificates and
other evidence of ownership of other securities or other property in such manner
as such Holder shall direct as required in connection with the consummation such
transaction upon which the exercise is conditioned. At any time that such Holder
shall give notice to the Company that such transaction has been abandoned or
such Holder has withdrawn from participation in such transaction, the Company
shall return the items delivered pursuant to Section 4.3(a), and such Holder's
election to exercise such Warrant shall be deemed rescinded.
(h) Regulatory Problem. No Holder shall exercise or exchange any
Warrant for shares of Common Stock if after giving effect to such Holder
reasonably determines that such exercise would cause such Holder and its
Affiliates to have a Regulatory Problem (as defined in the Compliance
Sideletter).
ARTICLE V
ADJUSTMENT OF EXERCISE PRICE AND SHARES.
5.1 General.
The Exercise Price and the number and kind of Warrant Shares issuable
upon exercise of each Warrant shall be subject to adjustment from time to time
in accordance with this Article V.
5.2 Stock Dividends, Subdivisions and Combinations.
If, at any time after the Closing Date, the Company shall:
(i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock; or
(ii) subdivide, split or reclassify its outstanding shares of
Common Stock into a larger number of shares of Common Stock; or
<PAGE>
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (A) the number of Warrant Shares issuable upon exercise of each Warrant
shall be adjusted so as to equal the number of Warrant Shares that the Holder of
such Warrant would have held immediately after the occurrence of such event if
the Holder had exercised such Warrant immediately prior to the occurrence of
such event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to the adjustment in
clause (A) and (2) the denominator of which is the number of Warrant Shares
issuable upon exercise of this Warrant immediately after the adjustment in
clause (A). An adjustment made pursuant to this Section 5.2 shall become
effective immediately after the occurrence of such event retroactive to the
record date, if any, for such event.
5.3 Issuance of Common Stock.
(a) General. If, at any time after the Closing Date, the Company shall
issue or sell (or, in accordance with Section 5.3(b), shall be deemed to have
issued or sold) any shares of Common Stock without consideration or for a
consideration per share less than the Market Price for the Common Stock
determined as of the date of such issuance or sale, then, effective immediately
upon such issuance or sale, the Exercise Price and the number Warrant Shares
issuable upon exercise of each Warrant shall be adjusted as follows:
(i) The Exercise Price shall be reduced to an amount equal to
the product obtained by multiplying (A) the Exercise Price in effect
immediately prior to such issuance or sale times (B) a fraction, (I)
the numerator of which shall be the sum of (x) the product of (1) the
number of shares of Common Stock outstanding (on a Fully-Diluted Basis)
immediately prior to such issuance or sale times (2) the Market Price
for the Common Stock as of the date of such issuance or sale plus (y)
the consideration, if any, received by the Company upon such issuance
or sale, and (II) the denominator of which shall be the product of (x)
the number of shares of Common Stock outstanding (on a Fully-Diluted
Basis) immediately after such issuance or sale times (y) such Market
Price.
(ii) The number of Warrant Shares issuable upon exercise of
such Warrant shall be increased to the number of shares determined by
multiplying (A) the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such issuance or sale by (B) a
fraction, (1) the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment in clause (i) of this
Section 5.3(a), and (2) the denominator of which shall be the Exercise
Price in effect immediately after such adjustment.
(b) Issuance of Options or Convertible Securities. The issuance or sale
of Options or Convertible Securities shall be deemed, in accordance with this
Section 5.3(b), to be the issuance of Common Stock.
<PAGE>
(i) Definitions. For the purposes of this Section 5.3(b), the
term "Options" means any warrants, options or other rights to subscribe
for or to purchase (A) Common Stock or (B) Convertible Securities, and
the term "Convertible Securities" means any capital stock, evidence of
indebtedness or other securities or rights convertible into or
exchangeable for Common Stock.
(ii) Issuance of Options. If the Company in any manner issues
or grants any Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options (or upon
conversion or exchange of the total maximum amount of Convertible
Securities issuable upon the exercise of such Options) shall be deemed,
for purposes of Section 5.3(a), to be outstanding and to have been
issued and sold by the Company. For purposes of Section 5.3(a), the
Common Stock issuable upon exercise of Options or upon conversion or
exchange of Convertible Securities issuable upon exercise of Options
for Convertible Securities shall be deemed to have been issued and sold
at a price per share equal to (A) the sum of (x) the total amount, if
any, received or receivable by the Company as consideration for the
issuance or granting of such Options plus (y) the minimum aggregate
amount of additional consideration payable to the Company upon the
exercise of all such Options plus (z) in the case of such Options for
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon issuance or sale of
such Convertible Securities and the conversion or exchange thereof
divided by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise
of such Options.
(iii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities, then the maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities shall be deemed, for purposes
of Section 5.3(a) to be outstanding and to have been issued and sold by
the Company. For purposes of Section 5.3(a), the Common Stock issuable
upon conversion or exchange of Convertible Securities shall be deemed
to have been issued and sold at a price per share equal to (A) the sum
of (x) the total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities
plus (y) the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof
divided by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities.
(iv) Superseding Adjustment. If, at any time after any
adjustment of the Exercise Price and the number of Warrant Shares
issuable upon exercise of the Warrants shall have been made pursuant to
Section 5.3(a) as a result of the issuance of Options or Convertible
Securities, or after any new adjustment of the Exercise Price and the
number of Warrant Shares shall have been made pursuant to this Section
5.3(b)(iv) (each of the foregoing, a "previous adjustment"):
(A) such Options or the right of conversion or
exchange of such Convertible Securities shall expire, or be
terminated or surrendered, and all or a portion of such
Options or the right of conversion or exchange with respect to
all or a portion of such Convertible Securities, as the case
<PAGE>
may be, shall not have been exercised or treated as having
been exercised or otherwise canceled or acquired by the
Company in connection with any settlement, including any cash
settlement, of such Options or the rights of conversion or
exchange of such Convertible Securities; or
(B) there has been any change in the number of shares
of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities
(including as a result of a change in the number of
Convertible Securities issuable upon the exercise of such
Options or the operation of antidilution provisions applicable
thereto); or
(C) the consideration per share for which shares of
Common Stock are issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible
Securities, or the maturity of such Convertible Securities,
shall be changed;
then the previous adjustment shall be rescinded and annulled and the
shares of Common Stock which were deemed to have been issued and that
gave rise to the previous adjustment shall no longer be deemed to have
been issued. Thereupon, a recomputation shall be made of the
adjustment, if any, of the Exercise Price and the number of Warrant
Shares issuable upon exercise of the Warrants as a consequence of such
Options or Convertible Securities on the basis of:
(D) treating the number of shares of Common Stock, if
any, theretofore actually issued or issuable pursuant to the
previous exercise of such Options or such right of conversion
or exchange (including Options or rights treated as exercised,
otherwise cancelled or acquired in connection with any
settlement), as having been issued on the date or dates of
such issuance as determined for purposes of the previous
adjustment and for the total amount of consideration actually
received and receivable therefor (determined in the manner
described in Section 5.3(b)(ii) or (iii), as the case may be);
(E) treating the maximum number of shares of Common
Stock (1) issuable upon the exercise (or upon the conversion
or exchange of Convertible Securities issuable upon the
exercise) of all Options which then remain outstanding and (2)
issuable upon the conversion or exchange of all Convertible
Securities which then remain outstanding, as having been
issued; and
(F) making the computations called for in Section
5.3(a) hereof on the basis of the revised terms of such
outstanding Options or Convertible Securities, as the case may
be, as if they were newly issued at the time of such revision.
Any adjustment of the Exercise Price and the number of Warrant Shares
issuable upon exercise of the Warrants resulting from such
recomputation shall supersede the previous adjustment.
<PAGE>
(v) No Further Adjustments. Any adjustment of the Exercise
Price or the number of Warrant Shares issuable upon the exercise of
Warrants to be made pursuant to this Section 5.3 with respect to the
issuance of (A) any Options (whether for Common Stock or Convertible
Securities), (B) any Convertible Securities issuable upon the exercise
of such Options or (C) any shares of Common Stock issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities shall be made effective upon the issuance of
such Options. Any adjustment of the Exercise Price or the number of
Warrant Shares issuable upon the exercise of Warrants to be made
pursuant to this Section 5.3 with respect to the issuance of (x) any
Convertible Securities (other than Convertible Securities issuable upon
the exercise of Options) or (y) any shares of Common Stock issuable
upon the conversion or exchange of such Convertible Securities shall be
made effective upon the issuance of such Convertible Securities. No
further adjustment of the Exercise Price or the number of Warrant
Shares issuable upon the exercise of Warrants shall be made upon the
actual issuance of Common Stock or of Convertible Securities upon the
exercise of such Options or upon the actual issuance of Common Stock
upon conversion or exchange of Convertible Securities.
5.4 Issuance of Other Equity Securities.
If, at any time after the Closing Date, the Company shall issue or sell
any of its equity securities other than any class or series of Common Stock,
Convertible Securities or Options ("Other Securities") without consideration or
for a consideration per share (or other similar unit) of such Other Securities
that is less than the Market Price per share (or other similar unit) of such
Other Securities determined as of the date of such issuance or sale, then,
effective immediately upon such issuance or sale, the Exercise Price and the
number of Warrant Shares issuable upon exercise of each Warrant shall be
adjusted as follows:
(i) The Exercise Price shall be reduced to an amount equal to
the product of (A) the Exercise Price in effect immediately prior to
such issuance or sale times (B) a fraction (I) the numerator of which
shall be the (x) the product obtained by multiplying (1) the number of
shares of Common Stock outstanding (on a Fully-Diluted Basis) on the
date of such issuance or sale times (2) the Market Price for the Common
Stock as of the date of such issuance or sale less (y) the amount by
which (1) the aggregate Market Price for the total number of such Other
Securities sold or issued exceeds (2) the aggregate consideration
received by the Company for the total number of such Other Securities
sold or issued, and (II) the denominator of which shall be the product
obtained by multiplying (x) the number of shares of Common Stock
outstanding (on a Fully-Diluted Basis) on the date of such issuance or
sale, by (y) such Market Price.
