THIS JUNIOR SUBORDINATED NOTE ("NOTE") WAS ACQUIRED FOR INVESTMENT ONLY AND NOT
FOR RESALE. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAW. THIS NOTE MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS FIRST REGISTERED UNDER SUCH LAWS, OR UNLESS THE
COMPANY (AS HEREINAFTER DEFINED) HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION UNDER SUCH LAWS IS NOT REQUIRED. THIS NOTE IS
SUBORDINATE AND JUNIOR TO ALL SENIOR DEBT AS PROVIDED HEREIN.
MAINE INDUSTRIAL TIRES LIMITED
JUNIOR SUBORDINATED NOTE
$8,794,586.00 April 29, 1999
1. PAYMENT. MAINE INDUSTRIAL TIRES LIMITED, an Indiana corporation and
successor by merger to Maine Rubber Company, an Indiana corporation (the
"Company"), for value received, hereby promises to pay to ITL Industrial Tires,
Inc., a Delaware corporation, the principal sum of Eight Million Seven Hundred
Ninety-Four Thousand Five Hundred Eighty-Six and no/100 Dollars ($
8,794,586.00), together with interest, accruing commencing on the date of this
Note, on said principal sum at the rate of eight percent (8%) per annum (based
on a 360-day year).
Principal and interest shall be due and payable, subject to the
limitations and restrictions hereinafter set forth, as follows, time is of the
essence:
(a) All accrued but unpaid interest shall be payable quarterly on
the last day of each calendar quarter, commencing on June 30,
1999, and on the date the final principal payment is made.
(b) Principal shall be paid as follows:
(i) One payment of principal in the amount of One Million
Dollars ($1,000,000) shall be paid on April 29, 2002.
(ii) One payment of principal in the amount of Two Million
Five Hundred Ninety-Eight Thousand One Hundred
Ninety-Five and 33/100 Dollars ($2,598,195.33) shall
be paid on April 29, 2003.
(iii) Payment of the entire remaining unpaid principal
balance shall be paid on April 29, 2004.
The ability of the Company to pay principal and interest under this
Note is dependent upon the ability of its subsidiaries to pay dividends or make
other distributions to the Company in amounts equal to or greater than the
principal and interest due on the Junior Subordinated Notes (as hereafter
defined). Notwithstanding anything to the contrary contained herein, no payment
of principal or interest shall be due hereunder during any period to the extent
the Company and/or its subsidiaries are not able or permitted under any of the
loan agreements, guaranties and other
financing arrangements (collectively, the "Senior Debt Documents") among or
between the Company and/or any of its subsidiaries and the holders of the Senior
Debt (defined below) to pay to the Company's subordinated lenders principal and
interest due on the Junior Subordinated Notes, PROVIDED, HOWEVER, THAT such
payment, together with interest accrued on such payment, shall become due as
soon as, and to the extent that, payment would be permitted under the Senior
Debt Documents. "Junior Subordinated Notes" shall mean this Note, all of the
other junior subordinated notes of even date herewith issued by the Company, and
any replacement notes thereof. "Subordinated Holder" shall mean the holder of
this Junior Subordinated Note.
2. PREPAYMENT. Subject to the Company's obligations in its Senior Debt
Documents, the principal and/or accrued interest due hereunder may be prepaid in
whole or in part, at the sole discretion of the Company, at any time without
penalty. Any such prepayment shall be first applied to accrued but unpaid
interest, and any balance shall be applied to reduce the unpaid principal as
described by the Company in writing to the payee, and if no such direction is
given, to the reduction of the principal with the earliest maturity date.
3. PLACE OF PAYMENT. Payments of principal and interest shall be made
in lawful money of the United States of America at the address of the
Subordinated Holder set forth at the end of this Note or, at the option of the
Subordinated Holder, at such other place in the United States of America as the
Subordinated Holder shall have designated to the Company in writing. Any
principal or interest payment not made on a date specified in Section 1 shall
bear interest at the rate specified in such Section PLUS two percent (2%)
commencing on the date payment was due until paid.
