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EXHIBIT - 10.11
EXECUTION COPY
HOME PRODUCTS INTERNATIONAL, INC.
SELFIX, INC.
TAMOR CORPORATION
SHUTTERS, INC.
SUBORDINATED EQUITY BRIDGE NOTES DUE
FEBRUARY 27, 2005
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NOTE PURCHASE AGREEMENT
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DATED AS OF FEBRUARY 27, 1997
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TABLE OF CONTENTS
PAGE
1.1 The Notes........................................................... 1
1.2. Note Terms, Prepayments............................................. 1
2. Sale and Purchase of Note........................................... 2
3.1 Closing; Fees....................................................... 2
4. Conditions Precedent; Conditions to Closing......................... 3
4.1.1 Representations and Warranties............................. 3
4.1.2 Performance; No Default.................................... 3
4.1.3 Opinions of Counsel........................................ 3
4.1.4 Credit Agreement........................................... 3
4.1.5 Warrant Agreement.......................................... 3
4.1.6 Security Documents......................................... 3
4.1.7 Certain Legal Matters...................................... 3
4.1.8 Compliance with Securities Laws............................ 3
4.1.9 Proceedings and Documents.................................. 3
4.1.10 No Actions Pending......................................... 4
4.1.11 Other Documents............................................ 4
4.1.12 Performance; No Default.................................... 4
5. Representations and Warranties...................................... 4
5.1. Disclosure................................................. 4
5.2. No Material Adverse Effect................................. 4
5.3. No Default................................................. 4
5.4. Organization, Powers, Capitalization and Good Standing..... 5
5.5. Financial Statements....................................... 5
5.6. Property................................................... 6
5.7. Investigations, Audits, Etc................................ 6
5.8. Employee Matters........................................... 6
5.9. Solvency................................................... 6
5.10. Compliance with Laws....................................... 6
5.11. Pending and Threatened Litigation.......................... 6
6. Purchase Intent..................................................... 6
7. Financial Covenants and Reporting................................... 7
7.1. Financial Statements and Other Reports..................... 7
7.2. Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement............................... 8
7.3. Inspection................................................. 8
8. Affirmative and Negative Covenants.................................. 8
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8.1. Liens, etc................................................ 9
8.2. Investments; Joint Ventures............................... 9
8.3. Restricted Payments....................................... 9
8.4. Restriction on Certain Amendments and Fundamental Changes. 9
8.5. Disposal of Assets or Subsidiary Stock.................... 9
8.6. Transactions with Affiliates.............................. 10
8.7. Conduct of Business....................................... 10
8.8. Indebtedness.............................................. 10
8.9. Fiscal Year............................................... 10
8.10. Press Release; Public Offering Materials.................. 10
8.11. Subsidiaries.............................................. 10
8.12. Compliance With Laws...................................... 10
8.13. Maintenance of Properties; Insurance...................... 11
8.14. Corporate Existence, Etc.................................. 11
8.15. Intervening Debt.......................................... 11
8.16. Notice of Default......................................... 11
9. Prepayment of Notes................................................ 11
9.1 Maturity; Surrender....................................... 11
10. Subordination of Notes............................................. 11
10.1. General................................................... 11
10.2. Senior Loans.............................................. 12
10.3. Default in Respect of Senior Loans and the Notes.......... 12
10.4. Insolvency, etc........................................... 13
10.5. Payments and Distributions Received....................... 13
10.6. No Prejudice or Impairment................................ 13
10.7. Payment of Senior Loans, Subrogation, etc................. 14
10.8. Filing of Claims.......................................... 14
10.9. Reliance; Binding on Subsequent Holders................... 14
11. Registration, Transfer and Substitution of Securities.............. 15
11.1. Note Register; Ownership of Notes......................... 15
11.2. Transfer and Exchange of Notes............................ 15
11.3. Replacement of Notes...................................... 15
11.4. Notes Held Holdings, etc., Deemed Not Outstanding......... 15
12. Payments on Notes.................................................. 15
13. Events of Default; Acceleration.................................... 16
14. Remedies on Default................................................ 18
15. Definitions........................................................ 18
15.1. Certain Defined Terms..................................... 18
15.2. Accounting and other Terms................................ 23
16. Submission to Jurisdiction; Waiver................................. 23
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17. Survival of Representations and Warranties.......................... 24
18. Amendments and Waivers.............................................. 24
19. Indemnification..................................................... 24
20. Notices, etc........................................................ 25
21. Miscellaneous....................................................... 26
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SCHEDULES
SCHEDULE 5.3 Defaults Under Agreements
SCHEDULE 5.4(B) Capitalization
SCHEDULE 5.4(D) Qualification
SCHEDULE 5.7 Audits and Investigations
SCHEDULE 5.8 Employee Matters
SCHEDULE 8.6 Transactions With Affiliates
EXHIBITS
EXHIBIT 1.1 Form of Subordinated Equity Bridge Note Due 2005
EXHIBIT 7.1 Compliance Certificate
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NOTE PURCHASE AGREEMENT
This Note Purchase Agreement dated as of February 27, 1997, is
by and among Selfix, Inc., a Delaware corporation; Tamor Corporation, a
Massachusetts corporation and Shutters, Inc., an Illinois corporation (the
"Joint Issuers"); Home Products International, Inc., a Delaware corporation
("Holdings"); and General Electric Capital Corporation, a New York corporation
and the other Note Purchasers that are signatories hereto (the "Note
Purchasers").
In Witness Whereof the parties hereto agree as follows:
1.1. The Notes. The Joint Issuers have authorized the issuance
and sale of Subordinated Equity Bridge Notes due February 27, 2005 (including
any notes issued in payment of interest pursuant to Section 1.2 or in
substitution therefor pursuant to Section 11, collectively, the "Notes"), to be
in the form of the Note set forth in Exhibit 1.1, with such changes thereto, if
any, as may be approved by the Note Purchasers and the Joint Issuers.
1.2. Note Terms, Prepayments. (a) Except as set forth in
clause (b) below, the Notes shall bear interest at a rate of thirteen and
one-half percent (13.5%) per annum, and interest shall be paid solely by the
issuance of Notes in the amount of such interest. Such Notes shall, themselves,
bear interest at the same interest rates as herein set forth, shall be due and
payable in full on February 27, 2005, and shall be subject to all of the terms
and conditions of this Agreement, including, without limitation, this Section
1.2(a). The outstanding principal balance of all of the Notes, together with all
accrued and unpaid interest thereon, shall be due and payable in full on
February 27, 2005. Interest shall be payable quarterly in arrears on each
Interest Payment Date. Interest on the Notes shall be calculated daily on the
basis of a three hundred sixty (360) day year for the actual number of days
elapsed in the period during which it accrues. If the Majority Holders so elect,
after the occurrence of an Event of Default and for so long as it continues, the
Notes shall bear interest at a per annum rate equal to 15.5% per annum. The Note
Purchasers agree that under no circumstances will the rate of interest
chargeable be in excess of the maximum amount permitted by law. If excess
interest is charged and paid in error, the Note Purchasers agree that the excess
amount will be promptly refunded to the Joint Issuers.
(b) So long as no event of default shall have occurred and be
continuing under the Credit Agreement, the Joint Issuers may, at their election,
pay interest in cash on all Notes issued in accordance with this Agreement;
provided that the aggregate amount of cash interest paid on the Notes shall not
exceed 25% of
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Excess Cash Flow from January 1, 1997 through any date of determination and the
amount of Excess Cash Flow shall be determined annually for each Fiscal Year
based on Holdings' annual audited financial statements, commencing with its
Fiscal Year ending December 31, 1997. So long as interest on the outstanding
Notes is paid in cash, the outstanding Notes shall bear interest at eleven and
one-half percent (11.5%) per annum.
(c) If Holdings or any Joint Issuer issues equity securities,
no later than the Business Day following the date of receipt of the proceeds
thereof, the Joint Issuers shall prepay the Notes, ratably, in an amount equal
to 50% of the proceeds of such equity issuance, net of underwriting discounts
and commissions and other reasonable out-of-pocket costs incurred in connection
therewith. In addition, the Joint Issuers shall prepay the Notes in full upon
payment in full of the Senior Loans and termination of the Senior Lenders'
commitment to make Senior Loans.
(d) In addition to the mandatory prepayments required under
clause (c) above, the Joint Issuers may voluntarily prepay the Notes in whole or
in part (in integral multiples of $100,000) at any time upon not less than ten
(10) days' prior written notice to the Note Purchasers. All prepayments, whether
mandatory or voluntary, shall be applied first to accrued interest under the
Notes, pro rata, and then to the principal balance of the Notes, pro rata, and
all prepayments may be made without premium or penalty.
2. Sale and Purchase of Note. The Joint Issuers will issue and
sell to the Note Purchasers on the date hereof Notes in the aggregate principal
amount of $7,000,000 in the respective principal amounts set forth on the
signature pages hereto. Such Notes shall be issued in the State of Illinois and
governed by the laws of that State.
3.1 Closing; Fees. The sale of the Notes to be purchased by
the Note Purchasers shall take place at the offices of Winston & Xxxxxx, 00 Xxxx
Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, at a closing (the "Closing") on February
27, 1997 or on such other Business Day thereafter as may be agreed upon by the
Joint Issuers and the Majority Holders (the "Closing Date"). At the Closing, the
Joint Issuers will deliver to each Note Purchaser the Notes to be purchased by
it in the principal amount set forth on the signature pages hereto on such date
against delivery by each Note Purchaser to Selfix or its order of immediately
available funds in the amount of the principal amount of each Note to be
purchase by it. If, at the Closing, the Joint Issuers shall fail to tender to
any Note Purchaser the Notes to be purchased by it as provided herein, or any of
the material conditions specified in Section 4 shall not have been fulfilled to
to the Note Purchasers' satisfaction, all of the Note
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Purchasers shall be relieved of their respective obligations under this
Agreement, without thereby waiving any other rights such Note Purchasers may
have by reason of such failure or such non-fulfillment.
3.2 The Joint Issuers agree, jointly and severally, to
promptly pay all reasonable fees, costs and expenses (including those of
attorneys) incurred by the Note Purchasers in connection with any matters
arising out of the Note Purchase Documents and the other Related Transactions
Documents, in connection with the examination, review, due diligence
investigation, documentation, negotiation and closing of the transactions
identified herein and in connection with the continued administration (other
than administrative matters arising in the ordinary course) of the Note Purchase
Documents including any amendments, modifications, and waivers of or with
respect to the Note Purchase Documents or any of the other Related Transactions
Documents. The Joint Issuers agree, jointly and severally, to promptly pay all
reasonable fees, costs and expenses incurred by each Note Purchaser in
connection with any action to enforce any Note Purchase Document or to collect
any payments due from the Joint Issuers. All fees, costs and expenses for which
the Joint Issuers are responsible under this Section 3.2 shall be payable on
demand and secured by the Collateral (as defined in the Security Documents).
4. Conditions Precedent; Conditions to Closing. Each Note
Purchaser's obligation to execute and deliver this Agreement and to purchase and
pay for the Note to be sold to it at the Closing is subject to the fulfillment
to the reasonable satisfaction of the Majority Holders, prior to or at the
Closing, of the following conditions:
4.1.1 Representations and Warranties. The representations and
warranties of Holdings and each of the Joint Issuers contained in this Agreement
and those otherwise made in writing by or on behalf of the Joint Issuers in
connection with the transactions identified in this Agreement shall be correct
in all material respects at the time of Closing.
4.1.2 Performance; No Default. The Joint Issuers shall have
performed and complied in all material respects with all agreements and
conditions contained in this Agreement required to be performed or complied with
by them prior to or at the Closing and at the time of the Closing no Default or
Event of Default shall have occurred and be continuing.
4.1.3 Opinions of Counsel. Each Note Purchaser shall have
received from Much, Shelist, Freed, Denenberg, Ament, Xxxx & Xxxxxxxxxx PC,
counsel to Holdings and the Joint Issuers, a favorable opinion in form and
substance reasonably satisfactory to the Majority Holders, addressed to the Note
Purchasers and dated the Closing Date.
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4.1.4 Credit Agreement. The Related Transactions shall have
been consummated.
4.1.5 Warrant Agreement. Each Note Purchaser shall have
received duly executed copies of the Warrant and any and all documents,
instruments or agreements required to be executed and/or delivered in connection
therewith, including, without limitation, a duly executed Allocation Agreement.
4.1.6 Security Documents. Each Note Purchaser shall have
received duly executed copies of the Security Agreement and each of the other
Security Documents, together with reasonably satisfactory evidence that the Note
Purchasers have a valid and perfected second priority security interest in the
Collateral (as defined in the Security Documents), subject only to liens and
encumbrances permitted herein, in the Security Agreement or in the Credit
Agreement.
4.1.7 Certain Legal Matters. On the date of the Closing, no
Note Purchaser's purchase of the Note shall be prohibited by any applicable law
or governmental regulation.
4.1.8 Compliance with Securities Laws. The offering and sale
of the Note to be issued at the Closing shall have complied with all applicable
requirements of federal and state securities laws.
4.1.9 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and the other Related Transactions Documents to be executed and delivered on the
Closing Date and all documents and instruments incident to such transactions
shall be reasonably satisfactory to each Note Purchaser, and each Note Purchaser
shall have received all such counterpart originals or certified or other copies
of such documents as it may reasonably request.
4.1.10 No Actions Pending. There shall be no suit, action,
investigation, inquiry or other proceeding by any governmental body or any other
Person or any other legal or administrative proceeding, pending or, to the Joint
Issuers' knowledge, threatened, which questions the validity or legality of the
transactions contemplated by this Agreement or any of the other Related
Transactions Documents or which seeks damages or injunctive or other equitable
relief in connection therewith.
4.1.11 Other Documents. Each Note Purchaser's obligation to
purchase the Note on the Closing Date is, in addition to the conditions
precedent specified above, subject to the delivery to it of all Note Purchase
Documents, all in form and substance reasonably satisfactory to the initial Note
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Purchasers.
4.1.12 Performance; No Default. The Joint Issuers shall have
performed and complied in all material respects with all agreements and
conditions contained in this Agreement required to be performed or complied with
by any of them as of the Closing Date and, as of the Closing Date, no Default or
Event of Default shall have occurred and be continuing.
5. Representations and Warranties. The Joint Issuers represent
and warrant to each Note Purchaser that:
5.1. Disclosure. No representation or warranty of Holdings or
any Joint Issuer contained in this Agreement, the financial statements referred
to in Section 5.5, the other Related Transactions Documents or any other
document, certificate or written statement furnished to any Note Purchaser by or
on behalf of any such Person for use in connection with the Note Purchase
Documents or the other Related Transactions Documents contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made.
5.2. No Material Adverse Effect. Since December 31, 1996, no
events have occurred which, taken as a whole, have had a Material Adverse
Effect.
5.3. No Default. The consummation of the Related Transactions
does not and will not violate, conflict with, result in a breach of, or
constitute a default (with due notice or lapse of time or both) under, or
require the consent of any third party under, any material contract of the Joint
Issuers except if such violations, conflicts, breaches or defaults have either
been waived on or before the Closing Date and are disclosed on Schedule 5.3 or
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
5.4. Organization, Powers, Capitalization and Good Standing.
(A) Organization and Powers. Each Joint Issuer and Holdings is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of its incorporation. Each of the Joint Issuers has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and proposed to be conducted, to enter
into each Related Transactions Document to which it is a party and to carry out
the Related Transactions.
(B) Capitalization. The authorized and issued capital stock of
Holdings and each of the Joint Issuers is as set forth
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on Schedule 5.4(B). All issued and outstanding shares of capital stock of each
of the Joint Issuers are duly authorized and validly issued, fully paid,
nonassessable, and such shares were issued in compliance with all applicable
state and federal laws concerning the issuance of securities. The capital stock
of each of the Joint Issuers is owned by Holdings. There are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from Holdings or
any Joint Issuer of any shares of capital stock or other securities of any such
entity, except for the Warrant and the other securities disclosed in the
Schedules to the Credit Agreement as of the Closing Date.
(C) Binding Obligation. This Agreement is, and the other
Related Transactions Documents when executed and delivered will be, the legally
valid and binding obligations of Holdings and the Joint Issuers, respectively,
each enforceable against each of them, as applicable, in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and similar laws affecting
creditors' rights generally, and by general principles of equity.
(D) Qualification. Each of the Joint Issuers is duly qualified
and in good standing wherever necessary to carry on its business and operations,
except in jurisdictions in which the failure to be qualified and in good
standing could not reasonably be expected to have a Material Adverse Effect. All
jurisdictions in which each Joint Issuer is qualified to do business are set
forth on Schedule 5.4(D).
5.5. Financial Statements. All financial statements concerning
any of the Joint Issuers which have been or will hereafter be furnished to the
Note Purchasers pursuant to this Agreement, including those listed below, have
been or will be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do or will present fairly the financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
(A) The audited balance sheets for fiscal year 1995 and the
related statement of income of each Joint Issuer, for the fiscal year
then ended, certified by BDO Xxxxxxx in the case of Tamor and Xxxxxx
Xxxxxxxx in the case of Selfix and Shutters.
(B) The unaudited balance sheets for Fiscal Year 1996 and the
related statements of income of each Joint Issuer for the twelve (12)
months then ended.
5.6. Property. Each Joint Issuer owns, is licensed to
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use or otherwise has the right to use, all assets used in or necessary for the
conduct of its business as currently conducted or that are material to the
condition (financial or other), business or operations of the Joint Issuers.
5.7. Investigations, Audits, Etc. Except as set forth on
Schedule 5.7, none of the Joint Issuers are the subject of any review or audit
by the Internal Revenue Service or any governmental authority concerning the
violation or possible violation of any law.
5.8. Employee Matters. Except as set forth on Schedule 5.8,
(a) no Joint Issuer has any obligation under any collective bargaining
agreement, (b) no petition for certification or union election is pending with
respect to the employees of any Joint Issuer and no union or collective
bargaining unit has sought such certification or recognition with respect to the
employees of any Joint Issuer and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the best knowledge of the Joint
Issuers threatened between any Joint Issuer and its respective employees, other
than employee grievances arising in the ordinary course of business which could
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
5.9. Solvency. As of and from and after the date of this
Agreement and after giving effect to the consummation of the Related
Transactions, each Joint Issuer: (a) owns and will own assets the fair saleable
value of which are greater than the total amount of liabilities (including
contingent liabilities) of that Joint Issuer; (b) is able to pay its debts as
they become due; (c) has capital that is not unreasonably small in relation to
its business as presently conducted or any contemplated or undertaken
transaction; and (d) does not intend to incur and does not believe that it will
incur debts beyond its ability to pay such debts as they become due.
5.10. Compliance with Laws. Each Joint Issuer is in compliance
with all applicable laws after giving effect to the Related Transactions, where
failure to comply would not have a Material Adverse Effect.
5.11. Pending and Threatened Litigation. Neither Holdings nor
any Joint Issuer is a party to any litigation that is pending or to the
knowledge of any Joint Issuer, threatened, which is likely to be determined
adversely to Holdings or that Joint Issuer and, which, if so determined, would
have a Material Adverse Effect.
6. Purchase Intent. Each Note Purchaser represents that it is
purchasing a Note hereunder for its own account, not with a view to the
distribution thereof or with any present
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intention of distributing or selling such Note except in compliance with the
Securities Act, provided that the disposition of each Note Purchaser's property
shall at all times be within its control. Each Note Purchaser represents that it
is an accredited investor, within the meaning of Regulation 501(a) under the
Securities Act.