(ii) The number of Warrant Shares issuable upon exercise of
such Warrant shall be increased to the number of shares determined by
multiplying (A) the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such issuance or sale of Other
Securities times (B) a fraction (1) the numerator of which shall be the
Exercise Price in effect immediately prior to the adjustment in clause
(i) of this Section 5.4 and (2) the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
<PAGE>
5.5 Capital Reorganization, Capital Reclassifications, Merger, Etc.
If, at any time after the Closing Date, there shall be any capital
reorganization or any reclassification of the capital stock of the Company
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares to which Section 5.2 applies) or the Company
shall consolidate with, merge with or into, or sell all or substantially all of
its assets or property to, another Person, then in each case the Company shall
cause effective provision to be made so that each Warrant shall, effective as of
the effective date of such event retroactive to the record date, if any, of such
event, be exercisable for the kind and number of shares of stock, other
securities, cash or other property to which a holder of the number of Warrant
Shares issuable upon exercise of such Warrant would have been entitled upon such
event. In any such case, if necessary, the provisions of this Agreement and the
Warrants with respect to the rights and interests thereafter of the Holders of
the Warrants shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock, other securities, cash or other
property thereafter deliverable upon the exercise of the Warrants.
5.6 Other Actions Affecting Common Stock.
(a) Equitable Equivalent. If at any time or from time to time the
Company shall take any action affecting its Common Stock, other than any action
otherwise described in this Article V, then the number of Warrant Shares
issuable upon exercise of each Warrant shall be adjusted in such manner and at
such time as the Board shall in good faith determine (such determination to be
reasonably acceptable to the Majority Holders) to be equitable in the
circumstances, but no such adjustment shall decrease the number of Warrant
Shares issuable upon exercise of this Warrant.
(b) No Avoidance. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, 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 Company. The Company
shall at all times in good faith assist in the carrying out of all the
provisions of this Article V and in the taking of all such action as may be
necessary or appropriate in order to protect the exercise rights of the Holders
against impairment.
5.7 Miscellaneous
(a) Calculation of Consideration Received. If any Common Stock,
Options, Convertible Securities or Other Securities are issued or sold or deemed
to have been issued or sold for cash, then the consideration received therefor
shall be deemed to be the net amount received by the Company therefor. If any
Common Stock, Options, Convertible Securities or Other Securities are issued or
sold for consideration other than cash, then the amount of the consideration
other than cash received by the Company shall be the fair market value of such
consideration, as of the date of receipt, determined in accordance with the
Valuation Procedure.
(b) Treasury Shares. The number of shares of Common Stock outstanding
at any given time does not include shares owned or held by or for the account of
the Company or any Subsidiary, and the disposition of any shares so owned or
held shall be considered an issuance of Common Stock.
<PAGE>
(c) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or (B)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issuance or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be. If the Company shall take any such record of the holders of its Common Stock
and shall, thereafter and before the taking of the action for which such record
was taken, legally abandon its plan to take much action, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(d) Deferral of Issuance. In any case in which this Article V shall
require that any adjustment in the number of Warrant Shares purchasable
hereunder or in the Exercise Price be made effective as of immediately after a
record date for a specified event, the Company may elect to defer, until the
occurrence of such event, the issuing to the Holder of any Warrant exercised
after such record date of the shares of Common Stock and other capital stock of
the Company, if any, issuable upon such exercise over and above the number of
shares of Common Stock and other capital stock of the Company, if any, that
would have been issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment. In such case, the Company shall deliver to
the Holder a due bill or other appropriate instrument evidencing the Holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(e) Notice; Adjustment Rules. Whenever the Exercise Price and the
number of Warrant Shares shall be adjusted as provided in this Article V, the
Company shall provide to each Holder a statement, signed by the Chairman, the
President or the Chief Financial Officer of the Company, describing in detail
the facts requiring such adjustment and setting forth a calculation of the
Exercise Price and the number of Warrant Shares applicable to each Warrant after
giving effect to such adjustment. All calculations under this Article V shall be
made to the nearest one hundredth of a cent ($.0001) or to the nearest one-tenth
of a share, as the case may be. Adjustments pursuant to this Article V shall
apply to successive events or transactions of the types covered thereby.
Notwithstanding any other provision of this Article V, no adjustment shall be
made to the number of shares of Common Stock or to the Exercise Price if such
adjustment represents less than 1% of the number of shares previously required
to be so delivered, but any lesser adjustment shall be carried forward and shall
be made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 1% or more of
the number of shares to be so delivered.
(f) Certain Adjustments. The Company may make such reductions in the
Exercise Price or increase in the number of Warrant Shares to be received by any
Holder upon the exercise or exchange of a Warrant, in addition to those
adjustments required by this Article V, as it in its sole discretion shall
determine to be advisable in order that any consolidation or subdivision of the
Common Stock, or any issuance wholly for cash of any shares of Common Stock, or
any issuance wholly for cash of shares of Common Stock or Convertible
Securities, or any stock dividend, or any issuance of Options hereinafter made
by the Company to the holders of its Common Stock shall not be taxable to such
holders.
<PAGE>
(g) Excluded Issuances. Notwithstanding any other provision of this
Article V, no adjustment shall be made pursuant to this Article V in respect of
(a) the issuance of Common Stock or Options to purchase Common Stock issued to
employees, officers or directors of the Company or any Subsidiary, or the
issuance of Common Stock upon the exercise of any such Options, provided,
however, that the aggregate amount of all such Common Stock or Common Stock
which may be acquired upon the exercise of such Options shall not exceed an
aggregate of 5% of the Common Stock outstanding on the date of the issuance of
such Common Stock or Options, as the case may be, (b) the issuance from time to
time of shares of Common Stock upon the exercise of any of the Warrants, (c) the
issuance of Common Stock obtained upon conversion of the Class B Common Stock
and (d) securities issued upon exercise of conversion or exchange rights,
options or subscription calls, warrants, commitments or claims, provided that
the foregoing are issued and outstanding on the date hereof and are listed on
Schedule 2.4(g).
(h) Par Value. The Company shall not increase the par value of any
shares of Common Stock or other securities issuable upon the exercise of the
Warrants to an amount that exceeds the Exercise Price. Before taking any action
that would cause an adjustment pursuant to this Article V that would reduce the
Exercise Price below the par value per share of the Common Stock, the Company
shall be required to take any corporate action which may be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.
ARTICLE VI
CERTAIN OTHER RIGHTS
6.1 Payments in Respect of Dividends and Distributions.
If, at any time prior to the Expiration Date, the Company pays any
dividend or makes any distribution (whether in cash, property or securities of
the Company) on its capital stock which does not result in an adjustment under
Article V, then the Company shall simultaneously pay to the Holder of each
Warrant, the dividend or distribution which would have been paid to such Holder
on the Warrant Shares receivable upon the exercise in full of such Warrant had
such Warrant been fully exercised immediately prior to the record date for such
dividend or distribution or, if no record is taken, the date as of which the
record holders of Warrant Shares entitled to such dividend or distribution are
to be determined.
6.2 Right of First Offer.
(a) Offer. The Company shall not issue, sell or exchange, agree to
issue, sell or exchange, any (i) Common Stock, (ii) any Options or (iii) any
Convertible Securities unless, in each case, the Company shall have first
offered (the "Section 6.2 Offer") to sell to each Holder its Proportionate
Percentage of such securities (the "Section 6.2 Securities"), at a price and on
such other terms as shall have been specified by the Company in a written notice
(the "Section 6.2 Offer Notice") delivered to such Holder. Each Section 6.2
Offer by its terms shall remain open and irrevocable for a period of twenty (20)
Business Days from the date it is delivered by the Company to the Holders.
<PAGE>
(b) Acceptance Procedure. Notice of each Holder's intention to accept,
in whole or in part, a Section 6.2 Offer shall be evidenced by a writing signed
by such Holder and delivered to the Company prior to the end of the 20 -
Business - Day period of such Section 6.2 Offer, setting forth such portion of
the Section 6.2 Offered Securities as such Holder elects to purchase (the
"Section 6.2 Notice of Acceptance").
(c) Sale of Refused Securities. In the event that Section 6.2 Notices
of Acceptance are not given by the Holders in respect of all the Section 6.2
Securities offered to the Holders pursuant to Section 6.2(a), the Company shall
have ninety (90) days from the expiration of the offer and reoffer process
described in Section 6.2(b), to sell all or any part of such Section 6.2
Securities as to which Section 6.2 Notices of Acceptance have not been given by
the Holders (the "Refused Securities") to any other Person or Persons, but only
upon terms and conditions in all respects, including, without limitation, unit
price and interest rates, which are no more favorable, in the aggregate, to such
other Person or Persons or less favorable to the Company than those set forth in
the Section 6.2 Offer. Upon the closing of the sale of the Section 6.2
Securities, the Holders shall purchase from the Company, and the Company shall
sell to the Holders, the Section 6.2 Securities in respect of which Section 6.2
Notices of Acceptance were delivered to the Company, at the terms specified in
the Section 6.2 Offer.
(d) Exclusions. The provisions of this Section 6.2 shall not apply to
the issuance or sale of Excluded Securities.