4. SUBORDINATION.
(a) Notwithstanding anything to the contrary contained in this
Note, including, without limitation, the obligation of the Company to
make the principal and interest payments set forth in Section 1 herein,
the indebtedness evidenced by this Note is subordinate and junior to
the prior payment in full of all Senior Debt. "Senior Debt" as used
herein shall mean the principal of and premium, if any, fees, expenses
and interest and other amounts payable, including all fees, expenses
and interest accruing after commencement of any case, proceeding or
action relating to the bankruptcy, insolvency or reorganization of the
Company (whether or not such interest is deemed an allowed claim), on
indebtedness or other obligations (including, without limitation,
guaranties) of the Company or any of its subsidiaries (i) created
pursuant to that certain (A) Loan Agreement dated as of April 29, 1999
among National Bank of Canada, Maine Rubber International ("MRI"),
Monarch Industrial Tires, Inc. ("Monarch"), Precision Products Limited
("PPL") and Industrial Tires Limited ("ITL") and the Canadian Loan
Agreement dated as of April 29, 1999 among National Bank of Canada,
MRI, Monarch, PPL and ITL (collectively, the "Loan Agreement") and the
notes issued pursuant to the Loan Agreement (collectively, the "Senior
Notes"); and (B) Note Agreement (the "Note Agreements"), dated as of
April 29, 1999, among the Company, MRI and each of the purchasers
identified on the signature pages thereto and the 12.00% Senior
Subordinated Secured Notes due April 30, 2009 issued
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pursuant to the Note Agreement (collectively, the "Secured Subordinated
Notes"), and (ii) constituting renewals, modifications, extensions, or
refinancing of the indebtedness or other obligations of the kinds
described in the preceding clause (i) provided the restrictions against
the payment of the indebtedness evidenced by this Note contained in any
future renewals, modification, extension or refinancing shall not be
materially more restrictive than the restrictions set forth in the Loan
Agreement and in the Note Agreements, and provided further, that the
aggregate amount of the principal payments under any renewals,
modifications, extensions or refinancings referred to in clause (ii) to
which the indebtedness evidenced by this Note is subordinate and junior
shall be limited to an amount equal to (A) the maximum commitment under
the Senior Notes LESS the scheduled amortization principal payments
which have been made on the term loan facility at the time of such
renewal, modification, extension or refinancing (the "Specified Time"),
PLUS (B) the aggregate outstanding principal balance of the Secured
Subordinated Notes at the Specified Time.
(b) In the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization, or other similar proceedings involving the
Company or its property, the holders of Senior Debt shall be entitled
to receive payment in full, in cash, of all Senior Debt (whether for
principal, interest, premium or fees) before the Subordinated Holder is
entitled to receive payment on account of principal of or premium, if
any, or interest on this Note.
(c) In the event that this Note is declared due and payable
before its expressed maturity under circumstances other than those
described in Section 4(b), the holders of Senior Debt then outstanding
shall be entitled to receive payment in full, in cash, of all principal
of and premium, if any, fees, expenses and interest, including all
fees, expenses and interest accruing after commencement of any case,
proceeding or action relating to the bankruptcy, insolvency or
reorganization of the Company (whether or not such interest is deemed
an allowed claim), on all Senior Debt before the Subordinated Holder is
entitled to receive any payment on account of the principal of or
premium, if any, or interest on this Note. The Subordinated Holder
shall be entitled to interest subject to the terms hereof whether or
not such interest is deemed an allowed claim.
(d) During the continuance of any default in the payment of
principal of and premium, if any, or interest on any Senior Debt or any
other default on any Senior Debt which gives its holders the right to
accelerate the maturity of such Senior Debt, no payment of principal of
or premium, if any, or interest shall be made on or with respect to the
indebtedness evidenced by this Note or any renewal or extensions
thereof, if written or telegraphic notice of such default has been
given to the Company by any holder or holders of any Senior Debt. If
the holders of any Senior Debt have the right to accelerate the
maturity of such Senior Debt as a result of a default under any of the
Senior Debt Documents, the Subordinated Holder shall have no right to
accelerate the maturity of this Note or take any action against the
Company or any of its subsidiaries or affiliates to collect the debt
evidenced hereby.
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(e) This Section 4 shall constitute a continuing offer to all
parties who, in reliance upon such provisions, become holders of, or
continue to hold, Senior Debt; such provisions are made for the benefit
of the holders of Senior Debt; and such holders are made obligees
hereunder and they or each of them may enforce such provisions.
(f) Until the Senior Debt is paid in full in cash, any
distribution to which the Subordinated Holder would be entitled shall
be subject to the restrictions set forth in any agreement by the
Company with respect to the Senior Debt, which agreement or agreements
may provide that any distribution to which Subordinated Holder would be
entitled shall be made to the holders of the Senior Debt.