7. Financial Covenants and Reporting. Holdings agrees that so
long as any Note is outstanding, unless each Note Purchaser shall otherwise give
its prior written consent, Holdings shall comply with and shall cause each of
the other Joint Issuers that are owned or controlled by it to comply with all
covenants in this Section 7 applicable to such Person.
7.1. Financial Statements and Other Reports. Holdings will
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly financial statements are not required to have footnote
disclosures). Holdings will deliver to each Note Purchaser each of the financial
statements and other reports described below.
(A) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month, Holdings will deliver to
each Note Purchaser (1) the consolidated and consolidating balance sheet of
Holdings and its Subsidiaries as at the end of such month and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for such month and for the period from the beginning of the then
current fiscal year of such Person to the end of such month and (2) a schedule
of the outstanding Indebtedness for borrowed money of each such Person
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan.
(B) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Holdings, Holdings
will deliver to each Note Purchaser (1) the consolidated and consolidating
balance sheet of Holdings and each of its Subsidiaries as at the end of such
year and the related consolidated and consolidating statements of income,
stockholders' equity and cash flow for such fiscal year, (2) a schedule of the
outstanding Indebtedness for borrowed money of each such Person describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan and (3) an unqualified report with respect to the financial
statements from a firm of certified public accountants selected by Holdings and
reasonably acceptable to the Majority Holders.
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(C) Compliance Certificate. Together with each delivery of
financial statements of Holdings and its Subsidiaries pursuant to Sections
7.1(A) and 7.1(B) above, Holdings will deliver to each Note Purchaser a fully
and properly completed Compliance Certificate (in substantially the same form as
Exhibit 7.1) signed by Holdings' chief executive officer or chief financial
officer.
(D) Accountants' Reports. Promptly upon receipt thereof,
Holdings will deliver copies of all significant reports submitted by Holdings'
outside auditors in connection with each annual, interim or special audit or
review of any type of the financial statements or related internal control
systems of Holdings made by such accountants, including any comment letter
submitted by such accountants to management in connection with their services.
(E) SEC Filings and Press Releases. Promptly upon their
becoming available, Holdings will deliver to each Note Purchaser copies of (1)
all financial statements, reports, notices and proxy statements made publicly
available by Holdings, to its security holders, (2) all regular and periodic
reports and all registration statements and prospectuses, if any, filed by
Holdings, with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority, and (3) all
press releases and other statements made available by Holdings, to the public
concerning material adverse changes or other developments in the business of any
such Person.
(F) Events of Default, Etc. Promptly upon any officer of
Holdings obtaining knowledge of any of the following events or conditions,
Holdings shall deliver to each Note Purchaser copies of all notices given or
received by Holdings with respect to any such event or condition and a
certificate of Holdings' chief executive officer specifying the nature and
period of existence of such event or condition and what action Holdings has
taken, is taking and proposes to take with respect thereto: (1) any condition or
event that constitutes an Event of Default or Default; (2) any notice that any
Person has given to Holdings or any of its Subsidiaries or any other action
taken with respect to a claimed default or event or condition of the type
referred to in Section 13(e); or (3) any event or condition that could
reasonably be expected to result in any Material Adverse Effect.
(G) Litigation. Holdings shall notify each Note Purchaser in
writing, promptly upon learning thereof, of any litigation commenced or
threatened against Holdings or any of its Subsidiaries, and of the institution
against it of any suit or administrative proceeding that (a) seeks damages of
$250,000 or more or (b) seeks injunctive relief.
(H) Other Information. With reasonable promptness,
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Holdings will deliver such other information and data with respect to Holdings
or any Joint Issuer as from time to time may be reasonably requested by the
Majority Holders.
7.2. Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to the Note Purchasers pursuant to Section 7.1 shall be prepared in
accordance with GAAP as in effect at the time of such preparation.
7.3. Inspection. Holdings shall permit any authorized
representatives designated from time to time by the Majority Holders to visit
and inspect any of the properties of Holdings or any of its Subsidiaries,
including its and their financial and accounting records, and to make copies and
take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and certified public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested.
8. Affirmative and Negative Covenants. Holdings covenants
that, from the date of this Agreement through the Closing and thereafter so long
as any of the Notes are outstanding:
8.1. Liens, etc. (A) Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist any Lien on or with respect to any property or asset (including
any document or instrument in respect of goods or accounts receivable) of
Holdings or any of its Subsidiaries, whether now owned or held or hereafter
acquired, or any income or profits therefrom, except Liens securing the Senior
Loans or otherwise permitted under the Credit Agreement.
(B) No Negative Pledges. Holdings will not and will not
permit any of its Subsidiaries directly or indirectly to enter into or assume
any agreement (other than the Note Purchase Documents or as permitted under the
Credit Agreement) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired, except leases or
licenses which prohibit liens on the property subject thereto.
(C) No Restrictions on Subsidiary Distributions to
Holdings. Except as provided herein and in the Credit Agreement, Holdings will
not and will not permit any of its Subsidiaries directly or indirectly to create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary
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to: (1) pay dividends or make any other distribution on any of such Subsidiary's
capital stock owned by Holdings or any Subsidiary of Holdings; (2) pay any
Indebtedness owed to Holdings or any other Subsidiary; (3) make loans or
advances to Holdings or any other Subsidiary; or (4) transfer any of its
property or assets to Holdings or any other Subsidiary.
8.2. Investments; Joint Ventures. Holdings will not and will
not permit any of its Subsidiaries directly or indirectly to make or own any
Investment in any Person except Investments permitted from time to time under
the Credit Agreement.
8.3. Restricted Payments. Holdings will not directly or
indirectly declare, order, pay, make or set apart any sum for any Restricted
Payment except Restricted Payments permitted from time to time under the Credit
Agreement as in effect on the date hereof.
8.4. Restriction on Certain Amendments and Fundamental
Changes. Holdings will not and will not permit any of its Subsidiaries directly
or indirectly to: (a) amend, modify or waive any term or provision of its
charter or by-laws in a manner which would have a Material Adverse Effect; (b)
enter into any transaction of merger or consolidation, except that any
Subsidiary may be merged with or into Holdings (provided that Holdings is the
surviving entity) or any other Subsidiary of Holdings; (c) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); or (d) except as
permitted by the Credit Agreement or consented to by the Senior Lenders, acquire
by purchase or otherwise all or any substantial part of the business or assets
of any other Person.
8.5. Disposal of Assets or Subsidiary Stock. Holdings will not
and will not permit any of its Subsidiaries directly or indirectly to: convey,
sell, lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of transactions any of its
property, business or assets, or the capital stock of or other equity interests
in any of its Subsidiaries, whether now owned or hereafter acquired, except
dispositions permitted under the Credit Agreement.
8.6. Transactions with Affiliates. Except as otherwise
permitted herein (or in the Credit Agreement), Holdings will not and will not
permit any of its Subsidiaries directly or indirectly to, enter into or be a
party to any transaction with any Affiliate of Holdings, except (a) as set forth
on Schedule 8.6, or (b) in the ordinary course of and pursuant to the reasonable
requirements of Holdings' or such Subsidiary's business and upon fair and
reasonable terms and are no less favorable to Holdings or such Subsidiary than
would be obtained
17
in a comparable arm's-length transaction with a Person that is not an Affiliate
of Holdings or such Subsidiary.
8.7. Conduct of Business. Holdings will not and will not
permit any of its Subsidiaries directly or indirectly to engage in any business
other than businesses currently engaged in by them or any lines of business
reasonably related thereto.
8.8. Indebtedness. Holdings will not and will not permit any
of its Subsidiaries directly or indirectly to incur or become liable in any
manner with respect to any Subordinated Indebtedness or any other Indebtedness
except the Senior Loans under the Credit Agreement (as from time to time in
effect) or as permitted under the Credit Agreement (as from time to time in
effect).
8.9. Fiscal Year. Neither Holdings nor any Subsidiary of
Holdings shall change its fiscal year without the Majority Holders' prior
written consent, which shall not be unreasonably withheld.
8.10. Press Release; Public Offering Materials. Holdings will
not and will not permit any of its Subsidiaries to disclose any Note Purchaser's
identity in any press release or in any prospectus, proxy statement or other
materials filed with any governmental authority except as required by law
following the Note Purchasers' prior review.
8.11. Subsidiaries. Except as permitted in the Credit
Agreement, Holdings will not and will not permit any of its Subsidiaries
directly or indirectly to establish, create or acquire any new Subsidiary
without the Majority Holders' prior written consent, which shall not be
unreasonably withheld.
8.12. Compliance With Laws. Holdings shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to licensing, ERISA and labor matters and Environmental
Laws (as defined in the Credit Agreement) and Environmental Permits (as defined
in the Credit Agreement) except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Holdings will comply and will cause each of its
Subsidiaries to comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority
(including, without limitation, laws, rules, regulations and orders relating to
taxes, employer and employee contributions, securities, employee retirement and
welfare benefits, environmental protection matters and employee health and
safety) as now in effect and which may be imposed in the future in all
jurisdictions in which Holdings or its Subsidiaries are now doing business or
may hereafter be doing business. This Section 8.12
18
shall not preclude Holdings or any Subsidiary from contesting any taxes or other
payments, if they are being diligently contested in good faith and if
appropriate reserves have been recorded in conformity with GAAP.
8.13. Maintenance of Properties; Insurance. Holdings will
maintain or cause to be maintained all material properties used in the business
of Holdings and its Subsidiaries consistent with industry standards and will
make or cause to be made all appropriate repairs, renewals and replacements
thereof. Holdings will maintain or cause to be maintained, with financially
sound and reputable insurers, public liability and property damage insurance
with respect to its business and properties and the business and properties of
its Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts as set forth in the Credit Agreement and will deliver
evidence thereof to the Note Purchasers. Holdings represents and warrants that
it and each of its Subsidiaries currently maintains all material properties as
set forth above and maintains all insurance described above.
8.14. Corporate Existence, Etc. Except as otherwise permitted
hereunder, Holdings will, and will cause each of its Subsidiaries to, at all
times preserve and keep in full force and effect its respective corporate
existence and all rights and franchises material to its respective business.
8.15. Intervening Debt. Neither Holdings nor any Joint Issuer
shall incur any indebtedness that is subordinated in right of payment to the
Senior Loans and superior in right of payment or pari passu with the Notes.
8.16. Notice of Default. Holdings shall promptly notify the
Majority Holders of the occurrence of any Default or Event of Default known to
it hereunder.
9. Prepayment of Notes.
9.1. Maturity; Surrender. In the case of each prepayment in
accordance with Section 1.2(c) or (d), the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such
date.
10. Subordination of Notes.
10.1. General. All obligations under this Agreement and the
Notes, including without limitation, principal, interest, fees, expenses (the
"Subordinated Obligations") shall be subordinate and junior in right of payment
to all Senior Loans
19
(as defined in Section 10.2) to the extent and in the manner provided in this
Section 10. In furtherance of the foregoing, notwithstanding the date, manner or
order of grant, attachment or perfection of any Liens granted to the Senior
Lenders or to the Note Purchasers and notwithstanding any provisions of the UCC
or any applicable law or decision or any other circumstance, the Note Purchasers
agree that all Liens granted by Holdings or any Joint Issuer to the Note
Purchasers to secure the obligations under the Notes are hereby subordinated to
all Liens granted by Holdings or any Joint Issuer to secure the Senior Loans.
10.2. Senior Loans. As used in this Section 10, the term
"Senior Loans" shall mean all principal of and premium, if any, and interest
(including post-petition interest during any proceeding under the Bankruptcy
Code, whether or not allowed in such proceeding) on and fees, and expenses and
all other obligations including, without limitation, Holdings' obligations as a
guarantor and obligations to cash collateralize letters of credit, payable in
connection with, all loans and financial accommodations from time to time
outstanding under or in connection with the Credit Agreement. The Senior Loans
shall continue to be Senior Loans and entitled to the benefits of these
subordination provisions irrespective of any amendment, restatement,
modification or waiver of any term of the Senior Loans or extension or renewal
of the Senior Loans.
10.3. Default in Respect of Senior Loans and the Notes.
(a) Upon the occurrence of an Event of Default with respect to
any Senior Loans, as defined in the Credit Agreement, permitting the holders
thereof to accelerate the maturity thereof, then, unless and until such event of
default shall have been remedied or waived in writing or shall have ceased to
exist, no direct or indirect payment (in cash, property or securities or by
set-off or otherwise, except securities which are subordinate and junior in
right of payment to the payment of Senior Loans at least to the extent provided
in this Section 10) shall be made on account of the Subordinated Obligations or
on any Note or as a sinking fund for any Note, or in respect of any redemption,
retirement, purchase or other acquisition of any Note.
(b) The holders of the Notes shall not take any action to
enforce payment of any of the Subordinated Obligations or any security interest
or lien securing payment of the Notes (including, without limitation,
acceleration of the maturity of the Notes) until the earliest to occur of the
following: (i) final payment in full in cash of all Senior Loans and termination
of the commitments with respect thereto; (ii) the acceleration of any of the
Senior Loans, (iii) February 27, 2006; or (iv) the occurrence of an Event of
Default described in Section 13(f) or 13(g) hereof; provided that, in the event
of the
20
nonpayment when due of scheduled principal payments or required interest
payments (unless prohibited by Section 10.3(a)) such holders may ask or make
demand for payment of any such amount but shall not take any other action to
enforce payment of such amount; provided further that any payments received
shall be subject to the terms of Section 10.5 hereof.
(c) If the holders of the Senior Loans release their security
interests or liens in any items of Collateral, the holders of the Notes shall
release their security interests or liens in the same items of Collateral.
10.4. Insolvency, etc. In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to Holdings, its creditors as such or its property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of Holdings or any Joint Issuer, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings,
(c) any assignment by Holdings or any Joint Issuer for the
benefit of creditors, or
(d) any other marshaling of the assets of Holdings or any
Joint Issuer,
all Senior Loans shall first be paid in full in cash before payment or
distribution, whether in cash, securities or other property, shall be made to
any holder of any Note on account of any Note. Any payment or distribution,
whether in cash, securities or other property (other than securities of Holdings
or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Section 10 with respect to any Note, to the payment of all
Senior Loans at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Notes shall be paid or delivered directly to the holders of
Senior Loans until all Senior Loans shall have been paid in full in cash.
10.5. Payments and Distributions Received. If any payment or
distribution of any character or any security, whether in cash, securities or
other property (other than securities of Holdings or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Section 10
21
with respect to any Note, to the payment of all Senior Loans at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), shall be received by any holder of any Note
in contravention of any of the terms hereof and before all the Senior Loans
shall have been paid in full in cash and the commitments with respect thereto
have been terminated, such payment or distribution or security shall be received
in trust for the benefit of, and shall be paid over or delivered and transferred
to, the holders of the Senior Loans at the time outstanding for application to
the payment of all Senior Loans remaining unpaid, to the extent necessary to pay
all such Senior Loans in full in cash.
10.6. No Prejudice or Impairment. No present or future holder
of any Senior Loans shall be prejudiced in its right to enforce subordination of
the Notes by any act or failure to act on the part of Holdings, any Joint Issuer
or the holders of the Notes. Without in any way limiting the generality of the
preceding sentence, the holders of Senior Loans may, at any time and from time
to time, without the consent of or notice to the holders of the Notes, without
incurring responsibility to the holders of the Notes and without impairing or
releasing the subordination provided in this Section 10 or the obligations of
the holders of the Notes to the holders of Senior Loans, do any one or more of
the following: (a) change the manner, place or terms of payment of, or renew or
alter any Senior Loans, or otherwise amend or supplement in any manner, any
Senior Loans or any instrument evidencing the same or any agreement under which
Senior Loans is outstanding; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing any Senior Loans; (c)
release any Person liable in any manner for the collection or payment of any
Senior Loans; and (d) exercise or refrain from exercising any rights against any
obligor. Holdings shall notify the holders of the Notes of any of the events
described in the preceding sentence, but any failure so to notify such holders
shall not affect or impair the rights of the holders of Senior Loans hereunder.
Nothing contained herein shall impair, as between Holdings and the holder of any
Notes, the obligation of Holdings to pay to the holder thereof the principal
thereof and interest thereon as and when the same shall become due and payable
in accordance with the terms thereof and of this Agreement, or prevent the
holder of any Note from exercising all rights, powers and remedies otherwise
permitted by applicable law or hereunder upon a Default or Event of Default
hereunder, all subject to the terms of this Section 10 and the rights of the
holders of the Senior Loans to receive cash, securities or other property
otherwise payable or deliverable to the holders of the Notes.
10.7. Payment of Senior Loans, Subrogation, etc. Upon the
payment in full of all Senior Loans in cash and termination of the commitments
with respect thereto, the holders
22
of the Notes shall be subrogated to all rights of any holders of Senior Loans to
receive any further payments or distributions applicable to the Senior Loans
until the Notes shall have been paid in full, but only to the extent that any
payment or distribution otherwise payable with respect to the Notes has been
applied to the Senior Loans, and, for the purposes of such subrogation, no
payment or distribution received by the holders of Senior Loans of cash,
securities, or other property to which the holders of the Notes would have been
entitled except for this Section 10 shall, as between Holdings and its creditors
other than the holders of Senior Loans, on the one hand, and the holders of the
Notes, on the other, be deemed to be a payment or distribution by Holdings or
any Joint Issuer on account of Senior Loans.
10.8. Filing of Claims. The holders of the Notes hereby
irrevocably authorize and empower the holders of the Senior Loans to file a
claim or proof of claim in any proceeding under the Bankruptcy Code for any
portion of the Notes if the holder or holders thereof shall have failed to file
a claim or proof of claim with respect thereto at least 10 days prior to the
date established by rule of law or order of court for such filing. Except as
expressly stated in this Section 10.8, the holders of the Notes retain their
rights to vote their claims to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement or composition.
10.9. Reliance; Binding on Subsequent Holders. Holdings and
each Joint Issuer agree, and each present and future holder of a Note, by its
acceptance of such Note, agrees to be bound by the subordination provisions of
this Section 10, and agrees that such subordination provisions are inducement to
the present and future holders of Senior Loans to continue to hold such
Indebtedness and/or to make advances of credit to the Joint Issuers and/or
Holdings.
11. Registration, Transfer and Substitution of Securities.
11.1. Note Register; Ownership of Notes. Holdings will keep at
its principal office a register in which Holdings will provide for the
registration of Notes and the registration of transfers of Notes and the Senior
Loans. Holdings may treat the Person in whose name any Note is registered on
such register as the owner thereof for the purpose of receiving payment of the
principal of and interest on such Note and for all other purposes, whether or
not such Note shall be overdue, and Holdings shall not be affected by any notice
to the contrary. All references in this Agreement to a "holder" of any Note
shall mean the Person in whose name such Note is at the time registered on such
register.
23
11.2. Transfer and Exchange of Notes. Upon surrender of any
Note for registration of transfer or for exchange to Holdings at its principal
office, the Joint Issuers at their expense (except for transfer taxes) will
execute and deliver in exchange therefor a new Note or Notes in denominations of
at least $100,000 (except one Note may be issued in a lesser principal amount if
the unpaid principal amount of the surrendered Note is not evenly divisible by,
or is less than, $100,000), as may be requested by the holder or transferee,
which aggregate the unpaid principal amount of such surrendered Note, registered
as such holder or transferee may request, dated so that there will be no loss of
interest on such surrendered Note and otherwise of like tenor.