6.3 Tag-Along Rights.
(a) Right to Sell. With respect to any proposed Transfer of Common
Stock by any member of the Spell Group (including, without limitation, (i) any
Transfer by a majority-controlled Affiliate of any such Person or any member of
such Person's Family Group and (ii) any Transfer to the Company or any of its
Subsidiaries but in each case excluding any Excluded Transaction), such member
of the Spell Group (or such majority-controlled Affiliate or Family Group
member, as the case may be) shall have the obligation, and each Holder shall
have the right, to require the proposed Transferee to offer to purchase from
such Holder, at the same price per share (less, in the case of a purchase of
Warrants, the Exercise Price) and upon the same terms and conditions of sale
offered to such member of the Spell Group (or such majority-controlled Affiliate
or Family Group member, as the case may be), up to a number of Warrant Shares
(issued or represented by outstanding Warrants) equal to the product (rounded to
the nearest whole number) obtained by multiplying (i) a fraction, the numerator
of which is the number of shares of Common Stock proposed to be transferred by
such member of the Spell Group (or such majority-controlled Affiliate or Family
Group member, as the case may be) and the denominator of which is the total
number of shares of Common Stock held by such member of the Spell Group (or such
majority-controlled Affiliate or Family Group member, as the case may be) by
(ii) the aggregate number of Warrant Shares then (issued or represented by
outstanding Warrants) held by such Holder. At least twenty (20) Business Days
prior to any Transfer of Common Stock (other than an Excluded Transaction) by
any member of the Spell Group (or a majority-controlled Affiliate or Family
Group member of any Spell Group member, as the case may be), such member of the
Spell Group (or such majority-controlled Affiliate or Family Group member, as
the case may be) shall provide notice to each Holder specifying (A) the maximum
number of shares of Common Stock to be transferred, (B) the name and address of
the proposed transferee, (C) the form of consideration and terms and conditions
thereof, (D) the number of shares which such Holder may require the proposed
purchaser to purchase from it in accordance with this Section 6.3 and (E) a
representation and warranty by such member of the Spell Group (or such
<PAGE>
majority-controlled Affiliate or Family Group member, as the case may be) that
the proposed transferee has been informed of the "tag-along" rights provided
herein and that such member of the Spell Group (or such majority-controlled
Affiliate or Family Group member, as the case may be) will not Transfer shares
unless such transferee has agreed to purchase all shares required to be
purchased from Holders hereunder. Any Transfer of Common Stock by any member of
the Spell Group ( a majority-controlled Affiliate or Family Group member of such
Spell Group Member, as the case may be) shall not be consummated until (and
shall be void ab initio unless) the provisions of this Section 6.3 shall have
been complied with.
(b) Exercise. Any Holder may exercise its rights under Section 6.3(a)
by delivering at least 5 Business Days prior to the end of such 20-Business-Day
period, a written notice to such member of the Spell Group indicating the desire
of such Holder to exercise its rights under this Section 6.3 and the number of
shares such Holder wishes to Transfer, if less than the number which the Holder
is entitled to Transfer under Section 6.3(a). The rights of a Holder under this
Section 6.3 in connection with any proposed Transfer shall not be adversely
affected by a Holder's failure to exercise such rights in connection with any
prior proposed Transfer.
(c) Additional Sales. If at any time prior to a proposed Transfer such
member of the Spell Group wishes to Transfer a greater number of shares than
that originally proposed, such member of the Spell Group shall notify each
Holder immediately of the additional number of shares being proposed for
Transfer. Each Holder may require the proposed transferee to purchase from such
Holder a number of additional Warrant Shares (issued or represented by
outstanding Warrants) determined in accordance with 6.3(a) above but based upon
the number of additional shares the proposed transferee desires to purchase. The
additional tag-along rights provided by this Section 6.3(c) shall be exercised
by any Holder within ten (10) Business Days following the date of the giving of
the supplementary notice by such member of the Spell Group by delivery of
written notice indicating its desire to exercise its additional rights under
this Section 6.3(c) and the number of shares such Holder wishes to Transfer, if
less than the number which such Holder is entitled to Transfer under Section
6.3(a) and this Section 6.3(c).
(d) Closing. At the closing of any purchase of shares pursuant to this
Section 6.3, each participating Holder shall deliver certificates representing
the Warrant Shares (or Warrants) being purchased by the transferee, duly
endorsed for transfer. At such closing, all of the parties to the transaction
shall execute such customary documentation as may reasonably be requested by the
parties thereto; provided, however, that any Holder may withdraw from such
transaction if the documentation is not in form and substance satisfactory to
such Holder.
(e) Spell Group Undertaking. Simultaneously with the execution and
delivery hereof, the Company is delivering an undertaking from all the members
of the Spell Group in the form attached hereto as Exhibit C.
<PAGE>
6.4 Put Rights.
(a) Put Rights.
(i) At any time on or after the occurrence of a Change of
Control, but prior to the Expiration Date, each Holder will have the
right to require the Company to purchase all or any part of the
Warrants and the Warrant Shares owned by such Holder.
(ii) Any Holder may exercise a Put Right by delivering a
notice to the Company stating that such Holder will require the Company
to purchase the Warrants or Warrant Shares specified in such notice (a
"Put Notice"). Within 15 days after the first date of receipt of a Put
Notice by the Company (the "Put Notice Date"), the Company shall give a
notice to all other Holders advising them of the receipt by the Company
of such Put Notice, together with a copy of such Put Notice. The date
upon which the Company shall so advise such other Holders is herein
called the "Company Notice Date". Within 15 days after the Company
Notice Date, each such other Holder also may give a Put Notice to the
Company and each such Put Notice shall be deemed given as of the date
of the Put Notice given by the Holder initially exercising the Put
Right.
(b) Procedures.
(i) The purchase and sale of the Warrants and the Warrant
Shares pursuant to a Put Right shall be consummated on a date selected
by the Company upon at least 15 days' prior written notice to the
Holders which have given the relevant Put Notice(s), which date in no
event shall be earlier than the date 30 days, nor later than the date
60 days, after the determination of the Market Price of a share of
Common Stock (the "Put Closing Date"). On the Put Closing Date, the
Company shall purchase from the Holder or Holders which have given such
Put Notice(s), and such Holder or Holders shall sell to the Company,
the Warrants and/or the Warrant Shares specified in such Put Notice(s):
(A) in the case of each Warrant Share so purchased, at a purchase price
equal to the Put Price Per Share as of the Put Notice Date; and (B) in
the case of each Warrant so purchased at a purchase price equal to (1)
the product of (x) the Put Price Per Share as of the Put Notice Date
and (y) the number of Warrant Shares for which such Warrant is
exercisable as of the Put Notice Date, minus (2) an amount equal to the
aggregate Exercise Price as of the Put Notice Date for such number of
Warrant Shares. Payment of the purchase price for the Warrants and/or
the Warrant Shares so purchased by the Company shall be made by wire
transfer in immediately available funds.
(ii) If the Company is prohibited from purchasing the Warrants
and/or Warrant Shares put to it pursuant to a Put Notice because (A) of
the existence of a contractual restriction as in effect on the Closing
Date or contained in any agreement or instrument governing or
evidencing Senior Debt or (B) the Company does not have sufficient
funds legally available therefor under applicable law or such purchase
otherwise violates applicable law, then the Company shall give notice
(a "Put Response Notice") to each Holder which has delivered such Put
Notice of (x) the reason that it is unable to purchase all Warrants and
Warrant Shares put to it pursuant to a Put Notice, including (1) if due
to a deficiency, the computation thereof, and/or (2) if due to such a
contractual restriction, the nature of the provisions which have been
<PAGE>
or would be breached and if such provisions are financial covenants, a
computation of the amounts or ratios setting forth the deficiencies
with respect to such covenants, and (y) the aggregate amount of such
Warrants and Warrant Shares, if any, which it will be able to lawfully
purchase, which Put Response Notice shall be delivered within 30 days
of the determination of the Market Price of a share of Common Stock and
shall be given together with the notice of the Put Closing Date, if
any, given by the Company pursuant to the first sentence of Section
6.4(b)(i). Each such Holder shall have the right to withdraw its Put
Notice by delivering a notice (a "Put Withdrawal Notice") to the
Company at any time prior to the 10th day immediately preceding the Put
Closing Date or if none is set in the Put Response Notice, prior to the
10th day immediately preceding the last day on which a Put Closing
could occur pursuant to the first sentence of Section 6.4(b)(i) hereof.
If any such Holders have not timely delivered Put Withdrawal Notices,
unless prohibited by a contractual restriction which has not been
waived by the requisite Persons, the Company thereupon shall purchase
from such Holders the aggregate amount of Warrants and Warrant Shares,
if any, it may purchase on such date with funds legally available under
applicable law for such purpose. Such purchase shall be allocated among
the Holders which have not timely delivered Put Withdrawal Notices pro
rata, based on the ratio of the number of Warrant Shares put to the
Company (including Warrant Shares issuable upon the exercise of
Warrants put to the Company) by each such Holder to the number of
Warrant Shares put to the Company (including Warrant Shares issuable
upon the exercise of Warrants put to the Company) by all such Holders.
If the Company is prohibited from purchasing any Warrants
and/or Warrant Shares upon the exercise by a Holder of a Put Right for
any of the reasons described in the first sentence of this Section
6.4(b)(ii), then the Company shall use its commercially reasonable best
efforts to increase its legally available funds under applicable law to
an amount sufficient to enable it to purchase legally all Warrants and
Warrant Shares put to it pursuant to a Put Notice and/or to obtain
relief from any contractual or legal restriction in order to enable it
to make the required payments, including through effecting a Financing,
obtaining the consent of requisite number of holders of Indebtedness or
otherwise, in each case, as soon as possible.
(iii) If the Company is prohibited from purchasing some or all
Warrants and/or Warrant Shares upon the exercise by a Holder of a Put
Right for any of the reasons described in the first sentence of Section
6.4(b)(ii) and such Holder shall not have timely delivered a Put
Withdrawal Notice, then: (A) the Put Price Per Share for such Holder
with respect to such unpurchased Warrants and/or Warrant Shares shall
become accruing liability of the Company with interest thereon
commencing on the date of exercise of such Put Right through the date
on which the related Warrants and/or Warrant Shares are purchased by
the Company at a rate per annum equal to the 14%, compounded quarterly
(such liability and interest being herein called the "Accruing
Liability"); and (B) such obligation of the Company to purchase the
Warrants and/or Warrant Shares of such Holder shall otherwise be deemed
suspended for so long as and only to the extent that the Company is
unable to repurchase such Warrants and/or Warrant Shares after taking
all the action described in the last paragraph of Section 6.4(b)(ii) (a
"Put Postponement"); provided that, notwithstanding Section 6.1 of this
Agreement, so long as the Accruing Liability shall remain outstanding
the Holders shall not be entitled to receive any dividends or other
<PAGE>
distributions under Section 6.1. On any Put Reactivation Date (as
defined below), the Accruing Liability shall become due and payable as
to the Warrants and the Warrant Shares which may then be purchased. As
used herein, "Put Reactivation Date" shall mean a date when the Put
Postponement lapses in whole or in part and the obligation of the
Company to purchase Warrants and Warrant Shares shall no longer be
deemed suspended to the same extent pursuant to clause (B) of this
Section 6.4(b)(iii)
(iv) If on the Expiration Date any Holder is prevented from
exercising its rights under this Section 6.4 for any of the reasons
described in the first sentence of Section 6.4(b)(ii), the Company's
obligation to purchase Warrants and/or Warrant Shares shall be extended
until 5:00 p.m., New York City time, on the last day of the calendar
month next following by at least 30 days the date upon which the
Company shall notify the Holders that such reason or reasons no longer
exist.