(g) In the event that notwithstanding the provisions of this
Section 4, the Subordinated Holder shall receive any payments in
violation of this Section 4, then, unless and until such violation
shall have been cured or waived in writing or shall have ceased to
exist, such payment shall be held in trust by such holder for the
benefit of the holders of the Senior Debt and shall be paid forthwith
over and delivered forthwith to the holders of the Senior Debt for
application to the payment of all Senior Debt remaining unpaid to the
extent necessary to pay all Senior Debt in full in cash in accordance
with its terms, after giving effect to any concurrent payment or
distribution or provisions therefor to or for the holders of the Senior
Debt; PROVIDED, HOWEVER, the Subordinated Holder shall have no
obligation to pay over to the holders of the Senior Debt any payment
received for which no notice of violation is received within three (3)
years of such payment.
(h) Except as specifically provided herein, the rights under
these subordination provisions of the holders of the Senior Debt as
against the Subordinated Holder shall remain in full force and effect
without regard to, shall not be impaired or affected by, and, with the
exception of subsection (i) below, the Subordinated Holder hereby
consents to:
(i) any act or failure to act on the part of the
Company under the terms of this Note (including, without
limitation, any amendments of the terms of this Note); or
(ii) any extension or indulgence in respect of any
payment or prepayment of any Senior Debt or any part thereof
or in respect of any other amount payable to any holder of the
Senior Debt; or
(iii) any amendment, modification or waiver of, or
addition or supplement to, or deletion from, or compromise,
release, consent or other action in respect of, any of the
terms of any Senior Debt or any agreement (in each case, to
the extent consistent with Section 4(a) of this Note) which
may be made relating to any Senior Debt; or
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(iv) any exercise or nonexercise by holder of the
Senior Debt of any right, power, privilege or remedy under or
in respect of any Senior Debt or these subordination
provisions or any waiver of any such right, power, privilege
or remedy or of any default in respect of the Senior Debt or
these subordination provisions, or any receipt by any holder
of the Senior Debt of any security, or any failure by any
holder of the Senior Debt to perfect a security interest in,
or any release by any holder of the Senior Debt of any
security or guaranty for the payment of the Senior Debt; or
(v) the sale, exchange, release, or failure to
perfect or otherwise deal with any property pledged, assigned
or mortgaged to secure, or otherwise securing, Senior Debt; or
(vi) the application of any sums from time to time
received to the payment of Senior Debt.
(i) This Section 4 shall continue to be effective, or be
reinstated, as the case may be, if any time any payment in respect of
any Senior Debt, or any other payment to any holder of any Senior Debt,
is rescinded or must otherwise be restored or returned by the holders
of such Senior Debt upon the occurrence of any event described in
Section 4(b) hereof, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer
for, the Company or any substantial part of its property, or otherwise,
all as though such payment had not been made.
(j) The holders of the Senior Debt shall have no obligation to
preserve the rights of the Subordinated Holder against any prior
parties or to marshal any of the assets or properties of the Company
for the benefit of the Subordinated Holder.
(k) The provisions of this Section 4 shall continue in full
force and effect, notwithstanding the commencement of a case under
Title 11 of the United States Code, as amended and/or superseded by or
against the Company or any of its property. In furtherance of the
foregoing, if the Subordinated Holder receives, directly or indirectly,
by set-off, redemption, purchase or in any other manner, any property
of, or payments from, the Company after the commencement of such a case
on account of a claim which is subordinated by the terms of this
Agreement (whether as "adequate protection" payments or otherwise), the
Subordinated Holder shall immediately turn such property or payments
over to the holders of the Senior Debt in accordance with the
applicable provisions of this Section 4.
(l) In the event that the Subordinated Holder does not file,
within thirty (30) days before the expiration of the time for such
filing, a proof of claim or other appropriate proof of debt in any
insolvency or bankruptcy case or proceeding involving the Company, the
holders of at least fifty-one percent (51%) in aggregate outstanding
principal amount of the Senior Debt are hereby irrevocably authorized
and empowered to file such proof of claim for
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or on behalf of the Subordinated Holder and to take any necessary
action to collect any amounts due in respect of such claim in such case
or proceeding. The holders of Senior Debt shall have the right, at
their option, to vote any claim or claims in respect to this Note in
connection with any insolvency or bankruptcy case or proceedings
involving the Company.
(m) The Subordinated Holder, by its acceptance hereof, shall
be conclusively presumed to have agreed that:
(i) all holders of Senior Debt, in determining to
acquire and retain Senior Debt, have relied upon the
subordination of this Note to Senior Debt; and
(ii) promptly upon request of any holder of Senior
Debt, the Subordinated Holder shall execute and deliver to
such holder of Senior Debt a written instrument by which such
Subordinated Holder confirms and agrees that this Note is
subordinate and junior in right of payment to such Senior Debt
on the terms and conditions provided herein and take such
other action as may be reasonably requested to protect the
rights of the holders of Senior Debt.