11.3. Replacement of Notes. Upon receipt of evidence
reasonably satisfactory to Holdings of the loss, theft, destruction or
mutilation of any Note and, in the case of any such loss, theft or destruction,
upon delivery of an indemnity bond in such reasonable amount as Holdings may
determine (or, in the case of any Note held by any institutional holder or its
nominee, of an unsecured indemnity agreement from such institutional holder
reasonably satisfactory to Holdings), or, in the case of any such mutilation,
upon the surrender of such Note for cancellation, at the principal office of
Holdings, the Joint Issuers, at their expense, will execute and deliver, in lieu
thereof, a new Note in the unpaid principal amount of such lost, stolen,
destroyed or mutilated Note, dated so that there will be no loss of interest on
such Note and otherwise of like tenor. Any Note in lieu of which any such new
Note has been so executed and delivered by the Joint Issuers shall not be deemed
to be an outstanding Note for any purpose of this Agreement.
11.4. Notes Held Holdings, etc., Deemed Not Outstanding. For
the purposes of determining whether the holders of the Notes of the requisite
principal amount at the time outstanding have taken any action authorized by
this Agreement with respect to the giving of consents or approvals or with
respect to acceleration upon an Event of Default, any Notes directly or
indirectly owned by Holdings or any of its Subsidiaries or Affiliates shall be
disregarded and deemed not to be outstanding.
12. Payments on Notes. All payments by the Joint Issuers of
principal, interest and fees becoming due on or with respect to the Notes shall
be made in same day funds and delivered to the Note Purchasers by wire transfer
to such account as each Note Purchaser may from time to time designate.
The Joint Issuers shall receive credit for such funds if received by 1:00 p.m.
CST on such day. In the absence of timely notice and receipt, such funds shall
be deemed to have been paid on the next Business Day. Whenever any payment to be
made hereunder
24
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest and fees due hereunder.
13. Events of Default; Acceleration. If any of the following
conditions or events ("Events of Default") shall occur and be continuing:
(a) if the Joint Issuers or Holdings, as guarantor, shall
default in the payment of any principal of any Note when the same
becomes due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise; or
(b) if the Joint Issuers or Holdings, as guarantor, shall
default in the payment of any interest on any Note (whether by issuance
of a Note or payment in cash as required by the terms hereof) for more
than 5 days after the same becomes due and payable; or
(c) if Holdings or any Joint Issuer shall default in the
performance of or compliance with any other material term contained in
this Agreement or any other Note Purchase Document and such default
shall continue unremedied for 30 days after such failure shall first
have become known to any officer of Holdings or written notice thereof
shall have been received by Holdings from any holder of any Note; or
(d) if any representation or warranty made in writing by or on
behalf of Holdings or any Joint Issuer in this Agreement, any other
Note Purchase Document, or in any instrument furnished in compliance
with or in reference to this Agreement shall prove to have been false
or incorrect in any material respect on the date as of which made; or
(e) if any event shall occur or condition shall exist in
respect of any Indebtedness of Holdings or any Joint Issuer in excess
of $1,000,000 or under any evidence of any such Indebtedness or of any
mortgage, indenture or other agreement relating thereto, the effect of
which event or condition is to cause the acceleration of such
Indebtedness before its stated maturity or before its regularly
scheduled dates of payment; or
(f) (1) An order for relief is entered with respect to
Holdings or any Joint Issuer or any such Person commences a voluntary
case under the Bankruptcy Code, or consents to the entry of an order
for relief in an involuntary case or to the conversion of an
involuntary case to a voluntary case under any such law or consents to
the appointment of or taking possession by a receiver, trustee or other
custodian
25
for all or a substantial part of its property; or (2) Holdings or any
Joint Issuer makes any assignment for the benefit of creditors; or (3)
the Board of Directors of Holdings or any Joint Issuer adopts any
resolution or otherwise authorizes action to approve any of the actions
referred to in this subsection 13(f); or
(g) (1) A court enters a decree or order for relief with
respect to Holdings or any Joint Issuer in an involuntary case under
the Bankruptcy Code, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law
within sixty (60) days after the entry thereof; or (2) the continuance
of any of the following events for sixty (60) days or more unless
dismissed, bonded or discharged: (a) an involuntary case is commenced
against Holdings or any Joint Issuer under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (b) a
decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Holdings or any Joint Issuer or over all or a
substantial part of its property, is entered; or (c) an interim
receiver, trustee or other custodian is appointed without the consent
of Holdings or any Joint Issuer, as applicable, for all or a
substantial part of the property of such Person; or
(h) A final judgment or judgments in any individual case or in
the aggregate at any time, in excess of $500,000 (in either case not
adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against Holdings or any
Joint Issuer or any of their respective assets and remains
undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days or more; or
(i) (1) Holdings or any Joint Issuer fails to make full
payment when due of all amounts which, under the provisions of any
employee benefit plans or any applicable provisions of the Internal
Revenue Code as amended from time to time ("IRC"), such Person is
required to pay as contributions thereto and such failure results in
the imposition of a lien on the assets of Holdings or any Joint Issuer;
or (2) an accumulated funding deficiency in excess of $1,000,000 occurs
or exists, whether or not waived, with respect to any Holdings' or any
Joint Issuer's employee benefit plans; or (3) any such employee benefit
plans lose their status as a qualified plan under the IRC which results
in the imposition of a material lien on the assets of Holdings or any
Joint Issuer; or
(j) Any of the Note Purchase Documents for any reason,
26
other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be
null and void, or Holdings or any Joint Issuer denies that it has any
further liability under any Note Purchase Document to which it is
party, or gives notice to such effect; or
(k) A Change of Control as defined under the Credit Agreement
(as in effect on the date hereof) shall occur and be continuing: (1)
upon the occurrence of any Event of Default described in subdivision
(f) or (g) of this Section 13, the unpaid principal amount of and
accrued interest on the Notes shall automatically become due and
payable immediately; or (2) upon the occurrence of any other Event of
Default, any holder or holders of 25% or more in principal amount of
the Notes at the time outstanding may at any time (unless all Events of
Default shall theretofore have been remedied) at its or their option,
by written notice or notices to Holdings as agent for the Joint
Issuers, declare all the Notes to be due and payable, whereupon the
same shall forthwith mature and become due and payable immediately if
no Senior Loans are then outstanding.
14. Remedies on Default. Subject to the terms of Section 10
hereof: In case any one or more Events of Default shall occur and be continuing,
the holder of any Note at the time outstanding may proceed to protect and
enforce the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in such Note, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise (it being agreed, however, that
no holder of a Note shall commence or continue any such proceeding in the case
of any Event of Default which shall have been waived in accordance with Section
18). In the case of a default in the payment of any principal of or any interest
on any Note, Joint Issuers will, jointly and severally, pay to the holder
thereof such further amount as shall be sufficient to cover the costs and
expenses (including, without limitation, reasonable attorneys' fees, expenses
and disbursements) incurred in connection with any such proceeding or
collection. No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise.
15. Definitions.
15.1. Certain Defined Terms. As used in this
27
Agreement, the following terms have the following respective meanings:
Affiliate: With respect to any Person, (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of any class of the Stock
or other equity interests of such Person or possesses, directly or indirectly,
the power to direct or cause the direction of the management of such Person,
whether through ownership of Stock or other equity interests, by contract or
otherwise, (ii) each Person that controls, is controlled by or is under common
control with such Person or any Affiliate of such Person or (iii) each of such
Person's employees, officers, directors, joint venturers and partners. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
Allocation Agreement: That certain Agreement Regarding Issue
Price of even date herewith between each initial Note Purchaser and Holdings,
pursuant to which the purchase price paid for the Notes and the Warrant shall be
allocated for purposes of calculating original issue discount.
Bankruptcy Code: Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.
Business Day: Any day except a Saturday, a Sunday or other day
on which commercial banks in the State of New York or the State of Illinois are
required or authorized by law to be closed.
Capital Expenditures: Shall mean, with respect to any Person,
all expenditures (by the expenditure of cash or the incurrence of indebtedness)
by such Person during any measuring period for any fixed assets or improvements
or for replacements, substitutions or additions thereto, that have a useful life
of more than one year and that are required to be capitalized under GAAP.
Capital Lease: Shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.
Closing: As defined in Section 3.
28
Closing Date: As defined in Section 3.
Collateral: Any property covered by the Security Documents and
any other property, real or personal, tangible or intangible, now existing or
hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of any Note Purchaser to secure any of the obligations
with respect to the Note Purchase Documents.
Credit Agreement: That certain Credit Agreement of even date
herewith among the Joint Issuers, General Electric Capital Corporation in its
capacity as Agent and Lender, and the Lenders that are from time to time parties
thereto, as the same may be amended, modified, extended, renewed or otherwise
supplemented from time to time and any credit agreement evidencing the
successive refunding, refinancing or replacement thereof.
Default: A condition or event which, with notice or lapse of
time or both, would become an Event of Default.
Event of Default: The meaning specified in Section 13.
Excess Cash Flow: Shall mean, without duplication, with
respect to any Fiscal Year of the Joint Issuers and their Subsidiaries,
consolidated net income plus (a) depreciation, amortization and Interest Expense
to the extent deducted in determining consolidated net income, minus (c) Capital
Expenditures during such Fiscal Year (excluding the portion thereof financed
from sources other than the Credit Agreement), minus (d) Interest Expense paid
or accrued (excluding any original issue discount, interest paid in kind or
amortized debt discount, to the extent included in determining Interest Expense)
and scheduled principal payments paid or payable in respect of Funded Debt, plus
or minus (as the case may be), (e) extraordinary gains or losses which are cash
items not included in the calculation of net income, minus (f) mandatory
prepayments paid in cash pursuant to Section 1.3 of the Credit Agreement other
than mandatory prepayments made pursuant to Sections 1.3(b)(i), 1.3(b)(iv) or
1.3(d) therein, plus (g) taxes deducted in determining consolidated net income
to the extent not paid for in cash.
Exchange Act: The Securities Exchange Act of 1934, as amended,
or any successor federal statute.
Fiscal Year: Shall mean any of the annual accounting periods
of the Joint Issuers ending on the Saturday closest to December 31st of each
year.
Funded Debt: Shall mean, with respect to any Person, all
indebtedness for borrowed money evidenced by notes, bonds,
29
debentures, or similar evidences of Indebtedness and which by its terms matures
more than one year from, or is directly or indirectly renewable or extendible at
such Person's option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one year from
the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor.
Holdings: Home Products International, Inc., a Delaware
corporation.
Holdings Guaranty: A guaranty by Holdings of payment of the
Notes.
Indebtedness: As applied to any Person, means: (a) all
indebtedness for borrowed money; (b) that portion of obligations with respect to
capital leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(d) any obligation owed for all or any part of the deferred purchase price of
property or services if the purchase price is due more than six (6) months from
the date the obligation is incurred or is evidenced by a note or similar written
instrument; and (e) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person.
Indemnified Party: As defined in Section 19.
Interest Expense: Shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with generally accepted accounting principles for the
relevant period ended on such date, including, in any event, interest expense
with respect to any Funded Debt of such Person.
Interest Payment Date: In each year, February 20 (with respect
to the Fiscal Quarter ending December 31 of the preceding Fiscal Year), May 20
(with respect to the Fiscal Quarter ending March 31), August 20 (with respect to
the Fiscal Quarter ending June 30), and November 20 (with respect to the Fiscal
Quarter ending September 30), commencing with the Interest Payment Date of May
20, 1997.
Investment: As to any Person, any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of
30
credit (other than accounts receivable arising in the ordinary course of
business on terms customary in the trade), deposit account or investment in, or
purchase or other acquisition of, the stock, partnership interests, notes,
debentures or other securities of any other Person made by such Person.
Lien: As to any Person, any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind, whether voluntary or involuntary,
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security interest).
Majority Holders: Note Purchasers holding a majority in
principal amount of the Notes outstanding hereunder.
Material Adverse Effect: A material adverse effect on (i) the
business, properties, assets, operations, prospects or financial or other
condition of Holdings and its Subsidiaries considered as a whole, (ii) Holdings'
and its Subsidiaries' ability to perform their respective obligations under any
Note Purchase Document, (iii) the Collateral or the Note Purchasers' Liens on
the Collateral or the priority of any such Lien, or (iv) the Note Purchasers'
rights and remedies under this Agreement or any other Note Purchase Document. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would result in a
Material Adverse Effect.
Note Purchase Documents: This Agreement, the Notes, the
Security Documents, the Warrant, the Allocation Agreement, the Holdings
Guaranty, and all other instruments, documents and agreements executed by or on
behalf of Holdings or any Joint Issuer and delivered concurrently herewith or at
any time hereafter to any Note Purchaser in connection with the Notes and other
transactions contemplated by this Agreement, including without limitation all
such documents executed and delivered after the Closing Date in connection with
Liens granted to the Note Purchasers, all as amended, supplemented or modified
from time to time.
Note Purchasers: General Electric Capital Corporation, each
other purchaser of Notes on the Closing Date and the successors and assigns of
each such Person.
Officer's Certificate: A certificate executed on behalf of
Holdings by its Chief Executive Officer or Chief Financial Officer.
Person: Natural persons, corporations, limited liability
companies, limited partnerships, general partnerships,
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joint stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations, whether or
not legal entities, and governments and agencies and political subdivisions
thereof and their respective permitted successors and assigns (or in the case of
a governmental person, the successor functional equivalent of such Person).
Pro Forma: The unaudited consolidated balance sheets of each
of Holdings and its Subsidiaries prepared in accordance with GAAP as of the
Closing Date after giving effect to the Related Transactions. The Pro Forma is
annexed hereto as Schedule 15.1(A).
Projections: Holdings' forecasted consolidated: (a) balance
sheets; (b) profit and loss statements; (c) cash flow statements; and (d)
capitalization statements, all prepared on a consistent basis with Holdings'
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions. The Projections represent and will
represent as of the date thereof the good faith estimate of Holdings and its
senior management concerning the most probable course of its business.
Related Transactions: The execution and delivery of each of
the Note Purchase Documents required to be executed and delivered on the Closing
Date, the issuance and sale of the initial Notes on the Closing Date, and each
of the "Related Transactions" as defined in the Credit Agreement.
Related Transactions Documents: The Note Purchase Documents,
the Credit Agreement and all other agreements, instruments and documents
executed or delivered in connection with the Related Transactions.
Restricted Payment: Shall mean (a) 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 a Person's stock,
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of a Person's stock or any other payment or distribution
made in respect thereof, either directly or indirectly, (c) 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 subordinated debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of,
32
any shares of such Person's stock or of claim for reimbursement, indemnification
or contribution arising out of or related to any such claim for damages or
rescission; (f) any payment, loan, contribution, or other transfer of funds or
other property to any stockholder of such Person; and (g) any payment of
management fees (or other fees of a similar nature) by such Person to any
stockholder of such Person or their affiliates.
Securities Act: The Securities Act of 1933, as amended or any
successor federal statute.
Security Agreement: That certain Subordinated Note Security
Agreement of even date herewith executed by the Joint Issuers in favor of the
Note Purchasers, in form and substance satisfactory to the Majority Holders.
Security Documents: The Security Agreement and all
instruments, documents, financing statements and agreements executed by or on
behalf of any Joint Issuers to provide collateral security with respect to the
Notes including, without limitation, any security agreement or pledge agreement,
second mortgages on each parcel of real estate owned by each Joint Issuer, and
all instruments, documents and agreements executed pursuant to the terms of the
foregoing.
Senior Lenders: Any lender which may from time to time provide
financing to any of the Joint Issuers pursuant to the Credit Agreement.
Senior Loans: As defined in Section 10.2.
Subsidiary: With respect to any Person, any corporation,
partnership, association or other business entity of which more than fifty
percent (50%) of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
Warrant: The Warrant Agreements dated as of the Closing Date
issued by Holdings to the initial Note Purchasers.
15.2. Accounting and other Terms. For the purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meaning assigned to them in accordance with GAAP. To the extent not otherwise
defined herein, all defined terms herein shall have the meanings ascribed
thereto in Schedule A to the Credit Agreement as in effect on the date hereof.
16. Submission to Jurisdiction; Waiver. Holdings
33
and each Joint Issuer hereby irrevocably (a) agree that any legal or equitable
action, suit or proceeding arising out of or relating to this Agreement or any
transaction contemplated hereby or the subject matter of any of the foregoing
may be instituted in any state or federal court in the City of Chicago,
Illinois, (b) waive any objection which they may now or hereafter have to the
venue of any action, suit or proceeding, and (c) irrevocably submit themselves
to the nonexclusive jurisdiction of any state or federal court of competent
jurisdiction in Chicago, Illinois, for purposes of any such action, suit or
proceeding. Holdings and each Joint Issuer waive personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of Section 20, and service so made shall be
deemed completed on the third business day after mailing. Nothing contained in
this Section 16 shall be deemed to affect the rights of any Note Purchaser to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Holdings and/or any Joint Issuer in any
jurisdiction. Each of the parties hereto irrevocably waives any right it may
have to a trial by jury in respect of any claim based upon, or arising out of
the terms and conditions of, this Agreement.
17. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of Holdings or any Joint Issuer in connection with the transactions
contemplated by this Agreement shall survive the execution and delivery of this
Agreement, any investigation at any time made by any Note Purchaser or on its
behalf, the purchase of the initial Note by any Note Purchaser under this
Agreement and any disposition of the same and the payment of the Notes.
18. Amendments and Waivers. Any term of this Agreement or of
the Notes may be amended and the observance of any term of this Agreement or of
the Notes may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of Holdings and
the Majority Holders, provided that, without the prior written consent of the
holders of all the Notes at the time outstanding, no such amendment or waiver
shall (a) change the maturity or the principal amount of, or reduce the rate or
change the time of payment of interest on, or decrease the amount or the time of
payment of any principal payable on any payment or prepayment of, any Note, (b)
reduce the aforesaid percentages of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, (c)
decrease the percentage of the principal amount of the Notes the holders of
which may declare the Notes to be due and payable as provided in Section 13, or
(e) otherwise change or waive any of the terms of Section 10 or this Section 18.
Any amendment or waiver effected in
34
accordance with this Section 18 shall be binding upon each holder of any Note
issued and outstanding pursuant to this Agreement, each future holder of any
Note and Holdings and the Joint Issuers.
19. Indemnification. Holdings and the Joint Issuers, jointly
and severally, will indemnify and hold harmless each Note Purchaser and each
person who controls a Note Purchaser within the meaning of the Securities Act or
the Exchange Act and each Affiliate of a Note Purchaser and each Note
Purchaser's respective directors, officers, employees and agents (any and all of
whom are referred to as the "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, whether joint or several (including all
legal fees or other expenses reasonably incurred by any Indemnified Party in
connection with the preparation for or defense of any pending or threatened
third party claim, action or proceeding, whether or not resulting in any
liability), to which such Indemnified Party may become subject (whether or not
such Indemnified Party is a party thereto) under any applicable federal or state
law or otherwise, caused by or arising out of, or allegedly caused by or arising
out of this Agreement and the other Related Transactions Documents or any
transaction contemplated hereby or thereby; provided that Holdings and the Joint
Issuers shall not be liable for any indemnification to any Indemnified Party to
the extent that any such losses, claims, damages or liabilities are the result
of any representation made by such Indemnified Party in Section 6 or result from
such Indemnified Party's gross negligence or willful misconduct. To the extent
that Holdings or any Joint Issuer is strictly liable under any environmental
laws, Holdings' or the applicable Joint Issuer's obligations to indemnify under
this Section 19 shall likewise be without regard to fault on the part of
Holdings or the applicable Joint Issuer and with respect to the violation of law
which results in liability to Holdings and/or the applicable Joint Issuer. To
the extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 19 may be unenforceable because it is violative of any law or
public policy, Holdings and/or the applicable Joint Issuer shall contribute the
maximum portion that it is permitted to pay an satisfy under applicable law to
the payment and satisfaction of all indemnified liabilities incurred by the
Indemnified Parties or any of them. Notwithstanding any other provision of this
Agreement to the contrary, the provisions of and undertakings and
indemnifications set forth in this Section 19 shall survive the satisfaction and
payment of the Notes and the termination of this Agreement. All of the foregoing
indemnification liabilities shall be secured by the Collateral. NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
35
RESULT OF CREDIT HAVING BEEN EXTENDED OR TERMINATED UNDER THIS AGREEMENT AND THE
OTHER NOTE PURCHASE DOCUMENTS.