(v) If the Company is unable, by reason of the condition
described in the first sentence of Section 6.4(b)(ii) hereof, to
purchase Warrants and/or Warrant Shares within six months after the
exercise by a Holder of the Put Right, then such Holder may request
registration of all or any part of the Warrants and Warrant Shares
owned by such Holder (or, in the case of a put affecting all of the
Warrants and Warrant Shares, by all of the Holders) (which request
shall state the intended method of disposition of such Warrants and
Warrant Shares). Upon such request, the Company shall use its
reasonable efforts to effect the registration and qualification of such
Warrants and/or Warrant Shares under the Securities Act and under
applicable state securities laws, all in accordance with the applicable
provisions of the Registration Rights Agreement; provided that such
registration shall be subject to, and governed by, the provisions of
the Registration Rights Agreement except for the provisions of Sections
2.1 and 2.2 thereof. Upon the effectiveness of the registration
statement with respect to such registration and the sale of such
Securities thereunder, the rights of the Holders under this Section 6.4
shall cease and terminate and any unpaid Accruing Liability shall be
extinguished.
(vi) Each Holder agrees, for the benefit of the holders of the
Senior Debt, that any Accruing Liability shall be subordinated in right
of payment to the prior payment in full in cash of all Senior Debt and
that no payment shall be made or accepted in respect of the principal
of or interest on the Accruing Liability until the earlier to occur of
(i) the date on which the Senior Debt shall have been paid in full in
cash and the commitments to extend credit in respect thereof have been
terminated and (ii) the date on which the requisite consent of the
holders of Senior Debt to such payment has been given.
(c) Other Put Rights. The Company shall not grant any other rights
similar to the Put Right that are exercisable prior to the time at which the Put
Right is exercised or that are not expressly subordinated to the Put Right, in
form and substance reasonably acceptable to the Holders, to the rights of
Holders pursuant to the Put Right.
<PAGE>
ARTICLE VII
COVENANTS OF THE COMPANY
7.1 Notices of Certain Actions.
(a) Corporate Events. In the event that the Company:
(i) shall authorize issuance to all holders of Common Stock of
rights or warrants to subscribe for or purchase capital stock of the
Company or of any other subscription rights or warrants; or
(ii) shall authorize a dividend or other distribution to all
holders of Common Stock of evidences of its indebtedness, cash or other
property or assets; or
(iii) proposes to become a party to any consolidation or
merger for which approval of any stockholders of the Company will be
required, or to a conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any capital
reorganization or reclassification or change of the 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, or as a result of a subdivision or
combination); or
(iv) commences a voluntary or involuntary dissolution,
liquidation or winding up; or
(v) proposes to take any other action which would require an
adjustment pursuant to Article V;
then the Company shall provide a written notice to each Holder stating (i) the
date as of which the holders of record of Common Stock to be entitled to receive
any such rights, warrants or distribution are to be determined, (ii) the
material terms of any such consolidation or merger and the expected effective
date thereof, or (iii) the material terms of any such conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, conveyance, transfer, dissolution,
liquidation or winding up. Such notice shall be given not later than twenty (20)
Business Days prior to the effective date (or the applicable record date, if
earlier) of such event. The failure to give the notice required by this Section
7.1 or any defect therein shall not affect the legality or validity of any
distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.
(b) Change of Control. To the extent possible not less than 70 days
prior to any Change of Control, but in no event later than the third Business
Day following the Company becoming aware thereof, notice of the occurrence of
such Change of Control, together with a brief description thereof.
<PAGE>
7.2 Financial Statements and Reports.
The Company shall furnish to each Holder:
(a) Annual Financial Statements. As soon as available but in any event
within ninety (90) days after the end of each Fiscal Year (commencing with the
Fiscal Year ending December 31, 1999), consolidated balance sheets, income
statements and cash flow statements of the Company and its Subsidiaries, showing
its financial condition as of the close of such Fiscal Year and the results of
its operations during such year, all the foregoing financial statements to be
audited by independent accountants of nationally-recognized standing and
prepared in accordance with GAAP;
(b) Quarterly Financial Statements. As soon as available but in any
event within forty-five (45) days after the end of each Fiscal Quarter, the
unaudited consolidated balance sheets, income statements and cash flow
statements, showing the financial condition and results of operations of the
Company, as at the end of each such Fiscal Quarter and for the then elapsed
portion of the Fiscal Year, in each case prepared in accordance with GAAP; and
(c) SEC Filings. Promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which the Company shall
have provided to its stockholders or filed with the Securities and Exchange
Commission or any national securities exchange.
(d) Special Information Rights. So long as the Initial Holders or any
of their respective Affiliates shall hold any Warrants or Warrant Shares, to
such Holders only, all other information required to be provided under Section
7.7 of the Securities Purchase Agreement as in effect on the date hereof
(whether or not the same shall remain in effect).
7.3 Information Rights.
The Company will, and will cause the Subsidiaries to, permit, upon
reasonable notice to the chief executive officer or any other designated
representative of the Company, officers and designated representatives of any
Holder designated by the Requisite Holders to visit and inspect any of the
properties or assets of the Company and any of the Subsidiaries in whomsoever's
possession, and to examine the books of accounts of the Company and any of its
Subsidiaries and discuss the affairs, finances and accounts of the Company and
of any of its Subsidiaries with, and be advised as to the same by, its and their
officers and independent accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company), all at such reasonable times and intervals and to such reasonable
extent as the Holders may desire. The Company will give one representative of
each of the Chase Holders and the MassMutual Holders designated in writing by
such Holder (x) concurrently with the members of the Board at the same time and
in the same manner but in no event less than ten Business Days prior written
notice of each regular meeting of the Board and such prior notice of each
special meeting of the Board as is reasonable under the circumstances and (y) in
each case, the opportunity for each such representative to attend (or
participate by telephone in the case of a telephonic meeting), at the expense of
the Company, as a guest, each such meeting. Such representative shall be
provided with copies of all materials distributed to the members of the Board
including, without limitation, any materials distributed in connection with such
meeting and any documents intended to effect written action by the Board and any
related materials distributed in connection therewith at the same time that they
are distributed to the Board.
<PAGE>
7.4 Transactions with Affiliates.
Except as expressly permitted by Section 8.3 of the Securities Purchase
Agreement, the Company shall not, and shall not permit any of the Subsidiaries
to, enter into any transaction with any Affiliate of the Company (including
without limitation, any member of the Spell Group), except in the ordinary
course of business on terms no less favorable to the Company or such Subsidiary
than would obtain in a comparable arm's-length transaction with an unrelated
third party.
7.5 Merger or Consolidation of the Company.
The Company will not merge or consolidate with or into, or sell,
transfer or lease all or substantially all of its property to, any other entity
unless the successor or purchasing entity, as the case may be (if not the
Company), is organized under the laws of the United States of America or any
state or political subdivision thereof and shall expressly agree to provide to
each Holder the securities, cash or property required by Section 5.5 hereof upon
the exercise or exchange of Warrants and expressly assumes, by supplemental
agreement reasonably satisfactory in form and substance to each Holder, the due
and punctual performance and observance of each and every covenant and condition
of this Agreement to be performed and observed by the Company; provided,
however, that the initial obligation of such successor with respect to the
exercise or exchange of Warrants shall be only as set forth in Section 5.5.
7.6 Reservation of Shares, Etc.
The Company will at all times have authorized, and reserve and keep
available, free from preemptive or similar rights, for the purpose of enabling
it to satisfy any obligation to issue Warrant Shares upon the exercise or
exchange of each Warrant, the number of authorized but unissued Warrant Shares
issuable upon exercise or exchange of all outstanding Warrants. The Company
shall as promptly as necessary take all actions necessary to ensure that Warrant
Shares shall be duly authorized and, when issued upon exercise or exchange of
any Warrant in accordance with the terms hereof, shall be validly issued, fully
paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale (except to the extent of
any applicable provisions set forth in this Agreement and the Registration
Rights Agreement) and free and clear of all preemptive or similar rights.
7.7 Redemptions, Etc.
The Company shall not, nor shall it permit any Subsidiary to, declare
or make at any time any dividends (in cash, property or obligations) on, or
other payments or distributions on account of, or the setting apart of money for
a sinking or other analogous fund for, or the purchase, redemption, retirement
or other acquisition of, any shares of any class of capital stock of the Company
or of any warrants, options or other rights to acquire the same (or to make any
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market or equity value of the
Company or any of its Subsidiaries), except for:
(i) the payment of dividends by any Subsidiary to the Company
or to any other Subsidiary;
<PAGE>
(ii) the payment of dividends by the Company to the extent the
requirements of Section 6.1 are satisfied in connection therewith; and
(iii) the redemption or repurchase of the Company's capital
stock from officers, employees and directors (or their estates) of the
Company or any Subsidiary upon the death, permanent disability,
retirement or termination of employment of any such Person or otherwise
in accordance with any shareholder agreement, stock option plan or any
employee stock ownership plan, provided that (x) no Default or Event of
Default under the Securities Purchase Agreement is then in existence or
would arise therefrom, and (y) the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased in any calendar
year does not exceed the sum of (A) $2,000,000 plus (B) all amounts
obtained by the Company from the sale of such stock (or a substantially
concurrent issuance of the Company's capital stock) to other officers,
employees and directors.