(n) For the avoidance of doubt, any payment on or in respect
to the Senior Debt other than in cash recovered or received by any
holder of Senior Debt shall be treated as having not been paid until
reduced to cash for the purposes of this Note.
5. EXCHANGE OF NOTE. Subject to compliance with applicable federal and
state securities laws, upon surrender for exchange of this Note (in negotiable
form, if not surrendered by the holder named on the face thereof) to the Company
at its principal office, the Company, at its expense, will issue and deliver a
new Note or Notes in the same aggregate principal amount, in the denomination or
denominations requested, to or on the order of such holder upon payment by such
holder of any applicable transfer taxes.
6. ASSET PURCHASE AGREEMENT. This Note is being delivered by the
Company to the Subordinated Holder pursuant and subject to an asset acquisition
described in the Asset Purchase Agreement dated as of the 6th day of April,
1999, by and among the Company, Cascade Corporation, an Oregon corporation
("Parent"), Cascade (Canada) Ltd. ("CCL"), an Ontario corporation and
wholly-owned by the Parent, Cascade (Ontario), Inc., an Ontario corporation and
wholly-owned by CCL, and ITL Industrial Tires, Inc., a Delaware corporation and
wholly-owned by the Parent, as amended through the date hereof (the
"Agreement"), the terms and conditions of which are incorporated herein by
reference. Unless otherwise defined herein, terms defined in the Agreement are
used herein as therein defined. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING
AND IN ADDITION TO ANY OTHER REMEDY THE COMPANY MAY HAVE TO ENFORCE ITS RIGHTS
UNDER THE AGREEMENT, THE COMPANY SHALL FIRST OFFSET THE FULL AMOUNT OF ANY
INDEMNIFIABLE LOSS FOR WHICH IT OR ANY OTHER PURCHASER PARTY IS ENTITLED TO
INDEMNIFICATION AGAINST ANY INTEREST AND/OR PRINCIPAL PAYMENTS TO BE MADE UNDER
THIS NOTE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT. SUCH
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OFFSETS SHALL NOT BE CONSIDERED PAYMENTS FOR PURPOSES OF SECTION 4 OF THIS NOTE.
7. NOTICES. All notices and other communications from the Company to
the Subordinated Holder shall be mailed by first-class registered or certified
mail, postage prepaid, to the address furnished to the Company in writing by the
last Subordinated Holder who has furnished an address to the Company in writing.
8. CHANGE; WAIVER. Neither this Note nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the Company, the Subordinated Holder and each of the holders
of the Senior Debt then outstanding.
9. HEADINGS. The headings in this Note are for purposes of convenience
of reference only, and shall not be deemed to constitute a part hereof.
10. GOVERNING LAW. This Note shall be construed in accordance with and
governed by the laws of the State of Indiana, without regard to its conflicts of
law principles.
11. FINANCIAL INFORMATION. So long as any principal or interest is due
under the terms of this Note, the Company shall provide to the Subordinated
Holder of this Note quarterly unaudited consolidated financial statements,
certified as true and correct by the Company's Chief Financial Officer, within
45 days of the end of each calendar quarter; PROVIDED, HOWEVER with respect to
the last quarter of the Company's fiscal year, the Company shall provide the
Subordinated Holder audit financial statements of the Company on a consolidated
basis within 90 days after such fiscal year.
12. ACCELERATION. Following the acceleration of all Senior Debt
pursuant to the Senior Debt Documents, all amounts due under this Note will
mature subject to the provisions of Section 4 of this Note.
13. FINAL PAYMENT. Notwithstanding the provisions set forth in Section
4 of this Note, all amounts under this Note then outstanding will be due and
payable on September 30, 2009.
14. COSTS AND EXPENSES. In any legal action between the Subordinated
Holder and the Company to enforce or interpret this Note, the prevailing party
shall be entitled to recover its costs and expenses, including reasonable
accounting and legal fees.
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IN WITNESS WHEREOF, MAINE INDUSTRIAL TIRES LIMITED has caused this Note
to be duly and executed by its officer thereunto duly authorized as of the first
date set forth above.
MAINE INDUSTRIAL TIRES LIMITED
By:
------------------------------
Xxxxxx X. Xxxxx, President
Name and Address of Initial Holder:
ITL Industrial Tires, Inc.
c/o Xxxx Xxxxxxxxxx
P.O. Box 20187
Portland, OR 97294-0187
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