Promptly after receipt by an Indemnified Party of notice of
any claim, action or proceeding with respect to which an Indemnified Party is
entitled to indemnity hereunder, such Indemnified Party will notify Holdings of
such claim or the commencement of such action or proceeding, provided that the
failure of an Indemnified Party to give notice as provided herein shall not
relieve Holdings of its obligations under this Section 19 with respect to such
Indemnified Party, except to the extent that Holdings is actually prejudiced by
such failure. Holdings and the Joint Issuers will assume the defense of such
claim, action or proceeding and will employ counsel satisfactory to the
Indemnified Party and will pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be entitled,
at the expense of Holdings and the Joint Issuers, to employ counsel separate
from counsel for Holdings and the Joint Issuers and for any other party in such
action if the Indemnified Party reasonably determines that a conflict of
interest or other reasonable basis exists which makes representation by counsel
chosen by Holdings and the Joint Issuers not advisable, but Holdings and the
Joint Issuers will not be obligated to pay the fees and expenses of more than
one counsel for all Indemnified Parties.
20. Notices, etc. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered, or mailed by registered or certified mail,
return receipt requested, or by overnight courier, or sent by telex or telecopy,
addressed, (a) if to the initial Note Purchasers, at the addresses set forth on
signature page hereof or at such other address as the initial Note Purchasers
shall have furnished to Holdings in writing, or (b) if to any other holder of
any Note, at such address as such other holder shall have furnished to Holdings
in writing, or, until any such other holder so furnishes to Holdings an address,
then to and at the address of the last holder of such Note who has furnished an
address to Holdings, or (c) if to Holdings or any Joint Issuer, to Selfix, Inc.,
0000 Xxxx 00xx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Chief Executive
Officer, telecopy no. (000) 000-0000 with a copy to, Much, Shelist, Freed,
Denenberg, Ament, Xxxx & Xxxxxxxxxx PC, 000 X. XxXxxxx Xx., Xxxxx 0000, Xxxxxxx,
XX 00000, Attention: Xxxxxxx X. Xxxxxxxxxx, telecopy (000) 000-0000 or at such
other address, or to the attention of such other officer, as Holdings shall have
furnished to each Note Purchaser. All such notices and communications shall be
deemed to have been given or made (i) when delivered, if by hand, (ii) one
Business Day after submission to a reputable courier for overnight delivery,
(iii) on the fifth Business Day after being mailed by registered or certified
mail, or (iv) if telecopied, when telecopy receipt is confirmed.
36
21. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not, and, in particular,
shall inure to the benefit of and be enforceable by any holder or holders at the
time of the Notes sold hereunder or any part thereof. This Agreement and the
Note Purchase Documents embody the entire agreement and understanding between
the Note Purchaser and Holdings and the Joint Issuers and supersede all prior
agreements and understandings relating to the subject matter hereof. THIS
AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF ILLINOIS. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. All payment obligations of Holdings
and the Joint Issuers hereunder or under the Notes shall be joint and several.
[signature page follows]
37
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Note Purchase Agreement on the date first above written.
HOLDINGS:
HOME PRODUCTS INTERNATIONAL, INC.
By:________________________
Title:_____________________
JOINT ISSUERS:
SELFIX, INC.
By:________________________
Title:_____________________
TAMOR CORPORATION
By:________________________
Title:_____________________
SHUTTERS, INC.
By:________________________
Title:_____________________
38
THE INITIAL NOTE PURCHASER:
GENERAL ELECTRIC CAPITAL
CORPORATION
Amount: $7,000,000
By:__________________________________________
Name:________________________________________
Its: Authorized Signatory
Address: 000 Xxxx Xxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Selfix Account Manager
39
EXHIBIT 1.1
TO
NOTE PURCHASE AGREEMENT
FORM OF
FIXED RATE SUBORDINATED NOTE
$7,000,000 February 27, 1997
FOR VALUE RECEIVED, the undersigned, SELFIX, INC. a Delaware
corporation; TAMOR CORPORATION, a Massachusetts corporation; and SHUTTERS, INC.,
an Illinois corporation (individually a "Joint Issuer" and, collectively, the
"Joint Issuers"), hereby unconditionally PROMISE TO PAY to the order of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE Capital"), in its
individual capacity, at 000 X. Xxxxxxx Xx., Xxxxx 0000, Xxxxxxx, XX 00000, or at
such other place as the holder of this Fixed Rate Subordinated 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 Seven
Million Dollars ($7,000,000), together with interest on the unpaid principal
amount of this Fixed Rate Subordinated Note outstanding from time to time from
the date hereof, at the rate provided in the Note Purchase Agreement (as
hereinafter defined). The Joint Issuers agree that they will be jointly and
severally liable for the payment of all amounts due hereunder.
This Fixed Rate Subordinated Note is issued pursuant to that
certain Note Purchase Agreement dated as of February 27, 1997 by and among the
Joint Issuers, Home Products International, Inc., a Delaware corporation, and GE
Capital (as the same from time to time may be amended, restated, supplemented or
otherwise modified, the "Note Purchase Agreement"), and is entitled to the
benefit and security of the Note Purchase Documents provided for therein, to
which reference is hereby made for a statement of all of the terms and
conditions under which the indebtedness evidenced hereby is made and is to be
repaid and for a statement of GE Capital's remedies upon the occurrence and
during the continuance of an Event of Default. All capitalized terms, unless
otherwise defined herein, shall have the meanings ascribed to them in the Note
Purchase Agreement.
The principal amount of the indebtedness evidenced hereby
shall be payable in one installment on February 27, 2005, if not sooner paid in
full, and is subject to certain prepayments as set forth in the Note Purchase
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 Note
Purchase Agreement.
40
If any payment on this Fixed Rate Subordinated Note becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the rate applicable for the
prior month during such extension.
Upon and after the occurrence of an Event of Default, this
Fixed Rate Subordinated Note may, as provided in the Note Purchase Agreement,
and without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.
Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by Joint Issuers to the fullest extent permitted by
law.
All payments under this Fixed Rate Subordinated Note shall be
paid in the State of Illinois, and this Fixed Rate Subordinated Note shall be
interpreted, governed by, and construed in accordance with, the laws of the
State of Illinois applicable to promissory notes made and payable in such State.
SELFIX, INC.
By:___________________________
Name:______________________
Title:_____________________
TAMOR CORPORATION
By:___________________________
Name:______________________
Title:_____________________
SHUTTERS, INC.
By:___________________________
Name:______________________
Title:_____________________
41
NOTE PURCHASE AGREEMENT
EXHIBIT 7.1
I, the undersigned, being the Chief Executive Officer/Chief Financial
Officer of Household Products International, Inc., a Delaware corporation
("Holdings"), hereby certifies that the financial statements attached hereto
present fairly in accordance with GAAP the financial position, results of
operations and statement of cash flows of Holdings and its Subsidiaries on a
consolidated and consolidating basis, as at the end of such year and for the
period then ended, and that no Default or Event of Default has occurred and is
continuing as of the date hereof or, if a Default or Event of Default shall have
occurred and be continuing describing the same and all efforts undertaken to
cure the same.
Dated:________ Home Products International, Inc.
By:_________________________________
Title:______________________________
42
EXECUTION COPY
SUBORDINATED NOTE SECURITY AGREEMENT
SUBORDINATED NOTE SECURITY AGREEMENT, dated February 27, 1997
(as it may be amended, supplemented or otherwise modified from time to time,
this "Security Agreement"), made by SELFIX, INC., a Delaware corporation
(individually, "Selfix"), TAMOR CORPORATION, a Massachusetts corporation
(individually, "Tamor"), and SHUTTERS, INC., an Illinois corporation
(individually, "Shutters") (Selfix, Tamor and Shutters collectively,
"Grantors"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("GE Capital"), as agent for holders of the Subordinated Notes (the
"Agent").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Note Purchase Agreement,
dated as of even date hereof, by and between Grantors and GE Capital, as Agent
for holders of the Subordinated Notes (as the same may from time to time be
amended, modified or supplemented, the "Note Purchase Agreement"), GE Capital
has agreed to purchase from Grantors fixed rate subordinated equity bridge notes
(the "Subordinated Notes") in the principal amount of $7,000,000;
WHEREAS, Grantors have agreed to grant to the holders of the
Subordinated Notes a Lien and security interest in, to and under substantially
all of their assets to secure payment of any and all obligations owing by
Grantors to the holders of the Subordinated Notes under the Note Purchase
Agreement; and
WHEREAS, GE Capital is willing to purchase the Subordinated
Notes but only upon the condition, among others, that Grantors shall have
executed and delivered to GE Capital this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Note Purchase Agreement are used herein as therein defined, and
the following terms shall have the following meanings (such meanings being
equally applicable to both the singular and plural forms of the terms defined):
"Account Debtor" shall mean any "account debtor," as such term
is defined in the Code.
"Accounts" shall mean any "account," as such term is defined
in the Code, now owned or hereafter acquired by any Grantor and, in any event,
including (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of
43
obligations evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to any Grantor whether
arising out of goods sold or services rendered by any Grantor or from any other
transaction, (including any such obligations which may be characterized as an
account or contract right under the Code), (b) and all of each Grantor's rights
in, to and under all purchase orders or receipts now owned or hereafter acquired
by it for goods or services, (c) all of each Grantor's rights to any goods
represented by any of the foregoing (including unpaid seller's rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all monies due or to become due
to any Grantor, under all purchase orders and contracts for the sale of goods or
the performance of services or both by such Grantor or in connection with any
other transaction (whether or not yet earned by performance on the part of such
Grantor), now or hereafter in existence, including the right to receive the
proceeds of said purchase orders and contracts, and (e) all collateral security
and guarantees of any kind, now or hereafter in existence, given by any Person
with respect to any of the foregoing.
"Chattel Paper" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Grantor.
"Code" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of Illinois provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Agent's or any Note Purchaser's
security interest in any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of Illinois, the
term "Code" shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.
"Collateral" shall have the meaning assigned to such term in
Section 2 of this Security Agreement.
"Contracts" shall mean all "contracts" as such term is defined
in the Code, now or hereafter acquired by any Grantor, in any event, including
all contracts, undertakings, or agreements (other than rights evidenced by
Chattel Paper, Documents or Instruments) in or under which any Grantor may now
or hereafter have any right, title or interest, including any agreement relating
to the terms of payment or the terms of performance of any Account.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Grantor, wherever
located.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Grantor, wherever
located and, in any event, including all of such Grantor's machinery and
equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment
-2-
44
(other than software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, all whether now owned or hereafter acquired,
and wherever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"Fixtures" shall mean any "fixtures," as such term is defined
in the Code, now owned or hereafter acquired by any Grantor.
"General Intangibles" shall mean any "general intangibles," as
such term is defined in the Code, now owned or hereafter acquired by any
Grantor, and, in any event, including all right, title and interest which such
Grantor may now or hereafter have in or under any Contract, all customer lists,
Licenses, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
trade secrets, proprietary or confidential information, inventions (whether or
not patented or patentable), technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise, experience,
processes, models, drawings, materials and records, goodwill (including the
goodwill associated with any Trademark or Trademark License), all rights and
claims in or under insurance policies (including insurance for fire, damage,
loss and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Grantor or any computer
bureau or service company from time to time acting for such Grantor.
"hereby," "herein," "hereof," "hereunder" and words of similar
import refer to this Security Agreement as a whole (including, without
limitation, any schedules hereto) and not merely to the specific section,
paragraph or clause in which the respective word appears.
"Instruments" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Grantor, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation, evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.
"Intellectual Property Collateral" shall mean any and all
Licenses, Patents,
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Trademarks and trade secrets and customer lists as to which Agent has been
granted a security interest hereunder.
"Inventory" shall mean all "inventory," as such term is
defined in the Code, now owned or hereafter acquired by any Grantor, wherever
located, and, in any event, including inventory, merchandise, goods and other
personal property which are held by or on behalf of any Grantor for sale or
lease or are furnished or are to be furnished under a contract of service, or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in such Grantor's business, or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Grantor, including
the rights of any Grantor to any securities account and the financial assets
held by a securities intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with respect to that
account; (iii) all securities accounts held by any Grantor; (iv) all commodity
contracts held by any Grantor; and (v) all commodity accounts held by any
Grantor.
"License" shall mean any Patent License, Trademark License or
other license as to which Agent has been granted a security interest hereunder.
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by any Grantor granting any right with respect
to any invention on which a Patent is in existence.
"Patents" shall mean all of the following now or hereafter
acquired by any Grantor: (i) all patents and patent applications, (ii) all
inventions and improvements described and claimed therein, (iii) all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) all income, royalties, damages and payments now and hereafter due
and/or payable to any Grantor with respect thereto, including, without
limitation, damages and payments for past, present or future infringements or
misappropriation thereof, (v) all rights to xxx for past, present and future
infringements or misappropriation thereof, and (vi) all other rights
corresponding thereto throughout the world.
"Proceeds" shall mean "proceeds," as such term is defined in
the Code and, in any event, shall include (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to any Grantor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to any Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person
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acting under color of governmental authority), (iii) any claim of any Grantor
against third parties (A) for past, present or future infringement of any Patent
or Patent License or (B) for past, present or future infringement or dilution of
any Trademark or Trademark License or for injury to the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License, (iv) any recoveries by any Grantor against third parties with respect
to any litigation or dispute concerning any of the Collateral, and (v) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral, upon disposition or otherwise.
"Secured Obligations" shall mean the obligations of each
Grantor to Agent pursuant to the Note Purchase Agreement and the Subordinated
Notes, including, without limitation, principal, interest, fees and expenses.
"Security Agreement" shall mean this Security Agreement, as
the same may from time to time be amended, modified or supplemented and shall
refer to this Security Agreement as in effect on the date such reference becomes
operative.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Grantor granting any right to
use any Trademark.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Grantor: (i) all trademarks (including service marks
and trade names, whether registered or at common law), registrations and
applications therefor, and the entire product lines and goodwill of any
Grantor's business connected therewith and symbolized thereby, (ii) all renewals
thereof, (iii) all income, royalties, damages and payments now and hereafter due
or payable or both with respect thereto, including, without limitation, damages
and payments for past, present or future infringements or misappropriations
thereof, (iv) all rights to xxx for past, present and future infringements or
misappropriations thereof, and (v) all other rights corresponding thereto
throughout the world.
2. Grant of Security Interest.
(a) As collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all the Secured Obligations, each Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to Agent on behalf of the holders
of the Subordinated Notes, and hereby grants to Agent on behalf of the holders
of the Subordinated Notes, a second Lien on all of such Grantor's right, title
and interest in, to and under the following (all of which being hereinafter
collectively called the, "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
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(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Grantor's Accounts, concentration
Accounts, disbursement Accounts and all
other deposit and other bank accounts and
all deposits therein;
(xiii) all money, cash or cash equivalents of any
Grantor; and
(xiv) to the extent not otherwise included, all
Proceeds and products of the foregoing and
all accessions to, substitutions and
replacements for, and rents and profits of,
each of the foregoing.
(b) In addition, as collateral security for the prompt and
complete payment when due of the Secured Obligations and in order to
induce Agent as aforesaid, Agent is hereby granted a second Lien on
all property of any Grantor held by Agent, including, without
limitation, all property of every description (including any real
property subject to any mortgage), now or hereafter in the possession
or custody of or in transit to Agent for any purpose, including
safekeeping, collection or pledge, for the account of any Grantor, or
as to which any Grantor may have any right or power.
3. Rights of Agent; Limitations on Agent's Obligations.
(a) It is expressly agreed by Grantors that, anything herein
to the contrary notwithstanding, each Grantor shall remain liable
under each of its Contracts and each of its Licenses to observe and
perform all the conditions and obligations to be observed and
performed by it thereunder and each Grantor shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant
to the terms and provisions of each such
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Contract or License. Agent shall not have any obligation or liability
under any Contract or License by reason of or arising out of this
Security Agreement or the granting to Agent of a security interest
therein or the receipt by Agent of any payment relating to any
Contract or License pursuant hereto, nor shall Agent be required or
obligated in any manner to perform or fulfill any of the obligations
of any Grantor under or pursuant to any Contract or License, or to
make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any
performance by any party under any Contract or License, or to
present or file any claim, or to take any action to collect or enforce
any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) Agent authorizes each Grantor to collect its Accounts
provided that such collection is performed in a prudent and
businesslike manner, and Agent may, upon the occurrence and during the
continuation of any Event of Default and without notice, limit or
terminate said authority at any time. If required by Agent after
payment in full of the Senior Loans and at any time during the
continuation of any Event of Default, any Proceeds, when first
collected by any Grantor, received in payment of any such Account or in
payment for any of its Inventory or on account of any of its Contracts,
shall be promptly deposited by such Grantor in precisely the form
received (with all necessary endorsements) in a special bank account
maintained by Agent subject to withdrawal by Agent only, as hereinafter
provided, and until so turned over shall be deemed to be held in trust
by such Grantor for and as Agent's property and shall not be commingled
with such Grantor's other funds or properties. Such Proceeds, when
deposited, shall continue to be collateral security for all of the
Secured Obligations and shall not constitute payment thereof until
applied as hereinafter provided. Agent shall apply all or a part of the
funds on deposit in said special account to the principal of or
interest on or both in respect of any of the Secured Obligations in
accordance with the provisions of Section 7(d) hereof and any part of
such funds which Agent elects not so to apply and deems not required as
collateral security for the Secured Obligations shall be paid over from
time to time by Agent to such Grantor. If an Event of Default has
occurred and is continuing and after payment in full of the Senior
Loans and, at the request of Agent, each Grantor shall deliver to Agent
all original and other documents evidencing, and relating to, the sale
and delivery of such Inventory or the performance of labor or service
which created such Accounts, including, without limitation, all
original orders, invoices and shipping receipts; and, prior to the
occurrence of an Event of Default, Grantor shall deliver photocopies
thereof to Agent at its request.
(c) Agent may at any time after payment in full of the Senior
Loans and upon the occurrence and during the continuation of any Event
of Default (whether or not waived), after first notifying the Grantors
of its intention to do so, notify Account Debtors of each Grantor,
parties to the Contracts of each Grantor, obligors of Instruments of
each Grantor and obligors in respect of Chattel Paper of each Grantor
that the Accounts and the right, title and interest of each Grantor in
and under such Contracts, such Instruments
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and such Chattel Paper have been assigned to Agent and that payments
shall be made directly to Agent. Upon the request of Agent after
payment in full of the Senior Loans, each Grantor will so notify such
Account Debtors, parties to such Contracts, obligors of such
Instruments and obligors in respect of such Chattel Paper that payments
shall be made directly to Agent. Upon the occurrence and during the
continuation of an Event of Default (whether or not waived), after
payment in full of the Senior Loans, Agent may in its own name or in
the name of others communicate with such Account Debtors, parties to
such Contracts, obligors of such Instruments and obligors in respect of
such Chattel Paper to verify with such Persons to Agent's satisfaction
the existence, amount and terms of any such Accounts, Contracts,
Instruments or Chattel Paper.