7.8 Restrictions on Performance.
The Company shall not at any time enter into, or permit to exist, an
agreement or other instrument restricting its ability to perform its obligations
under this Agreement, the Registration Rights Agreement or the Warrants, or
making such performance or the issuance of shares of Common Stock upon the
exercise of any Warrant a default under any such agreement or instrument other
than (x) the Senior Credit Agreement (as defined in the Securities Purchase
Agreement) and (y) the Securities Purchase Agreement.
7.9 Modification of Other Equity Documents.
The Company shall not amend or consent to any modification, supplement
or waiver of any provision of any Other Equity Documents in any manner which
would have an adverse effect on the Holders without the prior written consent of
the Requisite Holders.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices.
All notices, demands and requests of any kind to be delivered to any
party hereto in connection with this Agreement shall be in writing (i) delivered
personally, (ii) sent by nationally-recognized overnight courier, (iii) sent by
first class, registered or certified mail, return receipt requested or (iv) sent
by facsimile, in each case to such party at its address as follows:
(a) if to the Company, to:
Eagle Pacific Industries, Inc.
333 South Seventh Street
2430 Metropolitan Centre
Minneapolis, Minnesota 55402
Attention: William H. Spell
Telephone No.: (612) 305-0339
Telecopier No.: (612) 371-9651
<PAGE>
with a copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3397
Attention: Dobson West, Esq.
Telephone No.: (612) 347-7000
Telecopier No.: (612) 347-7077
(b) if to any Holder, to such Holder's address as set forth on Schedule
I hereto.
Any notice, demand or request so delivered shall constitute valid notice under
this Agreement and shall be deemed to have been received (i) on the day of
actual delivery in the case of personal delivery, if delivered on a Business Day
(otherwise on the next Business Day), (ii) on the next Business Day after the
date when sent in the case of delivery by nationally-recognized overnight
courier, (iii) on the fifth Business Day after the date of deposit in the U.S.
mail in the case of mailing or (iv) upon receipt in the case of a facsimile
transmission. Any party hereto may from time to time by notice in writing served
upon the other as aforesaid designate a different mailing address or a different
Person to which all such notices, demands or requests thereafter are to be
addressed.
8.2 Expenses, Etc.
The Company agrees to pay or reimburse the Holders for: (a) all
reasonable out-of-pocket costs and expenses of each Holder (including the
reasonable fees and expenses of counsel to each Holder), in connection with (i)
the negotiation, preparation, execution and delivery of this Agreement and the
Registration Rights Agreement and the issuance of Warrants hereunder, and (ii)
any amendment, modification or waiver of (or consents in respect of) any of the
terms of this Agreement, the Registration Rights Agreement or the Warrants; and
(b) all reasonable costs and expenses of the Holders (including reasonable legal
fees and expenses of each Holder) in connection with (i) any default by the
Company hereunder or under the Warrants or the Registration Rights Agreement or
any enforcement proceedings resulting therefrom, and (ii) the enforcement of
this Section 8.2.
8.3 No Voting Rights; Limitations of Liability.
No Warrant shall entitle the holder thereof to any voting rights or,
except as otherwise provided herein, other rights of a stockholder of the
Company, as such. No provision hereof, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no enumeration herein of the rights
or privileges of the Holder shall give rise to any liability of such Holder for
the Exercise Price of Warrant Shares acquirable by exercise hereof or as a
stockholder of the Company.
<PAGE>
8.4 Board Elections.
At all times prior to the earlier to occur of : (i) the second
anniversary of the Closing Date and (ii) the repayment in full of the Notes,
each Holder holding shares of Common Stock entitled to vote for the election of
directors agrees that such Holder shall vote such shares in favor of the
director nominees recommended to the shareholders by the Board.
8.5 Amendments and Waivers.
(a) Written Document. Any provision of this Agreement may be amended or
waived, but only pursuant to a written agreement signed by the Company and the
Requisite Holders, provided that no such amendment or modification shall without
the written consent of each Holder affected thereby (i) shorten the Expiration
Date of any Warrant, (ii) increase the Exercise Price of any Warrant, (iii)
change any of the provisions of this Section 8.5(a) or the definition of
"Requisite Holders" or any other provision hereof specifying the number or
percentage of Holders required to waive, amend, or modify any rights hereunder
or make any determination or grant any consent hereunder or otherwise act with
respect to this Agreement or any Warrants or (iv) increase the obligations of
any Holder or otherwise disproportionately adversely affect the rights and
benefits of any Holder under this Agreement.
(b) No Waiver; Cumulative Remedies. No failure on the part of any
Holder to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement, the Warrants or
the Registration Rights Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement, the Warrant or the Registration Rights Agreement preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
8.6 Specific Performance.
Each Holder shall have the right to specific performance by the Company
of the provisions of this Agreement, in addition to any other remedies it may
have at law or in equity. The Company hereby irrevocably waives, to the extent
that it may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Company for specific performance
of this Agreement by the Holders of the Warrants or Warrant Shares.
8.7 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, each Holder and their respective successors and permitted assigns.
8.8 Counterparts.
This Agreement may be executed in two or more counterparts each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
<PAGE>
8.9 Governing Law.
This Agreement and each Warrant shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of laws), except to the extent that the New York
conflicts of laws principles would apply the Minnesota Business Corporation Act
to matters relating to corporations organized thereunder
8.10 Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person
other than the Company and each Holder of a Warrant or a Warrant Share any legal
or equitable right, remedy or claim hereunder.
8.11 Headings.
Section headings in this Agreement have been inserted for convenience
of reference only and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their authorized officers, all as
of the date and year first above written.
EAGLE PACIFIC INDUSTRIES, INC.
By: /s/ William H. Spell
Name: William H. Spell
Title: Chief Executive Officer
CB CAPITAL INVESTORS, L.P.
By: CB Capital Investors, Inc.,
its general partner
By: /s/ John O'Connor
Name: John O'Connor
Title: General Partner
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Clifford M. Noreen
Name: Clifford M. Noreen
Title: Senior Managing Director
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: Massachusetts Mutual Life
Insurance Company, as Investment
Manager
By: /s/ Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
<PAGE>
SCHEDULE I
Initial Holders
INVESTOR NUMBER OF SHARES OF COMMON STOCK
CB Capital Investors, L.P. 1,343,452
380 Madison Avenue
12th Floor
New York, NY 10017
Attention: Richard D. Waters, Jr.
Telephone: (212) 622-9036
Telecopier: (212) 622-3101
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
24th Floor
New York, New York 10112
Attention: Frederick M. Bachman, Esq.
Tel: (212) 408-2400
Fax: (212) 728-5950
<PAGE>
Massachusetts Mutual Life Insurance Company (LTP) 191,069
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Warrant shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as __________, interest and principal), to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For MassMutual Long-Term Pool
Account No. 4067-3488
Re: Description of security, principal and
interest split
With telephone advise of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Notices
All notices and communications to be addressed
as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No.: 04-1590850
<PAGE>
Massachusetts Mutual Life Insurance Company (IFM) 47,767
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Warrant shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Warrant] interest and
principal), to:
Chase Manhattan Bank, N.A.
4 Chase Metro Tech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Non-Traditional
Account No. 910-2509073
Re: Description of security, principal and
interest split
With telephone advise of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Notices
All notices and communications to be addressed as
first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-1590850
<PAGE>
MassMutual Corporate Investors 197,040
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Warrant shall
be made by crediting in the form of
bank wire transfer of Federal or other immediately
available funds, (identifying
each payment as [insert name of issuer and
description of Warrant], interest and
principal) to:
Chase/NYC/Cust
ABA No. 021000021
A/C *900-9-000200 for F/C/T MassMutual Corporate
Investors
A/C #G06109
Attn: Bond Interest
Re: Description of security (principal and
interest split, if applicable)
With telephone advise of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561
Instruction for mailing checks
Mass Mutual Corporate Investors
(or Cudd & Co., if securities are registered in the
nominee name)
c/o Chase Manhattan Bank, N.A.
Attn: Income Processing, Level 4B
P.O. Box 1508, Church Street Station
New York, NY 10008
Please include a/c #G06109 on the check
Instructions for delivery of securities
All securities should be delivered to the following address:
Chase Manhattan Bank
4 New York Plaza
Ground Floor Window
New York, NY 10004
Attn: Larry Zimmer
Re: #G06109
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-2483041
<PAGE>
MassMutual Participation Investors 101,505
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Payments
All payments on account of the Warrant shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Warrant], interest and
principal), to:
Chase/NYC/Cust
ABA No. 021000021
A/C #900-9-000200 for F/C/T MassMutual
Participation Investors
A/C #G06110
Attn: Bond Interest
Re: Description of security (principal and
interest split, if applicable)
With telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561
Instructions for mailing checks
MassMutual Participation Investors
(or Cudd & Co., if the securities are registered in
nominee name)
c/o Chase Manhattan Bank, N.A.
Attn: Income Processing, Level 4B
P.O. Box 1508, Church Street Station
New York, NY 10008
Please include a/c #G06110 on the check.
Instructions for delivery of securities
All securities should be delivered to the following address:
Chase Manhattan Bank
4 New York Plaza
Ground Floor Window
New York, NY 10004
Attn: Larry Zimmer
Re: #G06110
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments to be addressed to:
Attention: Securities Custody and
Collection Department
F 381
Tax Identification No. 04-3025730
<PAGE>
MassMutual Corporate Value Partners Limited 59,709
(certificates registered in the name of Gerlach &
Co.)
c/o Bank of America Trust and Banking Corporation
(Cayman) Limited
P.O. Box 1092
George Town
Grand Cayman
Cayman Island, B.W.I.
Payments
All payments on account of the Warrant shall
be made by crediting in the form of
bank wire transfer of Federal or other
immediately available funds, (identifying
each payment as [insert name of issuer and
description of Warrant], interest and
principal), to:
Gerlach & Co.
c/o Citibank, N.A.