(d) Upon reasonable prior notice to any Grantor (unless
an Event of Default has occurred and is continuing, in which case no
notice is necessary), Agent shall have the right, during normal
business hours, to make test verifications of the Accounts and physical
verifications of the Inventory in any manner and through any medium
that it considers advisable, and all Grantors agree to furnish all such
assistance and information as Agent may require in connection
therewith. Upon the occurrence and continuation of an Event of Default,
each Grantor at its expense will cause certified independent public
accountants satisfactory to Agent to prepare and deliver to Agent at
any time and from time to time promptly upon Agent's request, the
following reports: (i) a reconciliation of all its Accounts, (ii) an
aging of all its Accounts, (iii) trial balances, and (iv) a test
verification of such Accounts as Agent may request. Each Grantor at its
expense will cause certified independent public accountants
satisfactory to Agent to prepare and deliver to Agent the results of
the annual physical verification of its Inventory made or observed by
such accountants.
4. Representations and Warranties. Each Grantor hereby
represents and warrants that:
(a) Except for the security interest granted to Agent
pursuant to this Security Agreement and other Liens permitted by the
Note Purchase Agreement, each Grantor is the sole owner of each item of
the Collateral in which it purports to grant a security interest
hereunder, having good and marketable title thereto, free and clear of
any and all Liens. No material amounts payable under or in connection
with any of its Accounts or Contracts are evidenced by Instruments
which have not been delivered to Agent.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by any Grantor in
favor of Agent pursuant to this Security Agreement or such as relate to
other Liens permitted by the Note Purchase Agreement.
(c) Appropriate financing statements having been filed in the
jurisdictions
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listed on Schedule I hereto, this Security Agreement is effective to
create a valid and continuing lien on and perfected security interest
in the Collateral with respect to which a security interest may be
perfected by the filing of financing statements pursuant to the Code,
or by filing in the United States Patent and Trademark Office, in favor
of Agent, prior to all other Liens except Liens permitted by the Note
Purchase Agreement, and is enforceable as such as against creditors of
and purchasers from any Grantor (other than purchasers of Inventory in
the ordinary course of business) and as against any purchaser of real
property where any of the Equipment is located and any present or
future creditor obtaining a Lien on such real property. All action
necessary or desirable to protect and perfect such security interest in
each item of the Collateral has been duly taken.
(d) Each Grantor's principal place of business and the
place where its records concerning the Collateral are kept and the
location of its Inventory and Equipment are set forth on Schedule II
hereto, and no Grantors will change such principal place of business or
remove such records or change the location of its Inventory and
Equipment unless it has taken such action as is necessary to cause the
security interest of Agent in the Collateral to continue to be
perfected. No Grantor will change its principal place of business or
the place where its records concerning the Collateral are kept or
change the locations of its Inventory and Equipment without giving
thirty (30) days' prior written notice thereof to Agent.
(e) The amount represented by each Grantor to Agent from
time to time as owing by each Account Debtor or by all Account Debtors
in respect of the Accounts of such Grantor will at such time be the
correct amount actually and unconditionally owing by such Account
Debtors thereunder.
5. Covenants. Grantors covenant and agree with Agent
that from and after the date of this Security Agreement and until the Secured
Obligations are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any
time and from time to time, upon the written request of Agent, and at
the sole expense of Grantors, Grantors will promptly and duly execute
and deliver any and all such further instruments and documents and take
such further action as Agent may reasonably deem desirable to obtain
the full benefits of this Security Agreement and of the rights and
powers herein granted, including, without limitation, using their best
efforts to secure all consents and approvals necessary or appropriate
for the assignment to Agent of any License or Contract held by any
Grantor or in which any Grantor has any rights not heretofore assigned,
the filing of any financing or continuation statements under the Code
with respect to the Liens and security interests granted hereby,
transferring Collateral to Agent's possession (if a security interest
in such Collateral can be perfected by possession), and using its best
efforts to obtain waivers of Liens from landlords and mortgagees.
Grantors also hereby authorize Agent to file any such financing or
continuation statement without the signature of any Grantor to the
extent permitted by
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applicable law. If any amount payable under or in connection with any
of the Collateral shall be or become evidenced by any Instrument, after
the Senior Loans has been paid in full, such Instrument shall be
immediately pledged to Agent hereunder, and shall be duly endorsed in a
manner satisfactory to Agent and delivered to Agent.
(b) Maintenance of Records. Each Grantor will keep and
maintain at its own cost and expense satisfactory and complete records
of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. Each Grantor
will xxxx its books and records pertaining to the Collateral to
evidence this Security Agreement and the security interests granted
hereby. All Chattel Paper will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are
subject to the security interest of General Electric Capital
Corporation." For Agent's further security, each Grantor agrees that
Agent shall have a special property interest in all of each Grantor's
books and records pertaining to the Collateral and, upon the occurrence
and during the continuation of any Event of Default, after the Senior
Loans has been paid in full, each Grantor shall deliver and turn over
any such books and records to Agent or to its representatives at any
time on demand of Agent. Prior to the occurrence of an Event of Default
and upon reasonable notice from Agent, each Grantor shall permit any
representative of Agent to inspect such books and records and will
provide photocopies thereof to Agent.
(c) Indemnification. In any suit, proceeding or action brought
by Agent relating to any Account, Chattel Paper, Contract, General
Intangible or Instrument for any sum owing thereunder, or to enforce
any provision of any Account, Chattel Paper, Contract, General
Intangible or Instrument, each Grantor will save, indemnify and keep
Agent harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach
by any Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from any Grantor, and all such
obligations of each Grantor shall be and remain enforceable against and
only against such Grantor and shall not be enforceable against Agent.
(d) Payment of Obligations. Each Grantor will pay promptly
when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without limitation,
claims for labor, materials and supplies), except that no such charge
need be paid if (i) such nonpayment does not involve any danger of the
sale, forfeiture or loss of any of the Collateral or any interest
therein, and (ii) such charge is being contested in good faith, by
proper proceedings, and adequate reserves therefor have been
established by each Grantor in accordance with and to the extent
required by GAAP.
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(e) Compliance with Terms of Accounts, etc. In all material
respects, each Grantor will perform and comply with all obligations in
respect of Accounts, Chattel Paper, Contracts and Licenses and all
other agreements to which it is a party or by which it are bound.
(f) Limitation on Liens on Collateral. Grantors will not
create, permit or suffer to exist, and will defend the Collateral
against and take such other action as is necessary to remove, any Lien
on the Collateral except Liens permitted by the Note Purchase
Agreement, and will defend the right, title and interest of Agent in
and to any of each Grantor's rights under the Chattel Paper, Contracts,
Documents, General Intangibles and Instruments and to the Equipment and
Inventory and in and to the Proceeds thereof against the claims and
demands of all Persons whomsoever.
(g) Limitations on Modifications of Accounts. Upon the
occurrence and during the continuation of any Default or Event of
Default, no Grantor will, without Agent's prior written consent, grant
any extension of the time of payment of any of the Accounts, Chattel
Paper or Instruments, compromise, compound or settle the same for less
than the full amount thereof, release, wholly or partly, any Person
liable for the payment thereof, or allow any credit or discount
whatsoever thereon other than trade discounts granted in the ordinary
course of business of such Grantor.
(h) Maintenance of Insurance. Each Grantor will maintain, with
financially sound and reputable companies, insurance policies (i)
insuring their Inventory and Equipment against loss by fire, explosion,
theft and such other casualties as are usually insured against by
companies engaged in the same or similar businesses and (ii) insuring
each Grantor and Agent against liability for personal injury and
property damage relating to such Inventory and Equipment, such policies
to be in such amounts and against at least such risks, as are usually
insured against, in the same general area by companies engaged in the
same or a similar business, naming Agent as an additional insured with
losses payable to each Grantor and Agent as their respective interests
may appear under a standard "lender loss-payable" clause.
(i) Further Identification of Collateral. Each Grantor will if
so requested by Agent furnish to Agent, as often as Agent reasonably
requests, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral
as Agent may reasonably request, all in reasonable detail.
(j) Notices. Each Grantor will advise Agent promptly, in
reasonable detail, (i) of any material Lien, security interest,
encumbrance or claim made or asserted against any of the Collateral,
(ii) of any material change in the composition of the Collateral, and
(iii) of the occurrence of any other event which would have a material
adverse effect on the aggregate value of the Collateral or on the
security interests created hereunder.
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(k) Right of Inspection. Upon reasonable notice to any
Grantor (unless an Event of Default has occurred and is continuing, in
which case no notice is necessary), Agent shall at all reasonable times
have access during normal business hours to all of the books and
records and correspondence of each Grantor, and Agent or its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and each Grantor agrees to render to Agent, at
such Grantor's cost and expense, such clerical and other assistance as
may be reasonably requested with regard thereto. Upon reasonable notice
to any Grantor (unless an Event of Default has occurred and is
continuing, in which case no notice is necessary), Agent and its
representatives shall also have the right, at reasonable times and
during normal business hours, to enter into and upon any premises where
any of the Equipment or Inventory is located for the purpose of
inspecting the same, observing its use or otherwise protecting its
interests therein.
(l) Maintenance of Equipment. Each Grantor will keep and
maintain the Equipment in good operating condition sufficient for the
continuation of the business conducted by each Grantor on a basis
consistent with past practices, and each Grantor will provide all
maintenance and service and all repairs necessary for such purpose.
(m) Continuous Perfection. Grantors will not change their
names, identities or corporate structures in any manner which might
make any financing or continuation statement filed in connection
herewith seriously misleading within the meaning of section 9-402(7) of
the Code (or any other then applicable provision of the Code) unless
such Grantor shall have given Agent at least thirty (30) days' prior
written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by Agent to amend such financing statement or
continuation statement so that it is not seriously misleading.
(n) Covenants Regarding Intellectual Property Collateral.
(i) Each Grantor shall notify Agent immediately if
it knows or has reason to know that any application or
registration relating to any Trademark which is material to
the conduct of such Grantor's business may become abandoned or
dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any proceeding in the
United States Patent and Trademark Office or any court)
regarding such Grantor's ownership of any Patent or Trademark
which is material to the conduct of such Grantor's business,
its right to register the same, or to keep and maintain the
same.
(ii) In no event shall any Grantor, either itself or
through any agent, employee, licensee or designee, file an
application for the registration of any Trademark with the
United States Patent or Trademark Office or any similar
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office or agency in any other country or any political
subdivision thereof, unless it promptly informs Agent, and,
upon request of Agent, executes and delivers any and all
agreements, instruments, documents, and papers as Agent may
request to evidence Agent's security interest in such
Trademark and the General Intangibles, including, without
limitation, the goodwill of such Grantor relating thereto or
represented thereby.
(iii) Each Grantor will take all necessary and
appropriate actions to maintain and pursue each application,
to obtain the relevant registration, and to maintain the
registration of each of the Trademarks which are material to
the conduct of such Grantor's business, including, without
limitation, the filing of applications for renewal, affidavits
of use, affidavits of incontestability and opposition and
interference and cancellation proceedings.
(iv) In the event that any of the Intellectual
Property Collateral is infringed, misappropriated or diluted
by a third party, the applicable Grantor shall notify Agent
promptly after it learns thereof and shall, unless such
Grantor shall reasonably determine that such Intellectual
Property Collateral is not material to the conduct of such
Grantor's business, promptly xxx for infringement,
misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution,
and take such other actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such
Intellectual Property Collateral.
6. Agent's Appointment as Attorney-in-Fact.
(a) Each Grantor hereby irrevocably constitutes and
appoints Agent and any officer or Agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor
and in the name of each Grantor or in its own name, from time to time
in Agent's discretion, for the purpose of carrying out the terms of
this Security Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, hereby
gives Agent the power and right, on behalf of each Grantor, without
notice to or assent by any Grantor to do the following after the Senior
Loans has been paid in full:
(i) in the name of each Grantor or its own name or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other Instruments for
the payment of moneys due under any Collateral and to receive
payment of any and all monies, claims, and other amounts due
or to become due at any time arising out of or in respect of
any Collateral;
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(ii) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Security
Agreement and to pay all or any part of the premiums therefor
and the costs thereof; and
(iii) Upon the occurrence and during the continuation
of an Event of Default (A) to direct any party liable for any
payment under any of the Collateral to make payment of any and
all moneys due, and to become due thereunder, directly to
Agent or as Agent shall direct; (B) to ask, demand and receive
payment of and receipt for any and all moneys, claims and
other amounts due, and to become due at any time, in respect
of or arising out of any Collateral; (C) to sign and indorse
any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
accounts and other Documents constituting or relating to the
Collateral; (D) to file any claim or take or commence and
prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (E) to defend any suit, action
or proceeding brought against any Grantor with respect to any
Collateral; (F) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as Agent may
deem appropriate; (G) to license or, to the extent permitted
by an applicable license, sublicense, whether general, special
or otherwise, and whether on an exclusive or non-exclusive
basis, any Patent or Trademark, throughout the world for such
term or terms, on such conditions, and in such manner, as
Agent shall in its sole discretion determine; and (H) to sell,
transfer, pledge, make, any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for
all purposes, and to do, at Agent's option and at such
Grantor's expense, at any time, or from time to time, all acts
and things which Agent reasonably deems necessary to protect,
preserve or realize upon the Collateral and Agent's Lien
therein, in order to effect the intent of this Security
Agreement, all as fully and effectively as each Grantor,
respectively, might do.
(b) Agent agrees that, except upon the occurrence and during
the continuation of an Event of Default, it will forebear from
exercising the power of attorney or any rights granted to Agent
pursuant to this Section 6(iii). Each Grantor hereby ratifies, to the
extent permitted by law, all that said attorneys shall lawfully do or
cause to be done by virtue hereof. The power of attorney granted
pursuant to this Section 6 is a power coupled with an interest and
shall be irrevocable until the Secured Obligations are indefeasibly
paid in full.
(c) The powers conferred on Agent hereunder are solely to
protect Agent's interests in the Collateral and shall not impose any
duty upon it to exercise any such
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powers. Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act, except for
its own gross negligence or willful misconduct.
(d) Each Grantor also authorizes Agent, at any time and
from time to time upon the occurrence and during the continuation of
any Event of Default and after the Senior Loans has been paid in full,
(i) to communicate in its own name with any party to any Contract with
regard to the assignment of the right, title and interest of such
Grantor in and under the Contracts hereunder and other matters relating
thereto and (ii) to execute, in connection with the sale provided for
in Section 7 hereof, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral.
7. Remedies, Rights upon Default.
(a) If any Event of Default shall occur and be
continuing, subject to the terms of the Note Purchase Agreement, Agent
shall exercise in addition to all other rights and remedies granted to
it in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights
and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, each Grantor expressly agrees that in any
such event Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon any Grantor or
any other person (all and each of which demands, advertisements and/or
notices are hereby expressly waived to the maximum extent permitted by
the Code and other applicable law), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at
public or private sale or sales, at any exchange or broker's board or
at any of Agent's offices or elsewhere at such prices as it may deem
best, for cash or on credit or for future delivery without assumption
of any credit risk. Agent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which
equity of redemption Grantor hereby releases. Each Grantor further
agrees, at Agent's request, to assemble the Collateral and make it
available to Agent at places which Agent shall reasonably select,
whether at any Grantor's premises or elsewhere. Agent shall apply the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, as provided in Section 7(d) hereof, all Grantors
remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after
the payment by Agent of any other amount required by any provision of
law, including section 9-504(1)(c) of the Code, need Agent account for
the surplus, if any, to such Grantor. To the maximum extent permitted
by applicable law, each Grantor waives
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all claims, damages, and demands against Agent arising out of the
repossession, retention or sale of the Collateral except such as arise
out of the gross negligence or willful misconduct of Agent as finally
determined by a court of competent jurisdiction after all possible
appeals have been exhausted. Each Grantor agrees that Agent need not
give more than ten (10) days' notice (which notification shall be
deemed given when mailed or delivered on an overnight basis, postage
prepaid, addressed to such Grantor at its address referred to in
Section 11 hereof) of the time and place of any public sale or of the
time after which a private sale may take place and that such notice is
reasonable notification of such matters. Grantors shall remain liable
for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Agent is
entitled, such Grantors also being liable for the fees of any attorneys
employed by Agent to collect such deficiency.
(b) Each Grantor also agrees to pay all costs of Agent
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies
hereunder.
(c) Each Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement or any
Collateral.
(d) After payment in full of the Senior Loans, the
Proceeds of any sale, disposition or other realization upon all or any
part of the Collateral (including real property) shall be distributed
by Agent in the following order of priorities:
first, to Agent in an amount sufficient to pay in
full the expenses of Agent in connection with such sale,
disposition or other realization, including all reasonable
expenses, liabilities and advances incurred or made by Agent
in connection therewith, including, without limitation,
attorney's fees;
second, to Agent and such other holders, if any, of
the Subordinated Notes in an amount equal to the then unpaid
principal of and accrued interest and prepayment premiums, if
any, on the Secured Obligations applicable to the Subordinated
Notes, and if such Proceeds shall be insufficient to pay in
full such amount, then to Agent and such other holders, if
any, of the Subordinated Notes ratably in accordance with the
then unpaid amounts thereof owing to Agent and each such
holder; and
finally, upon payment in full of all of the Secured
Obligations, to pay to the Grantors, or their representatives
or as a court of competent jurisdiction may direct, any
surplus then remaining from such Proceeds.
8. Grant of License to Use Intellectual Property Collateral.
For the purpose of enabling Agent to exercise rights and remedies under
Section 7 hereof at such time as Agent,
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without regard to this Section 8, shall be lawfully entitled to exercise such
rights and remedies, each Grantor hereby grants to Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to any Grantor) to use, license or sublicense any Patent, Trade
Secret or Trademark, now owned or hereafter acquired by any Grantor, and
wherever the same may be located, and including, without limitation, in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.
9. Appointment of Agent. By its acceptance of a Subordinated
Note, each Note Purchaser appoints GE Capital as agent for purposes of enforcing
each Note Purchaser's rights with respect to Collateral, including any real
property of the Grantors subject to any mortgage. The provisions of this Section
9 are solely for the benefit of GE Capital and the Note Purchasers and no
Grantor nor any other person shall have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Security Agreement and the other Note Purchase Documents, GE Capital shall
act solely as an agent of the Note Purchasers and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Note Purchaser or any other person. GE Capital shall have
no duties or responsibilities except for those expressly set forth in this
Security Agreement and the other Note Purchase Documents. The duties of GE
Capital shall be mechanical and administrative in nature and GE Capital shall
not have, or be deemed to have, by reason of this Security Agreement, any other
Note Purchase Document or otherwise, a fiduciary relationship in respect of any
Note Purchaser. Neither GE Capital nor any of its affiliates nor any of their
respective officers, directors, employees, agents or representatives shall be
liable to any Note Purchaser for any action taken or omitted to be taken by it
hereunder or under any other Note Purchase Document, or in connection herewith
or therewith, except for damages solely caused by its or their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction.