ABA Number 021000089
Concentration Account 36112805
Re: MassMutual Corporate Value Partners Limited
Name of Security/CUSIP
With telephone advice of payment to the Securities Custody and Collection
Document of Massachusetts Mutual Life Insurance Company at (413) 744-3561
Registration of Securities
All securities should be registered in Citibank's
nominee name of Gerlach & Co. and sent to the
following address:
Citibank
20 Exchange Place - Level C
New York, New York 10005
Attn: Danny Reyes
Acct. #794309
Notices
All notices and communications to be addressed as first provided above.
with a copy to the Investment Manager at:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111-0001 USA
Attn: Roger Crandall
Wallace Rodger
<PAGE>
EXHIBIT A
Registration Rights Agreement
[see attached]
<PAGE>
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN
ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SECTION 3.3 OF THE WARRANT AGREEMENT DATED AS OF SEPTEMBER 20, 1999
AMONG THE ISSUER OF THESE SECURITIES AND THE INITIAL HOLDERS NAMED THEREIN. NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. A COPY OF THE WARRANT AGREEMENT IS ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE WARRANT AGREEMENT.
EAGLE PACIFIC INDUSTRIES, INC.
No. W Warrant to Purchase
____ Shares
of Common Stock
---------, -----
Common Stock Purchase Warrant
THIS CERTIFIES that, for value received, [Insert name of
holder] (the "Holder"), or assigns, is entitled to purchase from Eagle Pacific
Industries, Inc., a Minnesota corporation (the "Company"), ___ shares of the
[Class B] Common Stock, $.01 par value (the "Common Stock"), of the Company, at
the price (the "Exercise Price") of $.01 per share, at any time or from time to
time during the period commencing on the date hereof and ending at 5:00 P.M.
Eastern time, on September 20, 2009 (the "Expiration Time").
This Warrant has been issued pursuant to the Warrant Agreement
(as amended or supplemented from time to time, the "Warrant Agreement") dated as
of September 20, 1999, between the Company and the Initial Holders named
therein, and is subject to the terms and conditions, and the Holder is entitled
to the benefits, thereof, including without limitation provisions (i) for
adjusting the number of Warrant Shares issuable upon the exercise hereof and the
Exercise Price to be paid upon such exercise, (ii) providing for certain rights
of first offer upon the sale or other issuance by the Company of equity
securities, (iii) providing for certain "tag-along" and "put" rights and (iv)
providing certain information and other rights. A copy of the Warrant Agreement
is on file and may be inspected at the principal executive office of the
Company. The Holder of this certificate, by acceptance of this certificate,
agrees to be bound by the provisions of the Warrant Agreement. Capitalized terms
used but not defined herein shall have the meanings given to them in the Warrant
Agreement.
<PAGE>
SECTION 1. Exercise of Warrant. On any Business Day prior to
the Expiration Time, the Holder may exercise this Warrant, in whole or in part,
by delivering to the Company this Warrant accompanied by a properly completed
Exercise Form in the form of Annex A and a check in an aggregate amount equal to
the product obtained by multiplying (a) the Exercise Price by (b) the number of
Warrant Shares being purchased. Any partial exercise of a Warrant shall be for a
whole number of Warrant Shares only.
SECTION 2. Exercise Price. The Exercise Price is subject to
adjustment from time to time as provided in the Warrant Agreement.
SECTION 3. Exchange of Warrant. On any Business Day prior to
the Expiration Date, the Holder may exchange this Warrant, in whole or in part,
for Warrant Shares by delivering to the Company this Warrant accompanied by a
properly completed Exchange Form in the form of Annex B. The number of shares of
Common Stock to be received by the Holder upon such exchange shall be determined
as provided in Section 4.2 of the Warrant Agreement.
SECTION 4. Transfer. Subject to the limitations set forth in
the Warrant Agreement, this Warrant may be transferred by the Holder by delivery
to the Company of this Warrant accompanied by a properly completed Assignment
Form in the form of Annex C.
SECTION 5. Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company will issue a
new Warrant of like denomination and tenor upon compliance with the provisions
set forth in the Warrant Agreement.
SECTION 6. No Stockholder Rights. This Warrant shall not
entitle the holder hereof to any voting rights or, except as otherwise provided
in the Warrant Agreement, other rights of a stockholder of the Company, as such.
SECTION 7. Successors. All of the provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
SECTION 8. Headings. Section headings in this Warrant have
been inserted for convenience of reference only and shall not affect the
construction of, or be taken into consideration in interpreting, this Warrant.
SECTION 9. Governing Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York (without
giving effect to principles of conflicts of laws), except to the extent that the
New York conflicts of laws principles would apply the Minnesota Business
Corporation Act to matters relating to corporations organized thereunder
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of the
date first set forth above.
EAGLE PACIFIC INDUSTRIES, INC.
By:
Name:
Title: [Chairman or Chief Executive Officer]
ATTEST:
By:
Name:
Title: [Chief Financial Officer, Treasurer or
Assistant Treasurer]
<PAGE>
ANNEX A
EXERCISE FORM
[To be signed upon exercise of Warrant]
TO EAGLE PACIFIC INDUSTRIES, INC.
The undersigned, being the Holder of the within Warrant,
hereby elects to exercise the purchase right represented by such Warrant for,
and to purchase thereunder _________ shares of, the [Common Stock] [Class B
Common Stock] of EAGLE PACIFIC INDUSTRIES, INC. and requests that the
certificates for such shares be issued in the name of, and be delivered to,
_________________________, whose address is
- --------------------------------------------------------------------.
The foregoing exercise is (check one):
______ irrevocable
______ conditioned upon the consummation of the transaction described briefly
below:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Dated: ------------------------------
(Signature)
------------------------------
(Address)
<PAGE>
ANNEX B
EXCHANGE FORM
[To be signed upon exercise of Warrant]
TO EAGLE PACIFIC INDUSTRIES, INC.
The undersigned, being the Holder of the within Warrant,
hereby irrevocably elects to exchange, pursuant to Section 4.2 of the Warrant
Agreement referred to in such Warrant, the portion of such Warrant representing
the right to purchase _________ shares of [Common Stock] [Class B Common Stock]
of EAGLE PACIFIC INDUSTRIES, INC. The undersigned hereby requests that the
certificates for the number of shares of [Common Stock] [Class B Common Stock]
issuable in such exchange pursuant to such Section 4.2 be issued in the name of,
and be delivered to, _____________, whose address is
________________________________________.
The foregoing exchange is (check one):
______ Irrevocable
______ conditioned upon the consummation of the transaction described briefly
below:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Dated:
------------------------------
(Signature)
------------------------------
(Address)
<PAGE>
ANNEX C
ASSIGNMENT FORM
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________, all of the rights represented by the
within Warrant to purchase shares of Common Stock and Class B Common Stock of
EAGLE PACIFIC INDUSTRIES, INC. (the "Company"), to which such Warrant relates,
and appoints ________________________ Attorney to transfer such Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
------------------------------
(Signature)
------------------------------
(Address)
<PAGE>
EXHIBIT C
Form of Spell Group Undertaking
[see attached]
<PAGE>
CONFORMED COPY
================================================================================
WARRANT AGREEMENT
Dated as of September 20, 1999
among
EAGLE PACIFIC INDUSTRIES, INC.
and
THE INITIAL WARRANT HOLDERS
LISTED ON SCHEDULE I HERETO
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Article I DEFINITIONS.......................................................1
1.1 Definitions.......................................................1
1.2 Accounting Terms and Determinations...............................9
Article II PURCHASE AND SALE OF WARRANTS....................................9
2.1 Authorization and Issuance of Shares and Warrants.................9
2.2 Issuance of the Warrants..........................................9
2.3 Representations by Initial Holders...............................10
2.4 Representations and Warranties of the Company....................10
Article III FORM; register; EXCHANGE FOR WARRANTS; TRANSFER................12
3.1 Form of Warrant; Register........................................12
3.2 Exchange of Warrants for Warrants................................13
3.3 Transfer of Warrant..............................................13
Article IV EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES................15
4.1 Exercise of Warrants.............................................15
4.2 Exchange for Warrant Shares......................................15
4.3 Issuance of Common Stock.........................................16
Article V ADJustment of Exercise Price and Shares..........................17
5.1 General..........................................................17
5.2 Stock Dividends, Subdivisions and Combinations...................17
5.3 Issuance of Common Stock.........................................18
5.4 Issuance of Other Equity Securities..............................21
5.5 Capital Reorganization, Capital Reclassifications, Merger, Etc...22
5.6 Other Actions Affecting Common Stock.............................22
5.7 Miscellaneous....................................................22
Article VI CERTAIN OTHER RIGHTS............................................24
6.1 Payments in Respect of Dividends and Distributions...............24
6.2 Right of First Offer.............................................24
6.3 Tag-Along Rights.................................................25
6.4 Put Rights.......................................................27
Article VII COVENANTS OF THE COMPANY.......................................30
7.1 Notices of Certain Actions.......................................30
7.2 Financial Statements and Reports.................................30
7.3 Information Rights...............................................31
7.4 Transactions with Affiliates.....................................32
7.5 Merger or Consolidation of the Company...........................32
7.6 Reservation of Shares, Etc.......................................32
7.7 Redemptions, Etc.................................................32
7.8 Restrictions on Performance......................................33
7.9 Modification of Other Equity Documents...........................33
Article VIII MISCELLANEOUS.................................................33
8.1 Board Voting.....................................................35
8.2 Notices..........................................................33
8.3 Expenses, Etc....................................................34
8.4 No Voting Rights; Limitations of Liability.......................34
8.5 Amendments and Waivers...........................................35
8.6 Specific Performance.............................................35
8.7 Binding Effect...................................................35
8.8 Counterparts.....................................................35
8.9 Governing Law....................................................36
8.10 Benefits of this Agreement.......................................36
8.11 Headings.........................................................36
SCHEDULE I - Initial Warrant Holders
SCHEDULE 2.4(g) - Capitalization of the Company
EXHIBIT A - Registration Rights Agreement
EXHIBIT B - Form of Warrant
EXHIBIT C - Spell Group Undertaking
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made effective as of this _____ day of September, 1999,
by and between Eagle Pacific Industries, Inc., a Minnesota corporation (the
"Company"), and __________ ____________ ("Employee").