(a) GE Capital's Reliance, Etc. GE Capital: (a) may treat the
payee of any Note as the holder thereof until GE Capital receives
written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to GE Capital; (b) 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; (c) makes no warranty or
representation to any Note Purchaser and shall not be responsible to
any Note Purchaser for any statements, warranties or representations
made in or in connection with this Security Agreement or the other Note
Purchase Documents; (d) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms,
covenants or conditions of this Security Agreement or the other Note
Purchase Documents on the part of any Grantor or to inspect the
Collateral (including the books and records) of any Grantor; (e) shall
not be responsible to any Note Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value
of this
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Security Agreement or the other Note Purchase Documents or any other
instrument or document furnished pursuant hereto or thereto; and (f)
shall incur no liability under or in respect of this Security Agreement
or the other Note Purchase Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties (including the Majority
Holders).
(b) GE Capital and affiliates. With respect to its commitments
hereunder, GE Capital shall have the same rights and powers under this
Security Agreement and the other Note Purchase Documents as any other
Note Purchaser and may exercise the same as though it were not GE
Capital; and the term "Note Purchaser" or "Note Purchasers" shall,
unless otherwise expressly indicated, include GE Capital in its
individual capacity. GE Capital and its affiliates may lend money to,
invest in, and generally engage in any kind of business with, any
Grantor, any of their affiliates and any person who may do business
with or own securities of any Grantor or any such affiliate, all as if
GE Capital were not GE Capital and without any duty to account therefor
to the Note Purchasers. GE Capital and its Affiliates may accept fees
and other consideration from any Grantor for services in connection
with this Security Agreement or otherwise without having to account for
the same to the Note Purchasers. GE Capital has also made Senior Loans
to the Grantors and received a warrant from Selfix. Each Note Purchaser
acknowledges the potential conflict of interest between GE Capital as
an agent and lender holding disproportionate interests in the Senior
Loans, GE Capital as a holder of the Subordinated Notes pursuant to the
Note Purchase Agreement and warrant holder of Selfix and GE Capital as
GE Capital.
(c) Note Purchaser Credit Decision. Each Note Purchaser
acknowledges that it has, independently and without reliance upon GE
Capital or any other Note Purchaser and based on documents and
information as it has deemed appropriate, made its own credit and
financial analysis of the Grantors and its own decision to enter into
this Security Agreement. Each Note Purchaser also acknowledges that it
will, independently and without reliance upon GE Capital or any other
Note Purchaser 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 Security Agreement. Each Note
Purchaser acknowledges that GE Capital holds Senior Loans and is the
agent for Senior Lenders.
(d) Indemnification. The Note Purchasers agree to indemnify
Agent (to the extent not reimbursed by Grantors and without limiting
the obligations of the Grantors hereunder), ratably according to their
respective pro rata shares, 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 Security Agreement or any other Note
Purchase Document or any action taken or omitted
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60
by Agent in connection therewith; provided, however, that no Note
Purchaser 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 limiting the foregoing, each
Note Purchaser agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including 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
Security Agreement and each other Note Purchase Document, to the extent
that Agent is not reimbursed for such expenses by Grantors.
(e) Successor Agent. GE Capital may resign at any time by
giving not less than thirty (30) days' prior written notice thereof to
the Note Purchasers. Upon any such resignation, the holders of
Subordinated Notes (other than GE Capital) shall have the right to
appoint a successor agent which shall be a holder of Subordinated
Notes. Upon the acceptance of any appointment as agent hereunder by a
successor agent, such successor agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the
resigning agent. Upon the earlier of the acceptance of any appointment
as agent hereunder by a successor agent or the effective date of the
resigning agent's resignation, the resigning agent shall be discharged
from its duties and obligations under this Security Agreement and the
other Note Purchase Documents, except that any indemnity rights or
other rights in favor of such resigning agent shall continue. After any
resigning agent's resignation hereunder, the provisions of this Section
9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was agent under this Security Agreement and the
other Note Purchase Documents.
10. Reinstatement. This Security Agreement shall remain in
full force and effect and continue to be effective should any petition be filed
by or against any Grantor for liquidation or reorganization, should any Grantor
become insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
11. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of
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the parties desires to give or serve upon any other communication with respect
to this Security Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and either
shall be delivered in person with receipt acknowledged or sent by registered or
certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback addressed as follows:
(a) If to Agent, at:
General Electric Capital Corporation
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Account Manager Selfix
Telecopy Number: (000) 000-0000
With copies to:
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Corporate Counsel
Telecopy Number: (000) 000-0000
and
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopy Number: (000) 000-0000
(b) If to any Grantor, at:
Selfix, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy Number: (000) 000-0000
With a copy to:
Much, Shelist, Freed, Denenberg, Xxxxx
Xxxx & Rubenstein PC
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000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
12. Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. Agent shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent, and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and, where applicable by any
Grantor.
14. Successors and Assigns; Governing Law.
(a) This Security Agreement and all obligations of Grantors
hereunder shall be binding upon the successors and assigns of any
Grantor, and shall, together with the rights and remedies of Agent
hereunder, inure to the benefit of Agent, its respective successors and
assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or
instrument evidencing the Secured
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Obligations or any portion thereof or interest therein shall in any
manner affect the security interest granted to Agent hereunder.
(b) This Security Agreement shall be governed by, and be
construed and interpreted in accordance with, the laws of the State of
Illinois, applicable to contracts made and performed in that State.
15. Waiver of Jury Trial. Each Grantor waives all right to
trial by jury in any action or proceeding to enforce or defend any rights or
remedies hereunder, under the Note Purchase Agreement or under the Note Purchase
Documents or relating to each of the foregoing.
16. Section Titles. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
17. Counterparts. This Security Agreement may be executed in
any number of counterparts, which shall, collectively and separately, constitute
one agreement.
18. Limitation on Actions. NOTWITHSTANDING ANY PROVISION
HEREIN CONTAINED TO THE CONTRARY, THE LIEN CREATED UNDER, AND THE TERMS AND
PROVISIONS OF, AND AGENT'S RIGHTS, POWERS AND REMEDIES UNDER, THIS SECURITY
AGREEMENT ARE SUBJECT TO AND LIMITED BY THE SUBORDINATION PROVISIONS CONTAINED
IN THE NOTE PURCHASE AGREEMENT INCLUDING, WITHOUT LIMITATION, SECTION 10.3(b)
THEREOF AS IN EFFECT ON THE DATE HEREOF.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
on the date first set forth above.
GRANTORS
SELFIX, INC.
By:
Name:
Title:
TAMOR CORPORATION
By:
Name:
Title:
SHUTTERS, INC.
By:
Name:
Title:
Accepted and acknowledged by:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
65
EXECUTION COPY
--------------------------------------------------------------------------------
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
WARRANT
TO PURCHASE COMMON STOCK OF
HOME PRODUCTS INTERNATIONAL, INC.
DATED AS OF FEBRUARY 27, 1997
--------------------------------------------------------------------------------
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS....................................................... 1
ARTICLE 2 EXERCISE OF WARRANT............................................... 5
2.1 Shares; Price; Notice..................................... 5
2.2 Manner of Exercise; Issuance of Common Stock.............. 6
2.3 Payment of Taxes.......................................... 7
2.4 Fractional Shares......................................... 7
2.5 Continued Validity........................................ 7
2.6 Payment by Application of Obligations..................... 7
ARTICLE 3 REGISTRATION, TRANSFER AND EXCHANGE............................... 8
3.1 Maintenance of Registration Books......................... 8
3.2 Transfer.................................................. 8
3.3 Loss or Mutilation........................................ 8
3.4 Expenses.................................................. 8
ARTICLE 4 ADJUSTMENTS; ANTIDILUTION PROVISIONS.............................. 9
4.1 General Statements of Intent.............................. 9
4.2 No Dilutive Issuances..................................... 9
4.3 Adjustment of Current Warrant Price....................... 10
4.4 Adjustment of Number of Shares Purchasable;
Consideration Receivable.................................. 10
4.5 Certain Other Distributions............................... 11
4.6 Other Actions Affecting Common Stock...................... 12
4.7 Certain Limitations....................................... 12
4.8 Preferred Stock........................................... 12
4.9 Excluded Transactions..................................... 12
4.10 Exemptions or Deferrals from Adjustment Procedure......... 12
4.11 Notice of Adjustments..................................... 13
4.12 Notice of Corporate Action................................ 13
ARTICLE 5 RESTRICTIONS ON TRANSFER.......................................... 14
5.1 Notice of Proposed Transfer; Registration Not Required.... 14
5.2 Required Registration and Qualification................... 15
5.3 Incidental Registration and Qualification................. 16
5.4 Registration and Qualification Procedures................. 17
5.5 Holdback Agreements....................................... 19
5.6 Allocation of Expenses.................................... 19
5.7 Indemnification........................................... 20
5.8 Legend on Warrants and Certificates....................... 21
5.9 Termination of Restrictions............................... 22
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5.10 Supplying Information...................................... 22
5.11 Liquidated Damages......................................... 22
ARTICLE 6 PARTICIPATION IN CORPORATE DISTRIBUTIONS.......................... 23
6.1 Company's Obligation to Make Payments...................... 23
ARTICLE 7 MANDATORY CALL.................................................... 23
7.1 Mandatory Call............................................. 23
7.2 Voluntary Call............................................. 24
ARTICLE 8 INTENTIONALLY DELETED............................................. 24
ARTICLE 9 FINANCIAL AND BUSINESS INFORMATION................................ 24
9.1 Monthly and Quarterly Information.......................... 24
9.2 Annual Information......................................... 24
9.3 Filings.................................................... 24
ARTICLE 10 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 25
10.1 Organization and Capitalization of the Company............. 25
10.2 Authority.................................................. 25
10.3 No Legal Bar............................................... 25
10.4 Validity of Shares......................................... 25
10.5 Incorporation of Representations and Warranties
of Credit Agreement........................................ 25
ARTICLE 11 VARIOUS COVENANTS OF THE COMPANY.................................. 26
11.1 No Impairment or Amendment................................. 26
11.2 Reservation of Common Stock; Qualification................. 26
11.3 Taking of Record........................................... 27
11.4 Listing on Securities Exchange............................. 27
11.5 Availability of Information................................ 27
11.6 Certain Expenses........................................... 27
ARTICLE 12 MISCELLANEOUS..................................................... 27
12.1 Nonwaiver and Expenses..................................... 27
12.2 Limitation of Liability.................................... 28
12.3 Notice Generally........................................... 28
12.4 Successors and Assigns..................................... 29
12.5 Remedies................................................... 29
12.6 Amendment.................................................. 29
12.7 Severability............................................... 29
12.8 Headings................................................... 29
12.9 GOVERNING LAW.............................................. 29
12.10 Jurisdiction............................................... 29
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12.11 WAIVER OF JURY TRIAL....................................... 29
EXHIBITS
Exhibit A Subscription Form
Exhibit B Assignment Form
69
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
WARRANT
TO PURCHASE COMMON STOCK OF
HOME PRODUCTS INTERNATIONAL, INC.
THIS IS TO CERTIFY that GENERAL ELECTRIC CAPITAL CORPORATION, or its
registered assigns, is entitled upon the due exercise hereof at any time prior
to the Expiration Date (as hereinafter defined), to purchase as of the Closing
Date an aggregate of 79,204 shares of Common Stock, $.01 par value, of Home
Products International, Inc., a Delaware corporation, at a Current Warrant Price
per share equal to 50% of the Market Price therefor as of the Closing Date (such
Current Warrant Price and the number of shares of Common Stock purchasable
hereunder being subject to adjustment as provided herein), and to exercise the
other rights, powers and privileges hereinafter provided, all on the terms and
conditions and pursuant to the provisions of this Warrant (this "Warrant").
ARTICLE 1
DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below (capitalized terms used but not otherwise defined
herein shall have the meanings ascribed thereto in the Credit Agreement (as
hereinafter defined and whether or not in effect)):
"Adjustment Transaction" means any of (i) any declaration of a dividend
upon, or distribution in respect of, any of the Company's capital stock, payable
in Common Stock, or options, warrants or securities convertible into Common
Stock, (ii) the subdivision or combination by the Company of its outstanding
Common Stock into a larger or smaller number of shares of Common Stock, (iii)
any capital reorganization or reclassification of the capital stock of the
Company, (iv) the consolidation or merger of the Company with or into another
corporation in which the Company's stockholders receive securities of another
entity, or (v) the sale or transfer of the property of the Company in (or
substantially in) its entirety in which the
70
Company's stockholders receive securities of another entity.
"Affiliate" of any entity means a Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such entity. The term "control," as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Appraised Value" means as to each share of Common Stock or other
equity securities issued by the Company, (i) so long as such Common Stock or
other equity security is actively traded on the NASDAQ or on a national
securities exchange, the Market Price, and (ii) otherwise, the fair market value
per share of Common Stock on a Fully Diluted Outstanding basis as determined by
agreement of the Majority Holders of this Warrant and the Company, or, if such
agreement is not obtained within 30 days after the relevant determination date,
as determined by a nationally recognized investment bank jointly selected by the
Company and the Majority Holders of this Warrant pursuant to an appraisal
process. If no agreement is reached within that 30-day period as to the
Appraised Value or the identity of the investment bank, the investment bank
shall be Xxxxxxx Xxxxx & Company. For purposes of determining the Appraised
Value of the Common Stock if it is no longer actively traded on the NASDAQ or on
a national exchange, the fair market value of the Common Stock shall equal the
price per share of Common Stock that could be obtained in an open sale of all
the outstanding Common Stock, valued as a whole on the basis of a sale of the
Company in an arms' length sale between a willing buyer and a willing seller,
neither acting under compulsion, without discount for illiquidity, minority
interest or otherwise, with ample time for marketing and closing, and assigning
equal value to each share of Common Stock. The determination of Appraised Value
by agreement between the Company and the Majority Holders or by that investment
bank shall be final and binding on the Company and all holders of Warrant
Shares. The cost of any investment bank's determination of the Appraised Value
will be borne by the Company and any such investment bank will be given full
access to the books, records, properties and employees of the Company and its
Subsidiaries.
"Assignment" means the form of Assignment attached as Exhibit B to this
Warrant.
"Closing Date" means February 27, 1997.
"Commission" means the Securities and Exchange Commission or any other
Federal agency from time to time administering the Securities Act.
"Common Stock" means (except where the context otherwise indicates) the
Common Stock, $.01 par value, of the Company, and any capital stock into which
such Common Stock may thereafter be exchanged, and shall also include (i)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is also not preferred as to dividends or assets over any other
class of stock of the Company and which is not subject to redemption, and (ii)
shares of common stock of any successor or acquiring corporation (as defined in
Section 4.4(b)) received by or
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distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.4(b).
"Company" means Home Products International, Inc., a Delaware
corporation, and any successor corporation.
"Credit Agreement" means the Credit Agreement of even date herewith
among the Company, GE Capital, individually and as Agent thereunder, and the
other lenders from time to time party thereto, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Current Warrant Price" means, in respect of a share of Common Stock at
any date herein specified, the price per share at which a share of Common Stock
may be purchased upon exercise of this Warrant on such date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Exercise Period" means the period commencing on the August 1, 1997 and
terminating at 5:00 p.m., Chicago time, on the tenth anniversary of the Closing
Date during which this Warrant is exercisable pursuant to Section 2.2.
"Expiration Date" means the tenth anniversary of the Closing Date.
"Fully Diluted Outstanding" means, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant, and any other options or warrants to
purchase, or securities convertible into, shares of Common Stock, which options,
warrants and convertible securities are outstanding on such date and would be
deemed outstanding in accordance with GAAP for purposes of determining book
value or net income per share.
"GAAP" has the meaning assigned thereto in the Credit Agreement.
"GE Capital" means General Electric Capital Corporation, a New York
corporation.
"Issuable Warrant Shares" means the number of shares of Common Stock
issuable from time to time upon exercise of this Warrant.
"Issued Warrant Shares" means (a) the cumulative total of the shares of
Common Stock issued from time to time upon exercise of this Warrant, plus (b)
any shares of Common Stock issued as a stock dividend with respect to such
shares or as part of a stock split affecting such shares.
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"Majority Holders" means the Persons holding a majority of the Warrant
Shares issued or issuable hereunder.
"Market Price" means, as to the Common Stock as of any date of
determination, the average of the publicly quoted bid and asked closing prices
per share of Common Stock on the NASDAQ or the average of the closing prices per
share of Common Stock on a national securities exchange, in each case, for the
fifteen (15) consecutive trading days preceding that date of determination.
"Net Book Value" as of any date means (i) the total consolidated assets
of the Company and its Subsidiaries minus (ii) the total consolidated
liabilities of the Company and its Subsidiaries, determined in accordance with
GAAP.
"Notice of Exercise" means the form of Notice of Exercise attached as
Exhibit A to this Warrant.
"Opinion of Counsel" means an opinion of counsel experienced in
Securities Act matters chosen by the applicable holder of this Warrant or the
applicable holder of Issued Warrant Shares.
"Other Property" has the meaning set forth in Section 4.4.
"Outstanding" means, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock except shares then owned or held by or for the account of
the Company or any Subsidiary thereof, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" has the meaning assigned thereto in the Credit Agreement.
"Piggy-Back Shares" has the meaning set forth in Section 5.3.
"Securities Act" means the Securities Act of 1933, as amended, 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.
"Subordinated Debt" means the principal of, and all payment-in-kind
notes and accrued interest with respect to, the Subordinated Equity Bridge
Notes.
"Subordinated Notes" means the Subordinated Equity Bridge Notes in the
initial principal amount of $7,000,000 issued by the Company to GE Capital and
other note purchasers on the date hereof.
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"Subsidiary" has the meaning assigned thereto in the Credit Agreement.
"Tranche" as to each group of Warrant Shares, refers to the date on
which the Warrant became effective as to those Issuable Warrant Shares and the
Current Warrant Price at which the Warrant is exercisable as to those Shares,
all as determined in accordance with Section 2.1.
"Warrant" means this warrant dated as of the Closing Date issued to the
initial holder hereof and all warrants issued upon the partial exercise,
transfer or division of or in substitution for any Warrant.
"Warrant Shares" means the Issuable Warrant Shares plus the Issued
Warrant Shares, but only during such time as certificates representing such
shares or this Warrant are required to bear the legend set forth in Section 5.8.
Whenever used in this Warrant, any noun or pronoun shall be deemed to
include both the singular and the plural and to cover all genders, and the words
"herein", "hereof", and "hereunder" and words of similar import shall refer to
this instrument as a whole, including any amendments hereto.
ARTICLE 2
EXERCISE OF WARRANT
2.1 Shares; Price; Notice. This Warrant shall be exercisable for 79,204
shares of Common Stock (the "Tranche 1 Warrant Shares") at a Current Warrant
Price per share equal to 50% of the Market Price determined as of the Closing
Date. This Warrant may be exercised by the applicable holder hereof at any time
during the Exercise Period by delivery to the Company of a Notice of Exercise
duly executed by such holder specifying the number of shares of Common Stock to
be purchased.
Notwithstanding the foregoing, if the Subordinated Debt has not been
paid in full in cash on or prior to the following dates, the number of shares of
Common Stock for which this Warrant is exercisable shall be automatically
increased on those dates as set forth below:
i) on July 31, 1997, the number of Issuable Warrant shares
shall be increased by that number of shares equal to the difference
between five percent 5.0% of the total number of shares of Fully
Diluted Outstanding Common Stock as of that date and 79,204 shares of
Common Stock (the "Tranche 2 Warrant Shares");
ii) on February 27, 1998, the number of Issuable Warrant
shares shall be increased by that number of shares equal to two percent
2.0% of the total number of shares of Fully Diluted Outstanding Common
Stock as of that date (the "Tranche 3 Warrant Shares");
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iii) on February 27, 1999, and on each subsequent anniversary
of the Closing Date until and including February 27, 2005, the number
of Issuable Warrant shares shall be increased by that number of shares
equal to one percent 1.0% of the total number of shares of Fully
Diluted Outstanding Common Stock as of each of those dates (the
"Subsequent Tranches of Warrant Shares").
Each Tranche of Warrant Shares shall be exercisable at a different
Current Warrant Price. The Current Warrant Price for each Tranche will be equal
to 50% of the Market Price determined as of the date that Tranche of Warrant
Shares became effective. By way of example, the Current Warrant Price for the
Tranche 2 Warrant Shares will equal 50% of the Market Price determined as of
July 31, 1997, and the Current Warrant Price for each Subsequent Tranche of
Warrant Shares shall be 50% of the Market Price determined as of the anniversary
date on which that particular Tranche of Warrant Shares became effective.
The increases in Issuable Warrant Shares described above shall occur at
the dates specified above regardless of whether this Warrant shall have been
exercised in whole or in part prior to any date specified for an increase.
2.2 Manner of Exercise; Issuance of Common Stock. To exercise this
Warrant, a holder hereof shall deliver to the Company (a) a Notice of Exercise
duly executed by such holder hereof specifying the number of shares of Common
Stock to be purchased and the applicable Tranche(s) and Current Warrant Price(s)
applicable to those shares, (b) an amount equal to the aggregate Current Warrant
Prices for all shares of Common Stock as to which this Warrant is then being
exercised and (c) this Warrant. At the option of an exercising holder hereof,
payment of such aggregate Current Warrant Price shall be made by (a) wire
transfer of funds to an account in a bank located in the United States
designated by the Company for such purpose; (b) certified or official bank check
payable to the order of the Company; (c) deducting from the shares deliverable
upon exercise hereof a number of shares having an aggregate Appraised Value on
the date of exercise equal to such aggregate Current Warrant Price (and so
directing the Company in the Notice); (d) applying certain indebtedness as
provided in Section 2.6 hereof; or (e) any combination of such methods.
Upon receipt of the above items, the Company shall, as promptly as
practicable, and in any event within five days thereafter, cause to be issued
and delivered to the applicable holder (or its nominee) or, subject to Article
5, the transferee designated in the Notice of Exercise, a certificate or
certificates representing shares of Common Stock equal in the aggregate to the
number of shares of Common Stock specified in the Notice of Exercise, reduced by
any applicable shares used as part of the payment therefor under Section 2.2(c)
above. Such certificate or certificates shall be registered in the name of such
holder hereof (or its nominee) or in the name of such transferee, as the case
may be.
If this Warrant is exercised in part, the Company shall, at the time of
delivery of such
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certificate or certificates, issue and deliver to the applicable holder hereof
or, subject to Article 5, the transferee so designated in the Notice of
Exercise, a new Warrant evidencing the right of such holder hereof or such
transferee to purchase the aggregate number of shares of Common Stock for which
this Warrant shall not have been exercised, and this Warrant shall be cancelled.
Unless otherwise requested by the exercising holder, this Warrant shall
be deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and the applicable holder or transferee so
designated in the Notice of Exercise shall be deemed to have become the holder
of record of such shares for all purposes, as of the close of business on the
date the Notice of Exercise, together with payment of the aggregate Current
Warrant Price and this Warrant, is received by the Company.
2.3 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be duly authorized,
validly issued, fully paid and nonassessable and without any preemptive rights.
The Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof (other than any income taxes imposed on each holder hereof in connection
herewith), unless such tax or charge is imposed by law upon such holder, in
which case such taxes or charges shall be paid by such holder and (except with
respect to any such income taxes) reimbursed to such holder by the Company.
2.4 Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock or scrip representing fractional shares of
Common Stock upon any exercise of this Warrant. As to any fractional share of
Common Stock which any holder hereof would otherwise be entitled to purchase
from the Company upon such exercise, the Company shall purchase from such holder
such fractional share at a price equal to an amount calculated by multiplying
such fractional share (calculated to the nearest .001 of a share) by the
Appraised Value per share calculated as of the date of the Notice of Exercise.
Payment of such amount shall be made at the time of delivery of any certificate
or certificates deliverable upon such exercise in cash or by check payable to
the order of the applicable holder hereof or, subject to Article 5, the
transferee designated in the Notice of Exercise, as the case may be.
2.5 Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder or issued pursuant to a Section4.2 private placement), shall continue
to be entitled with respect to such shares to all rights to which it would have
been entitled as a holder under this Warrant. The Company will, at the time of
any exercise of this Warrant, in whole or in part upon the request of the holder
of the shares of Common Stock issued upon the exercise hereof, acknowledge in
writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all such rights; provided, however, that if
such holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford to such holder all such
rights.
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2.6 Payment by Application of Obligations. Subject to the terms of the
Note Purchase Agreement pursuant to which the Equity Bridge Notes were issued,
upon any exercise of this Warrant, a holder hereof may, if such holder also
holds Subordinated Debt, at its option, instruct the Company, by so specifying
in the form of Notice of Exercise submitted herewith, to apply to the payment of
the Current Warrant Price all or any part of the Subordinated Debt owed to such
holder in such order as such holder shall determine.
ARTICLE 3
REGISTRATION, TRANSFER AND EXCHANGE
3.1 Maintenance of Registration Books. As long as this Warrant remains
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where this Warrant may be presented
for exercise and registration of transfer as provided in this Warrant. The
Company shall keep at its principal executive offices a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding up of the Company, close such register or its stock
transfer books so as to result in preventing or delaying the exercise or
transfer of this Warrant.
3.2 Transfer. Upon surrender for registration of transfer of this
Warrant at such office, together with an Assignment of this Warrant duly
executed by any holder or its agent or attorney, the Company shall promptly
execute and deliver a new Warrant or Warrants, subject to Article 5, in the name
of the designated transferee or transferees, and in the denomination specified
in such Assignment, and shall issue to the transferor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall promptly be
canceled. This Warrant, if properly assigned, may be exercised by a new holder
without first having a new Warrant issued.
Any Warrant issued upon any such registration of transfer shall be the
valid obligation of the Company evidencing the same rights, and entitled to the
same benefits, as the Warrant surrendered upon such registration of transfer.
3.3 Loss or Mutilation. Upon receipt by the Company from a holder
hereof of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Warrant and an indemnity
reasonably satisfactory to it (it being understood that the written agreement of
GE Capital shall be sufficient indemnity, so long as GE Capital is not then the
subject of a bankruptcy or insolvency proceeding and has not made an assignment
for the benefit of its creditors), and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor to such holder; provided, in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form is surrendered
to the Company for cancellation.
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3.4 Expenses. The Company shall prepare, issue and deliver at its own
expense any new Warrant or Warrants pursuant to this Article 3.
ARTICLE 4
ADJUSTMENTS; ANTIDILUTION PROVISIONS
4.1 General Statements of Intent. The Company hereby acknowledges that
the initial number of shares of Common Stock issuable upon exercise of this
Warrant was calculated based upon the representation of the Company that the
number of shares of Common Stock Outstanding as of the Closing Date was
3,881,000 shares of Common Stock. If for any reason it shall hereafter be
determined by the Majority Holders that the actual number of shares of Common
Stock on a Fully Diluted Outstanding basis as of the Closing Date was different
from the foregoing, such Majority Holders may notify the Company of such
determination and if the Company does not dispute the same, the Company shall
forthwith reissue this Warrant with appropriate adjustments as shall be
reasonably acceptable to the Majority Holders in the initial number of shares of
Common Stock issuable upon the exercise hereof. If the Company shall dispute
such determination (or the number of Issuable Warrant Shares to be set forth in
the reissued Warrant) and the parties cannot otherwise resolve the dispute
promptly and in good faith, then the Company shall appoint a firm of independent
public accountants of recognized national standing (which may be the regular
auditors of the Company), which shall give their opinion as to the adjustment,
if any, to be made to the number of shares of Common Stock issuable upon
exercise of this Warrant. The Company shall bear the expense of such independent
public accountants. Upon receipt of such opinion, the Company shall promptly
mail a copy thereof to each holder of this Warrant and shall make the adjustment
described therein.
It is the intent of the parties hereto that after giving effect to any
exercise of this Warrant, the holders hereof and the holders of Issued Warrant
Shares would collectively be the owners of (or have the right to acquire
pursuant hereto) 2.0% (as such amount may be adjusted upon the failure to pay
the Subordinated Note in full or in the event of a cashless exercise hereof
pursuant to the terms hereof) of the Common Stock calculated on a Fully Diluted
Outstanding basis, except as such percentage may be reduced as a consequence of
an issuance of Common Stock not requiring any adjustment in the number of shares
purchasable in accordance with Section 4.9.
4.2 No Dilutive Issuances. Except for transactions contemplated in
Sections 4.4, 4.5, and 4.9, the Company shall not issue or sell any shares of
Common Stock (or options, warrants or securities convertible into Common Stock)
after the Closing Date for a consideration less than Appraised Value per share,
or (ii) Current Warrant Price or otherwise engage in any dilutive transaction,
provided that, notwithstanding any contrary definition or other provision of
this Agreement, if such Common Stock or other securities are then actively
traded on the NASDAQ or any other national securities exchange, then for
purposes of this Section the "Appraised Value" shall mean the trading price for
such Common Stock or other securities on the applicable exchange solely as of
the date and time of such issuance or sale. Except for purposes of
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determining Appraised Value for Common Stock or other securities which are then
being traded on the NASDAQ or any other national securities exchange, the date
as of which the Appraised Value per share of Common Stock shall be computed
shall be the last day of the most recently completed fiscal period of the
Company for which financial statements have been delivered pursuant to Section
9.1 or 9.2 prior to which the Company shall first enter into a firm contract for
the issuance of such shares or issue such shares. For purposes of this Section
4.2, the issuance of warrants (other than this Warrant), options or other
securities convertible into Common Stock after the Closing Date (except as
referred to in Section 4.9(iii)) shall be deemed to be the same as the issuance
of additional shares of Common Stock. For purposes of the foregoing calculation,
the aggregate consideration received upon the issuance of options, warrants and
securities convertible into Common Stock shall be deemed to be (x) the
consideration paid to the Company in cash, if any, for the issuance thereof,
plus (y) the aggregate consideration payable to the Company upon the exercise or
conversion thereof, discounted to present value at the prime rate (as reported
in the Wall Street Journal on the first business day following the date of
issuance) and assuming that such exercise or conversion price will be paid on
the last day permitted for the exercise or conversion thereof.
4.3 Adjustment of Current Warrant Price. Upon any adjustment of the
number of shares of Common Stock issuable upon exercise of this Warrant as
provided in Section 4.4, the applicable Current Warrant Prices in effect
immediately prior to such adjustment shall be adjusted by multiplying such
Current Warrant Prices by a fraction, the numerator of which shall be the number
of shares of Common Stock issuable upon exercise of this Warrant immediately
prior to such adjustment and the denominator of which shall be the number of
shares of Common Stock issuable upon exercise of this Warrant immediately after
giving effect to such adjustment.
4.4 Adjustment of Number of Shares Purchasable; Consideration
Receivable. The number of shares of Common Stock issuable upon exercise of this
Warrant, and consideration receivable, shall be subject to adjustment from time
to time upon the occurrence of an Adjustment Transaction as hereinafter set
forth.
(a) Stock Dividends, Subdivisions and Combinations. In the event
that the Company subsequent to the Closing Date shall:
(i) declare a dividend upon, or make any distribution in
respect of, any of its stock, payable in Common Stock, convertible
securities or stock purchase rights, or
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
79
then the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted to that number determined by dividing
the number of shares of Common Stock issuable upon exercise of this
Warrant immediately prior to such event by a fraction (A) the numerator
of which shall be the total number of outstanding shares of Common
Stock of the Company immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares of
Common Stock of the Company immediately after such event, treating as
outstanding all shares of Common Stock issuable upon conversions or
exchanges of such convertible securities and exercises of such stock
purchase rights.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or
into another corporation (where the Company is not the surviving
corporation) or where there is a change in or distribution with respect
to the Common Stock, or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another
corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets,
shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or
distributed to the holders of Common Stock of the Company, then each
holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company
and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution
of the Board of Directors of the Company acting in good faith) in order
to provide for adjustments of shares of the Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Article 4. For
purposes of this Section 4.4(b), "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any
class which is not preferred as to dividends, distributions or assets
over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible
into or exchangeable for any such stock, either immediately or upon the
arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe
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for or purchase any such stock. The foregoing provisions of this
Section 4.4(b) shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.5 Certain Other Distributions. If at any time the Company shall
declare, set aside funds for or pay to the holders of its Common Stock any
dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its
capital stock or any other securities or property of any nature
whatsoever, or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its capital stock or
any other securities or property of any nature whatsoever,
then, the Company shall pay or distribute to each holder of this Warrant its
ratable share of such dividend or distribution as if this Warrant had been fully
exercised immediately prior to the date of any such dividend or distribution
described above or credit such amount against the Current Warrant Price,
provided, however, that if such dividend is a cash dividend under Section 4.5(a)
above, then, at the Company's option, the Company may either pay the
appropriate, ratable portion of such cash dividend to each holder of this
Warrant, or set the amount thereof off against the respective Current Warrant
Prices for the applicable Tranches.
4.6 Other Actions Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock
which would have a materially adverse effect upon the rights of a holder of this
Warrant or the economic value of this Warrant, then the number of shares of
Common Stock for which this Warrant is exercisable and/or the Current Warrant
Price thereof shall be adjusted in such manner as is equitable in the
circumstances.
4.7 Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
4.8 Preferred Stock. So long as any Warrant Shares are outstanding, the
Company shall not issue any shares of capital stock having any preferences over
any shares of Common Stock with respect to dividends, distributions or
liquidation.
4.9 Excluded Transactions. Notwithstanding any contrary provision of
this Agreement, no adjustment under this Section 4 shall be required in the
number of shares of Common Stock for which this Warrant is exercisable in the
case of (i) the issuance of shares of Common Stock upon the exercise in whole or
in part of this Warrant, (ii) the issuance of shares
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of Common Stock pursuant to a rights offering in which applicable holder hereof
elects to participate or (iii) the issuance to management officers, directors or
employees of Common Stock or options or other securities convertible into Common
Stock not to exceed an aggregate of 1,500,000 shares of Common Stock or the
equivalent thereof, or such other employee stock purchase plans as exist from
time to time.
4.10 Exemptions or Deferrals from Adjustment Procedure. If any issuance
of Common Stock or other transaction, which would otherwise require a
determination of the Appraised Value of the Common Stock, occurs within ninety
(90) days of a prior determination of that Appraised Value, the Appraised Value
of the Common Stock as previously determined shall govern and the appraisal
process contained in the definition of Appraised Value may be avoided; provided
that in such instance if the Company requests a new appraisal, the same shall be
obtained at the cost and expense of the Company.
If any transaction requiring a determination of Appraised Value shall
occur which involves the issuance of less than 25,000 shares of Common Stock or
options, warrants or securities convertible into less than 25,000 shares of
Common Stock, and the Company and the Majority Holders are unable to agree upon
the Appraised Value of the Common Stock or the securities involved in that
transaction or the adjustment in the number of shares of Common Stock issuable
upon exercise of this Warrant, then the submission of such determination to an
investment bank in accordance with the definition of "Appraised Value" shall be
deferred until the earlier of (i) the date on which the aggregate number of
shares of Common Stock or options, warrants or other securities convertible into
Common Stock issued by the Company (and as to which no adjustment in the number
of shares of Common Stock issuable under this Warrant has been made) equals or
exceeds 25,000 shares of Common Stock in the aggregate or (ii) the date on which
any dividend, distribution or other payment is to be made with respect to the
Common Stock, in which case the investment bank's determination of the number of
shares issuable upon exercise of this Warrant shall be retroactive to the date
of such payment.
4.11 Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the Current Warrant
Price at which a share of Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to this Article 4, the Company shall
forthwith prepare a certificate to be executed by the chief financial officer of
the Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated, specifying
the number of shares of Common Stock for which this Warrant is exercisable and
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to all
holders of Warrants in accordance with Section 12.3. The Company shall keep at
its office or agency designated pursuant to Section 3.1 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by each holder hereof or any prospective purchaser
of this Warrant designated by any holder hereof.
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4.12 Notice of Corporate Action. If at any time
(a) The Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
(other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company) or other distribution, or
any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all of the
property, assets or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to each holder
hereof (i) at least ten (10) days' prior written notice of the date on which a
record date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (x) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(y) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to each holder hereof at the last address of
such holder appearing on the books of the Company and delivered in accordance
with Section 12.3.
ARTICLE 5
RESTRICTIONS ON TRANSFER
The conditions contained in the following sections of this Article 5
are intended to ensure compliance with the Securities Act in respect of the
transfer of this Warrant and Common Stock
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issuable upon the exercise thereof. Reference in this Article 5 to shares of
Common Stock issuable upon the exercise of this Warrant includes shares of
Common Stock theretofore issued upon the exercise of this Warrant which are then
evidenced by certificates required to bear the legend set forth in Section 5.8.
5.1 Notice of Proposed Transfer; Registration Not Required. Each holder
hereof and each holder of any shares of Common Stock issuable upon the exercise
of this Warrant, by acceptance hereof or thereof, agrees to give written notice
to the Company, prior to any transfer of this Warrant, such shares of Common
Stock or any portion hereof or thereof, of its intention to make such transfer.
Such holder shall request an Opinion of Counsel (which shall be rendered by
counsel reasonably acceptable to the Company) that the proposed transfer may be
effected without registration or qualification under any federal or state
securities or blue sky law. Counsel shall, as promptly as practicable, notify
the Company and the applicable holder of such opinion and of the terms and
conditions, if any, to be observed in such transfer, whereupon the applicable
holder shall be entitled to transfer this Warrant or such shares of Common Stock
(or portion thereof). In the event this Warrant shall be exercised as an
incident to such transfer, such exercise shall relate back and for all purposes
of this Warrant be deemed to have occurred as of the date of such notice
regardless of delays incurred by reason of the provisions of this Article 5
which may result in the actual exercise on any later date.
Notwithstanding the provisions of the foregoing paragraph, each holder
hereof or shares of Common Stock issuable upon the exercise hereof, shall be
permitted to transfer this Warrant or any such shares of Common Stock to a
limited number of institutional holders without obtaining an Opinion of Counsel,
provided that (i) each such holder represents in writing that it is acquiring
such securities for investment and not with a view to the distribution thereof
(subject, however, to any requirement of law that the disposition thereof shall
at all times be within the control of such holder) and (ii) each such holder
agrees in writing to be bound by all the restrictions on transfer contained in
this Article 5.
5.2 Required Registration and Qualification. If the Majority Holders so
elect, at any time after August 1, 1997, such Persons shall have the right to
request the Company to use its best efforts to effect the registration and
qualification of part or all of the Warrant Shares under the Securities Act and
the securities or blue sky laws of any jurisdiction; provided, however, the
Company shall not be required to use such best efforts (i) on more than two (2)
occasions for all Warrants or Issued Warrant Shares pursuant to this Section 5.2
or (ii) if the Company shall so request, for a period not to exceed nine (9)
months immediately following the date a public offering of the Common Stock
(pursuant to an effective registration statement under the Securities Act) is
commenced. Such request by the Majority Holders shall be in writing and shall
specify the number of shares to be registered or qualified and the jurisdictions
in which such registration or qualification is desired. In no event shall the
Majority Holders be entitled to request a registration of less than thirty
percent (30%) of the then remaining Warrant Shares.