W I T N E S S E T H:
WHEREAS, the Employee on the date hereof is the
________________________ of the Company; and
WHEREAS, the Company wishes to provide Employee the opportunity to
obtain a greater equity interest in the Company by granting Employee certain
performance-based cash bonuses in the form of restricted stock; and
WHEREAS, the Company's Board of Directors has authorized the grant of
restricted stock awards to Employee pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Restricted Stock Award. The Company hereby grants to Employee a
restricted stock award of _____ shares of the Company's Common Stock, subject to
the terms of this Agreement. The Company shall cause to be issued a stock
certificate representing such shares of Common Stock in Employee's name, and the
Company shall hold such shares until such time as the risks of forfeiture
described in Section 2 have lapsed. Until such risks of forfeiture have lapsed
or the shares subject to such restricted stock award have been forfeited
pursuant to Section 2 below, Employee shall be entitled to vote the shares
represented by such stock certificates and shall receive all dividends
attributable to such shares, but Employee shall not have any other rights as a
shareholder with respect to such shares.
2. Vesting of Restricted Stock.
a. The shares of Common Stock subject to the restricted stock
award shall remain forfeitable until vesting according to the following schedule
(the "vesting date"):
Cumulative
Vesting Date Percentage of Shares Vested
September ___, 2002 20%
September ___, 2003 50%
September ___, 2004 100%
1
<PAGE>
If Employee's employment with the Company is terminated for any reason,
including Employee's voluntary resignation or retirement but excluding death or
total disability, at any time prior to the vesting date for the restricted stock
award, Employee shall immediately forfeit all shares of Common Stock subject to
such award that have not vested. If Employee's employment is terminated by death
or total disability prior to the vesting date for the restricted stock award,
all risks of forfeiture on the shares of Common Stock subject to such award
shall immediately lapse.
b. At such time as the risks of forfeiture on such restricted
stock award lapse, the certificates representing the shares of Common Stock
shall be distributed to Employee. If the shares are forfeited, the certificates
representing such shares shall be cancelled.
3. Change of Control. Notwithstanding anything in this Agreement to the
contrary, all risks of forfeiture applicable to Employee's restricted stock
awards shall immediately lapse upon a "change of control." For purposes of this
Section 3, a "change of control" shall mean the occurrence of any of the
following events: (i) all or substantially all of the Company's assets, on a
consolidated basis, are sold as an entirety to any person or related group of
persons or there shall be consummated any consolidation or merger of the Company
(A) in which the Company is not the continuing or surviving company (other than
a consolidation or merger with a wholly-owned Subsidiary in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
any case, other than a sale of assets or consolidation or merger of the Company
in which the holders of the Common Stock immediately prior to the sale of assets
or consolidation or merger have, directly or indirectly, at least a majority of
the Common Stock of the transferee or continuing or surviving company
immediately after such sale of assets or consolidation or merger, (ii) any
"person" (as such term is used in Sections 13(d) and 14 (d) of the Exchange Act)
other than the Spell Group, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 of the Exchange Act provided that such person shall be
deemed to have "beneficial ownership" of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the outstanding voting securities of the Company; or (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board cease for any reason to constitute a majority
of the Board, then in office.
4. General Provisions.
a. Employment; Rights as Shareholder. This Agreement shall not
confer on Employee any right with respect to continuance of employment by the
Company, nor will it interfere in any way with the right of the Company to
terminate such employment.
b. Securities Law Compliance. Employee may be required by the
Company, as a condition of the effectiveness of any restricted stock award, to
agree in writing that all Common Stock subject to such awards shall be held,
until such time that such Common Stock is registered and freely tradable under
2
<PAGE>
applicable state and federal securities laws, for Employee's own account without
a view to any further distribution thereof, that the certificates for such
shares shall bear an appropriate legend to that effect and that such shares will
be not transferred or disposed of except in compliance with applicable state and
federal securities laws.
c. Mergers, Recapitalizations, Stock Splits, Etc. In the event
of an increase or decrease in the number of shares of Common Stock resulting
from a subdivision or consolidation of shares or the payment of a stock dividend
or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company, the number of shares
of Common Stock subject to each outstanding restricted stock award shall be
adjusted by the Board to reflect such change. Additional shares which may be
credited pursuant to such adjustment shall be subject to the same restrictions
as are applicable to the shares with respect to which the adjustment relates.
d. Shares Reserved. The Company shall at all times during the
term of Employee's restricted stock awards reserve and keep available such
number of shares as will be sufficient to satisfy the requirements of this
Agreement.
e. Withholding Taxes. In order to provide the Company with the
opportunity to claim the benefit of any income tax deduction which may be
available to it as from the grant of restricted stock awards to Employee under
this Agreement and to permit the Company to comply with all applicable federal
or state income tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal or state
payroll, income or other taxes are withheld from any amounts payable by the
Company to Employee. If the Company is unable to withhold such federal and state
taxes, for whatever reason, the Employee hereby agrees to pay to the Company an
amount equal to the amount the Company would otherwise be required to withhold
under federal or state law prior to the transfer of any certificates for the
shares of Common Stock subject to such restricted stock awards.
f. Amendment; Waiver. This Agreement may not be modified,
amended or waived in any manner except by an instrument in writing signed by
both parties hereto. The waiver by either party of compliance with any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any other provision of this Agreement, or of any subsequent breach by
such party of a provision of this Agreement.
g. Supersedes Previous Agreements. This Agreement supersedes
all prior or contemporaneous negotiations, commitments, agreements (written or
oral) and writings between the Company and Employee with respect to the subject
matter hereof. All such other negotiations, commitments, agreements and writings
will have no further force or effect, and the parties to any such other
negotiation, commitment, agreement or writing will have no further rights or
obligations thereunder.
h. Governing Law. All matters affecting this Agreement,
including the validity thereof, are to be governed by, interpreted and
construed in accordance with the laws of the State of Minnesota.
3
<PAGE>
i. Notices. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, by telecopy (with confirmation
of transmission) or by certified mail, return receipt requested. If addressed to
Employee, the notice shall be delivered or mailed to Employee at the address
specified under Employee's signature hereto, or if addressed to the Company, the
notice shall be delivered or mailed to the Company at its executive offices to
the attention of its President. A notice shall be deemed given, if by personal
delivery or by telecopy, on the date of such delivery or, if by certified mail,
on the date shown on the applicable return receipt.
j. Headings. The headings of Sections and paragraphs
herein are included solely for convenience of reference and shall not
control the meaning or interpretation of any of the provisions of this
Agreement.
k. Scope of Agreement. This Agreement shall bind and inure
to the benefit of the Company and its successors and assigns and of Employee
and his successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:_____________________________________
Its:________________________________
________________________________________
("Employee")
Address: ______________________________
______________________________
______________________________
4
PROMISSORY NOTE
Minneapolis, Minnesota
$____________ September ___, 1999
FOR VALUE RECEIVED, _____________________ (the "Maker") promises to pay
to Eagle Pacific Industries, Inc., its or successors or assigns ("Eagle"), at
such place as may be designated from time to time by Eagle, in lawful money of
the United States of America, the principal sum of ___________________ Dollars
($__________) together with interest on the unpaid principal balance hereof,
from the date hereof until this Promissory Note (the "Note") is fully paid, at
an annual rate equal to the Applicable Interest Rate (defined below), calculated
on the basis of actual number of days elapsed in a 360-day year.
Payment of Interest.
The principal balance of this Note will accrue interest from the date
hereof until this Note is paid in full at that interest rate applicable to
Eagle's revolving credit facility in place during the term of this Note (the
"Applicable Interest Rate"). Interest only shall be paid (at the Applicable
Interest Rate) on the last day of each calendar year commencing on December 30,
1999, and continuing on the last day of each and every calendar year thereafter
until that date on which the Maker shall have paid the principal balance of this
Note in full, but in no event later than November 30, 2004 (the "Maturity
Date").
Payments of Principal.
On the Maturity Date, the entire principal balance of this Note plus
accrued interest and all other charges and sums due under this Note shall be due
and payable in full.
Prepayment.
This Note may be prepaid in whole at any time, or in part from time to
time, at the option of the Maker, without penalty or premium.
Application of Payments.
All payments shall be applied first to any costs of collection, then to
the payment of accrued interest, and then to the principal balance of this Note.
If any payment of principal, interest, late charge of other sum be made
hereunder becomes due and payable on a day other than a business day, the due
date of such payment shall be extended to the next succeeding business day and
interest thereon shall be extended to the next succeeding business day and
interest thereon shall be payable at the Applicable Interest Rated during such
extension.
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Use of Proceeds.
Eagle acknowledges that this Note was issued to Eagle in partial
payment of ______ shares of Common Stock of Eagle Pacific Industries, Inc.
purchased by the Maker from Eagle as of the date hereof (the "Purchased Stock").
Security.
As security for the payment and performance of this Note, the Maker
hereby pledges to Eagle all of the Maker's right, title and interest in and to
the Purchased Stock, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Purchased Shares. Upon request by Eagle, the
Maker shall deliver to Eagle the Purchased Shares for possession during the term
of this Note, and Eagle shall refrain from exercising the voting and other
consensual rights pertaining to the Purchased Shares.
Events of Default.
The occurrence of any one or more of the following events shall
constitute an Event of Default:
(a) The Maker shall fail to make when due any payment of
principal of, or interest on, this Note and such failure shall continue
for a period of thirty days after the Maker receives written notice
from Eagle of such failure; or
(b) The Maker's employment with Eagle is terminated for any
reason including, without limitation, death or total disability.
Remedies.
If any Event of Default shall occur and be continuing, then Eagle may
declare that the outstanding unpaid principal balance of the Note, the accrued
and unpaid interest thereon and all other obligations of the Maker to Eagle to
be forthwith due and payable, whereupon the Note, all accrued and unpaid
interest thereon and all such obligations shall immediately become due and
payable, in each case without further demand or notice of any kind.
No Waiver.
No delay or failure on the part of Eagle in exercising any right or
remedy hereunder, or at law or at equity, shall operate as a waiver of or
preclude the exercise of any such right or remedy, and no single or partial
exercise by Eagle of any such right or remedy shall preclude or estop another or
further exercise thereof or exercise of any other right or remedy. No waiver by
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Eagle hereof shall be effective unless in writing signed by Eagle. A waiver on
any one occasion shall not be construed as a waiver of any such right or remedy
on any prior or subsequent occasion.
Costs of Collection.
The Maker agrees to pay all costs of collection, including attorneys'
fees, in the event that any amount under this Note is not paid when due.
Miscellaneous.
This Note is being delivered in, and shall be governed by the laws of,
the State of Minnesota. Presentment or other demand for payment, notice of
dishonor and protest are expressly waived.
___________________________________
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
William H. Spell
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between William H. Spell (the "Employee") and Eagle Pacific Industries, Inc.
(the "Eagle"), having its corporate headquarters at 2430 Andersen Consulting
Tower, 333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Chief
Executive Officer of Eagle and to assure the continued service of the Employee
to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Chief Executive Officer of Eagle. He
shall perform such duties and functions commensurate with his position and as
directed by Eagle. The parties hereto acknowledge that the Employee is engaged
in other business pursuits in which he renders services to other organizations
for which he receives compensation. While the Employee is expected to devote an
appropriate amount of time to his duties for Eagle, the Employee may purse other
business interests during the term of this Agreement so long as he does not
violate Section 6 below.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $200,000
payable periodically on the payroll schedule established for Eagle
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employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"). Upon the consummation of
the PW Pipe transaction, Eagle shall pay the Employee a transaction
bonus equal to $175,000. In additions, during the term of this
Agreement, the Employee shall be entitled to participate in Level 1 of
Eagle's Key Employee Bonus Plan, a summary of which is attached hereto
as Exhibit A.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 30,000 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 20,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 10,000 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
d. Annuity.
Eagle shall continue to pay the premiums on the annuities that
are currently in effect for the benefit of the Employee.
e. Office Space.
Eagle shall continue to provide the Employee with office space
and support staff consistent with the past.
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f. Car Allowance.
Eagle shall pay the Employee a car allowance of six hundred
dollars ($600.00) per month.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
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duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
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<PAGE>
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
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8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
Dobson West, Secretary
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
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Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
8
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Roger Robb
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Roger Robb (the "Employee") and Eagle Pacific Industries, Inc. (the
"Eagle"), having its corporate headquarters at 2430 Andersen Consulting Tower,
333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Chief
Executive Officer of Eagle and to assure the continued service of the Employee
to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Chief Executive Officer of Eagle. He
shall perform such duties and functions commensurate with his position and as
directed by Eagle. The parties hereto acknowledge that the Employee is engaged
in other business pursuits in which he renders services to other organizations
for which he receives compensation. While the Employee is expected to devote an
appropriate amount of time to his duties for Eagle, the Employee may purse other
business interests during the term of this Agreement so long as he does not
violate Section 6 below.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $160,000
payable periodically on the payroll schedule established for Eagle
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employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Annual Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
a former employee of PW Pipe. As such, for calendar year 1999 under the
term of this Agreement, the Employee shall be entitled to a bonus equal
to the bonus to which he would have been entitled under PW Pipe's bonus
plan for the remainder of calendar year 1999, which shall be payable at
such time and under such schedule as set forth under PW Pipe's bonus
plan. For subsequent calendar years during the term of this Agreement,
the Employee shall be entitled to participate in Level 4 of Eagle's Key
Employee Bonus Plan, a summary of which is attached hereto as Exhibit
A.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 34,500 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 23,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 57,500 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
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<PAGE>
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
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6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
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b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
5
<PAGE>
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
William H. Spell, CEO
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
<PAGE>
Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
7
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Keith Steinbruck
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Keith Steinbruck (the "Employee") and Eagle Pacific Industries, Inc.
(the "Eagle"), having its corporate headquarters at 2430 Anderson Consulting
Tower, 333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Vice
President - Technical Director of Eagle and to assure the continued service of
the Employee to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Vice President - Technical Director of
Eagle. He shall perform such duties and functions commensurate with his position
and as directed by Eagle. During the term of this Agreement, Employee shall
devote all of the time, skills, attention, and energy necessary for the
performance of his duties and shall not be employed by any other entity without
the expressed written permission of the Chief Executive Officer of Eagle.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $136,000
payable periodically on the payroll schedule established for Eagle
employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
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<PAGE>
b. Annual Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
a former employee of PW Pipe. As such, for calendar year 1999 under the
term of this Agreement, the Employee shall be entitled to a bonus equal
to the bonus to which he would have been entitled under PW Pipe's bonus
plan for the remainder of calendar year 1999, which shall be payable at
such time and under such schedule as set forth under PW Pipe's bonus
plan. For subsequent calendar years during the term of this Agreement,
the Employee shall be entitled to participate in Level 4 of Eagle's Key
Employee Bonus Plan, a summary of which is attached hereto as Exhibit
A.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 24,000 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 16,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 40,000 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
2
<PAGE>
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
3
<PAGE>
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
4
<PAGE>
b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
5
<PAGE>
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
William H. Spell, CEO
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
<PAGE>
Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
7
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Larry Fleming
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Larry Fleming (the "Employee") and Eagle Pacific Industries, Inc. (the
"Eagle"), having its corporate headquarters at 2430 Anderson Consulting Tower,
333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Senior
Vice President - Sales and Marketing of Eagle and to assure the continued
service of the Employee to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Senior Vice President - Sales and
Marketing of Eagle. He shall perform such duties and functions commensurate with
his position and as directed by Eagle. During the term of this Agreement,
Employee shall devote all of the time, skills, attention, and energy necessary
for the performance of his duties and shall not be employed by any other entity
without the expressed written permission of the Chief Executive Officer of
Eagle.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $197,500
payable periodically on the payroll schedule established for Eagle
employees. Base salary shall be reviewed as of December 31 each year
1
<PAGE>
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Annual Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
a former employee of PW Pipe. As such, for calendar year 1999 under the
term of this Agreement, the Employee shall be entitled to a bonus equal
to the bonus to which he would have been entitled under PW Pipe's bonus
plan for the remainder of calendar year 1999, which shall be payable at
such time and under such schedule as set forth under PW Pipe's bonus
plan. For subsequent calendar years during the term of this Agreement,
the Employee shall be entitled to participate in Level 1 of Eagle's Key
Employee Bonus Plan, a summary of which is attached hereto as Exhibit
A. PW Pipe's Performance Unit Payment incentive program ("PUP") has
been terminated and nothing contained herein shall adversely impact the
Employee's rights under the PUP that accrued prior to the date hereof.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 42,500 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 30,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 67,500 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
2
<PAGE>
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
3
<PAGE>
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twleve months following such termination, on behalf of
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
4
<PAGE>
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
5
<PAGE>
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
William H. Spell, CEO
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
6
<PAGE>
Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
7
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Jack Cobb
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Jack Cobb (the "Employee") and Eagle Pacific Industries, Inc. (the
"Eagle"), having its corporate headquarters at 2430 Anderson Consulting Tower,
333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Senior
Vice President - Operations of Eagle and to assure the continued service of the
Employee to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Senior Vice President - Operations of
Eagle. He shall perform such duties and functions commensurate with his position
and as directed by Eagle. During the term of this Agreement, Employee shall
devote all of the time, skills, attention, and energy necessary for the
performance of his duties and shall not be employed by any other entity without
the expressed written permission of the Chief Executive Officer of Eagle.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $170,000
payable periodically on the payroll schedule established for Eagle
employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
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<PAGE>
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Annual Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
a former employee of PW Pipe. As such, for calendar year 1999 under the
term of this Agreement, the Employee shall be entitled to a bonus equal
to the bonus to which he would have been entitled under PW Pipe's bonus
plan for the remainder of calendar year 1999, which shall be payable at
such time and under such schedule as set forth under PW Pipe's bonus
plan. For subsequent calendar years during the term of this Agreement,
the Employee shall be entitled to participate in Level 1 of Eagle's Key
Employee Bonus Plan, a summary of which is attached hereto as Exhibit
A. PW Pipe's Performance Unit Payment incentive program ("PUP") has
been terminated and nothing contained herein shall adversely impact the
Employee's rights under the PUP that accrued prior to the date hereof.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 37,500 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 25,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 62,500 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
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<PAGE>
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
3
<PAGE>
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
4
<PAGE>
b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
5
<PAGE>
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
William H. Spell, CEO
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
6
<PAGE>
Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
7
EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Neil Chinn
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Neil Chinn (the "Employee") and Eagle Pacific Industries, Inc. (the
"Eagle"), having its corporate headquarters at 2430 Anderson Consulting Tower,
333 South Seventh Street, Minneapolis, MN 55402.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Vice
President - Human Resources of Eagle and to assure the continued service of the
Employee to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Vice President - Human Resources of
Eagle. He shall perform such duties and functions commensurate with his position
and as directed by Eagle. During the term of this Agreement, Employee shall
devote all of the time, skills, attention, and energy necessary for the
performance of his duties and shall not be employed by any other entity without
the expressed written permission of the Chief Executive Officer of Eagle.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $116,000
payable periodically on the payroll schedule established for Eagle
employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
1
<PAGE>
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Annual Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
a former employee of PW Pipe. As such, for calendar year 1999 under the
term of this Agreement, the Employee shall be entitled to a bonus equal
to the bonus to which he would have been entitled under PW Pipe's bonus
plan for the remainder of calendar year 1999, which shall be payable at
such time and under such schedule as set forth under PW Pipe's bonus
plan. For subsequent calendar years during the term of this Agreement,
the Employee shall be entitled to participate in Level 4 of Eagle's Key
Employee Bonus Plan, a summary of which is attached hereto as Exhibit
A.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that
(i) the Employee has purchased 21,000 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 14,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 35,000 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
2
<PAGE>
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
d. Severance.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
3
<PAGE>
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
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b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
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e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
William H. Spell, CEO
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on 16th day of September, 1999 and the Employee attests that he is in
full agreement with all terms and conditions herein and has exercised his legal
right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
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Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
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