Upon such request, the Company shall promptly (a) take such steps as
are necessary or
84
appropriate to prepare for a registration or qualification of shares of Common
Stock and (b) give written notice to the holders hereof and holders of Issued
Warrant Shares bearing the legend required by Section 5.8 hereof of a proposed
registration or qualification by the Company under the Securities Act and under
the securities or blue sky laws of the requested jurisdictions and shall, as
expeditiously as possible, in good faith, use its best efforts to effect any
such registration or qualification of the aggregate number of Warrant Shares
designated in such request, all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof) by the prospective
sellers of Warrant Shares to be registered or qualified, with notification to or
approval of any governmental authority under any federal or state law, or any
listing with any securities exchange, which may be required to permit the sale
or disposition of any Warrant Shares which the holders of such shares propose to
make, and the Company will keep effective and current such registration or
qualification for a period of nine (9) months.
If the managing underwriter, who shall be selected by the Company,
advises the prospective sellers in writing that the aggregate number of Warrant
Shares to be sold in the proposed distribution and other shares of Common Stock,
if any, requested to be registered by other holders of registration rights or
proposed to be included in such registration by the Company should be less than
the number of Warrant Shares and other shares of Common Stock requested or
proposed to be registered, the number of Warrant Shares and other shares of
Common Stock to be sold by each prospective seller (including the Company) shall
be reduced as follows: first, the number of shares of Common Stock proposed to
be registered by the Company shall be reduced to zero, if necessary; second, the
number of shares of Common Stock proposed to be registered by the holders of
Common Stock possessing registration rights granted by the Company other than
under or arising from this Warrant shall be reduced to zero, if necessary; and
third, the number of Warrant Shares proposed to be included in such registration
shall be reduced pro rata, so that each prospective seller may sell that
proportion of Warrant Shares to be sold in the proposed distribution which the
number of Warrant Shares proposed to be sold by such prospective seller bears to
the aggregate number of Warrant Shares proposed to be sold by all prospective
sellers. If such underwriter determines that the number of shares of Common
Stock proposed to be sold is insufficient to proceed with such registration or
qualification, the Company shall use its best efforts to effect such
registration as soon as commercially practicable thereafter.
5.3 Incidental Registration and Qualification. If the Company or any
security holder of the Company other than a holder hereof or of Issued Warrant
Shares proposes to register any securities of the Company under the Securities
Act on any registration form (otherwise than for the registration of securities
to be offered and sold by the Company pursuant to (a) an employee benefit plan,
(b) a dividend or interest reinvestment plan, (c) other similar plans or (d)
reclassifications of securities, mergers, consolidations and acquisitions of
assets) permitting a secondary offering or distribution, not less than ninety
(90) days prior to each such registration the Company shall give to the holders
hereof and the holders of Issued Warrant Shares bearing the legend required by
Section 5.8 written notice of such proposal which shall describe in detail the
proposed registration and distribution (including those jurisdictions where
registration or qualification under the securities or blue sky laws is intended)
and, upon the written request of
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any holder hereof or any holder of Issued Warrant Shares furnished within
thirty (30) days after the date of any such notice, proceed to include in such
registration such Warrant Shares ("Piggy-Back Shares") as have been requested
by any such holder to be included in such registration. The holders hereof or
any holder of such Issued Warrant Shares shall in its request describe briefly
the proposed disposition of such shares of Common Stock. The Company will in
each instance use its best efforts to cause all such Piggy-Back Shares to be
registered under the Securities Act and qualified under the securities or blue
sky laws of any jurisdiction requested by a prospective seller, all to the
extent necessary to permit the sale or other disposition thereof (in the manner
stated in such request) by a prospective seller of the securities so
registered.
If the managing underwriter, who shall be selected by the Person who
initiated such registration, advises the Company in writing that, in its
opinion, the inclusion of the Piggy-Back Shares with the securities being
registered by the Company and other prospective sellers would materially
adversely affect the distribution of all such securities, then (a) the Company
and each prospective seller may sell that proportion of the shares of Common
Stock to be sold in the proposed distribution which the number of shares of
Common Stock proposed to be sold by such prospective seller bears to the
aggregate number of shares of Common Stock proposed to be sold by all
prospective sellers (including the Company) or (b) a prospective seller may at
its option delay its offering and sale for a period not to exceed ninety (90)
days after the effective date of such registration as such managing underwriter
shall reasonably request. In the event of such delay, the Company shall use its
best efforts to effect any registration or qualification under the Securities
Act and the securities or blue sky laws of any jurisdiction as may be necessary
to permit such prospective seller to make its proposed offering and sale
following the end of such period of delay and shall pay all expenses related
thereto in accordance with Section 5.4.
Each holder hereof and of Issued Warrant Shares who has requested
shares of Common Stock to be included in a registration pursuant to this Section
5.3, by acceptance hereof or thereof, agrees to (a) the selection by the Company
or such other security holder of the underwriter to manage such registration and
(b) execute an underwriting agreement with such underwriter that is (i)
reasonably satisfactory to such holder and (ii) in customary form.
5.4 Registration and Qualification Procedures. Whenever the
Company is required by the provisions of Section 5.2 or 5.3 to use its best
efforts to effect the registration of any of its securities under the Securities
Act, the Company will, as expeditiously as is possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities in connection with which the
Company will give the sellers, their underwriters, if any, their
respective counsel and accountants the opportunity to participate in
the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants
who have certified their financial statements as shall be necessary, in
the
86
opinion of such sellers' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities
Act;
(b) 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 and the prospectus current and to comply with the
provisions of the Securities Act with respect to the sale of all
securities covered by such registration statement whenever the seller
of such securities shall desire to sell the same; provided, however,
the Company shall have no obligation to file any amendment or
supplement at its own expense more than nine (9) months after the
effective date of such registration statement;
(c) furnish to each seller such numbers of copies of
preliminary prospectuses and prospectuses and each supplement or
amendment thereto and such other documents as each seller may
reasonably request in order to facilitate the sale or other disposition
of the securities owned by such seller in conformity with (i) the
requirements of the Securities Act and (ii) the seller's proposed
method of distribution;
(d) register or qualify the securities covered by such
registration statement under the securities or blue sky laws of such
jurisdictions within the United States as each seller shall request,
and do such other reasonable acts and things as may be required of it
to enable each seller to consummate the sale or other disposition in
such jurisdictions of the securities owned by such seller; provided,
however, that the Company shall not be required to (i) qualify as a
foreign corporation or consent to a general and unlimited service of
process in any such jurisdiction or (ii) qualify as a dealer in
securities;
(e) furnish, at the request of any seller on the date such
securities are delivered to the underwriters for sale pursuant to such
registration or, if such securities are not being sold through
underwriters, on the date the registration statement with respect to
such securities becomes effective, (i) an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such
request, covering such legal matters with respect to the registration
in respect of which such opinion is being given as are customarily
included in such opinions and (ii) letters, dated, respectively, (1)
the effective date of the registration statement and (2) the date such
securities are delivered to the underwriters, if any, for sale pursuant
to such registration, from a firm of independent certified public
accountants of recognized national standing selected by the Company,
addressed to the underwriters, if any, and to the sellers making such
request, covering such financial, statistical and accounting matters
with respect to the registration in respect of which such letters are
being given as the seller of such securities may reasonably request and
are customarily included in such letters;
(f) otherwise use its best efforts to comply with all
applicable rules and
87
regulations of the Commission, and make available to its security
holders as soon as reasonably practicable, but not later than sixteen
(16) months after the effective date of the registration statement, an
earnings statement covering a period of at least twelve (12) months
beginning after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(g) enter into and perform an underwriting agreement with the
managing underwriter, if any, selected as provided in Section 5.2 or
5.3, containing customary (i) terms of offer and sale of the
securities, payment provisions, underwriting discounts and commissions
and (ii) representations, warranties, covenants, indemnities, terms and
conditions; the sellers may, at their option, require that any or all
of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters
shall also be made to and for the benefit of such sellers and that any
or all of the conditions precedent to the obligations of such
underwriters under such under writing agreement be conditions precedent
to the obligations of such sellers; such sellers shall not be required
to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding such sellers and such sellers' intended method of
distribution and any other representation required by law;
(h) notify each seller at any time when a prospectus
relating to the registration is required to be delivered under the
Securities Act, upon discovery that, or upon 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 any material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, at the
request of any such seller promptly 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 purchasers of such securities, 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 the light of the circumstances under which
they were made; and
(i) keep each seller advised in writing as to the
initiation and progress of any registration under Section 5.2 or 5.3.
5.5 Holdback Agreements. The Company agrees not to effect any
public sale or distribution of its equity securities or securities convertible
into or exchangeable or exercisable for any of such securities during the seven
(7) days prior to or ninety (90) days after any underwritten registration
pursuant to Section 5.2 or 5.3 has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form S-8 or
S-4 or any successor or similar forms thereto, and to cause each Person who
purchases its equity securities or any securities convertible into or
exchangeable or exercisable for any of such securities at any
88
time after the date of this Warrant (other than in a public offering) to agree
not to effect any such public sale or distribution of such securities, during
such period.
5.6 Allocation of Expenses. If the Company is required by the
provisions of Section 5.2 or 5.3 to use its best efforts to effect the
registration or qualification under the Securities Act or any state securities
or blue sky laws of any of the Warrant Shares, the Company shall pay all
expenses in connection therewith, including, without limitation, (a) all
expenses incident to filing with the National Association of Securities Dealers,
Inc., (b) registration fees, (c) printing expenses, (d) accounting and legal
fees and expenses, (e) expenses of any special audits incident to or required by
any such registration or qualification, (f) premiums for insurance in such
amount, if any, deemed appropriate by the managing underwriter and (g) expenses
of complying with the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification; provided, however, the
Company shall not be liable for (1) any discounts or commissions to any
underwriter attributable to Warrant Shares being sold; (2) any stock transfer
taxes incurred in respect of the Warrant Shares being sold; (3) the legal fees
of any holder of this Warrant or Warrant Shares being sold.
5.7 Indemnification. In connection with any registration or
qualification of securities under Section 5.2 or 5.3, the Company agrees to
indemnify the holders of this Warrant and the holders of any Warrant Shares and
each underwriter thereof, including each person, if any, who controls any holder
or such stockholder or underwriter within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) caused by any untrue, or alleged
untrue, statement of a material fact contained in any registration statement,
preliminary prospectus, prospectus or notification or offering circular (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or caused by any omission, or alleged omission, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement or alleged
untrue statement or omission or alleged omission based upon information
furnished in writing to the Company by the applicable holder or any such
stockholder or underwriter expressly for use therein. The Company and each
officer, director and controlling Person of the Company shall be indemnified by
the holders of this Warrant and by the holders of any Issued Warrant Shares for
all such losses, claims, damages, liabilities and expenses (including the costs
of reasonable investigation) caused by any such untrue, or alleged untrue,
statement or any such omission or alleged omission, based upon information
furnished in writing to the Company by the holders hereof or any such
stockholder expressly for use therein.
Promptly upon receipt by a party indemnified under this Section 5.7 of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 5.7, such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party under this Section 5.7
unless such failure shall
89
materially adversely affect the defense of such action. In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
(other than reasonable costs of investigation) shall be paid by the indemnified
party unless (a) the indemnifying party agrees to pay the same, (b) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party or (c) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). No indemnifying
party shall be liable for any settlement entered into without its consent.
If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages, liabilities, expenses or action in respect thereof referred to
herein, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities, expenses or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and the sellers of such Common Stock, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities, expenses or actions as well as any other
relevant equitable considerations, including the failure to give the notice
required hereunder. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact relates to information supplied by the Company, on the one hand, or the
sellers of such Common Stock, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each holder hereof agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if all of the sellers of such Common
Stock were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or action in respect thereof, referred to
above, shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section, in no event shall the amount contributed by any seller of Common Stock
exceed the aggregate gross offering proceeds received by such seller from the
sale of Common Stock to which such contribution claim relates. No person guilty
of fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
Each holder of this Warrant and each holder of shares of Issued Warrant
Shares upon the
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exercise hereof and bearing the legend required by Section 5.8, by acceptance
hereof or thereof, as the case may be, agrees to the indemnification and
contribution provisions of this Section 5.7.
5.8 Legend on Warrants and Certificates. Each Warrant shall bear a
legend in substantially the following form:
"This Warrant and any shares issuable upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
and neither this Warrant nor any such shares may be transferred in the
absence of such registration or an exemption therefrom under such Act."
In case any shares of Common Stock are issued upon the exercise in whole or in
part of this Warrant or are thereafter transferred, in either case under such
circumstances that no registration under the Securities Act is required, each
certificate representing such shares shall bear on the face thereof the
following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and any transfer thereof
is subject to the conditions specified in the Warrant dated as of
February , 1997 originally issued by Home Products International, Inc.
(the "Company") to General Electric Capital Corporation to purchase
shares of Common Stock, $.01 par value, of the Company. A copy of the
form of such Warrant is on file with the Secretary of the Company at
its principal executive office, and will be furnished without charge by
the Company to each holder of this certificate upon written request to
the Secretary of the Company at such address."
5.9 Termination of Restrictions. The restrictions imposed under this
Article 5 upon the transferability of this Warrant or of Warrant Shares shall
cease when (a) a registration statement covering such Warrant or Warrant Shares
becomes effective under the Securities Act or (b) the Company receives an
Opinion of Counsel that such restrictions are no longer required in order to
ensure compliance with the Securities Act. When such restrictions terminate, the
Company shall, or shall instruct its transfer agent and registrar to, issue new
certificates in the name of the applicable holder not bearing the legends
required under Section 5.8.
5.10 Supplying Information. The Company, the holders hereof and each
holder of Warrant Shares shall cooperate with each other in supplying such
information as may be necessary for any of such parties to complete and file any
information reporting forms presently or hereafter required by the Commission or
any commissioner or other authority administering the blue sky or securities
laws of any jurisdiction where shares of Common Stock are proposed to be sold
pursuant to Section 5.2 or 5.3.
5.11 Liquidated Damages. In the event the Company fails to comply with
any provision of Section 5.2, 5.3 or 5.4, upon written request of the holders of
this Warrant or any holder of Warrant Shares, the Company shall promptly obtain
an opinion of the independent
91
investment banking firm of Xxxxxxx Xxxxx & Company estimating the net proceeds
which such Person would have received (after deducting underwriting commissions
and discounts and any other expenses that would have been solely attributable to
the registration or qualification of such shares of Common Stock) upon the sale
of shares of Common Stock proposed to be sold pursuant to such registration or
qualification. Such opinion of an independent investment banking firm shall be
(a) delivered in writing to the Company, with a copy to such Person, within (7)
seven days after the date of the request of such Person to the Company and (b)
conclusive and binding on the Company and such Person.
Within thirty (30) days of receipt by the Company of such estimate, the
Company shall pay to such Person an amount equal to (a) such estimated net
proceeds minus (b) in the case of this Warrant or portion hereof that has not
been exercised, the aggregate Current Warrant Price payable upon the exercise
hereof. Payment of such amount shall be made by a certified or official bank
check payable to the order of such Person. Upon payment to such Person of such
liquidated damages, such Person shall assign to the Company this Warrant and the
Issued Warrant Shares proposed to be sold pursuant to the registration or
qualification in question without any representation or warranty (other than
that such holder has not taken any action which would impair its ownership of or
right to transfer to the Company the Warrant or such shares of Common Stock). If
less than all of the Issued Warrant Shares were proposed to be sold pursuant to
the registration or qualification in question, the Company shall cancel this
Warrant and issue in the name of, and deliver to, the applicable holder,
pursuant to Article 2, a new Warrant for the Issued Warrant Shares not required
to be assigned to the Company pursuant to the provisions of the preceding
sentence. The Company agrees that the amount of actual damages that would be
sustained by the applicable holder as a result of the failure of the Company to
comply with any provisions of Section 5.2, 5.3 or 5.4 is not capable of
ascertainment on any other basis.
ARTICLE 6
PARTICIPATION IN CORPORATE DISTRIBUTIONS
6.1 Company's Obligation to Make Payments. The Company shall not
repurchase or redeem any of its equity securities or any securities convertible
into or exchangeable for such equity securities or any warrants or other rights
to purchase such equity securities (except to the extent permitted under the
terms of the Credit Agreement) unless it concurrently makes a cash payment to
the holders of this Warrant equal to the product of (i) the quotient obtained by
dividing (x) the aggregate amount of cash and the aggregate fair value of any
property paid out by the Company in connection with any such repurchase or
redemption at the time, as determined in good faith by the Board of Directors of
the Company, by (y) the number of shares of Fully Diluted Outstanding Common
Stock (including shares of Common Stock then issuable upon exercise of this
Warrant) immediately after such repurchase or redemption, and (ii) the number of
shares of Common Stock then issuable upon the exercise of this Warrant. Upon any
such payment by the Company, the number of shares of Common Stock then issuable
upon the exercise of this Warrant shall be adjusted by multiplying the number of
shares of Common Stock
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for which this Warrant is exercisable immediately prior to such payment by a
fraction (A) the numerator of which shall be the number of shares of Common
Stock Outstanding immediately after such repurchase or redemption, and (B) the
denominator of which shall be the number of shares of Common Stock Outstanding
immediately prior to such repurchase or redemption. Concurrently, each holder of
this Warrant shall deliver the same to the Company for cancellation and the
Company shall deliver to each holder a new Warrant evidencing the adjusted
number of unpurchased shares of Common Stock called for by this Article 6, which
new Warrant shall in all other respects be identical to this Warrant, or, at the
request of the applicable holder, appropriate notation may be made on this
Warrant and the same returned to the applicable holder hereof.
ARTICLE 7
MANDATORY CALL
7.1 Mandatory Call. If the Subordinated Debt has been paid in full on
prior to July 31, 1997, the Company shall concurrently repurchase this Warrant
at a call price equal to $10 per Issuable Warrant Share ($792,040 in the
aggregate) and the holders hereof shall surrender this Warrant for cancellation
upon payment of the call price in immediately available funds.
7.2 Voluntary Call. The Company may call the Warrant shares and
terminate this Warrant at any time after July 31, 2002, at a call price equal to
the greater of:
(i) the Market Price for such Warrant Shares reduced by the respective
Current Warrant Prices therefore (if not paid as to Issuable Warrant Shares); or
(ii) ten dollars ($10.00) per Warrant Share reduced by the respective Current
Warrant Prices therefor, (if not paid as to Issuable Warrant Shares). The
Company shall exercise such call by providing written notice to the then holders
of this Warrant, and the parties shall close such transaction within thirty (30)
days of such notice, at the Company's principal office. At such closing, the
Company shall pay the call price in full to the holders of this Warrant, and the
holders of this Warrant shall surrender it to the Company.
ARTICLE 8
INTENTIONALLY DELETED
ARTICLE 9
FINANCIAL AND BUSINESS INFORMATION
9.1 Monthly and Quarterly Information. While the Credit Agreement is in
effect, the Company will deliver to GE Capital copies of the monthly financial
statements required to be delivered to the Agent, as and when the same are
delivered to the Agent. As to holders other than GE Capital and as to GE Capital
after the Credit Agreement has been terminated, the Company shall provide to
such holders, within ten (10) days after the filing thereof with the Commission,
copies of all quarterly financial statements and other financial reports
required to
93
be filed with the Commission or which the Company elects to file with the
Commission or otherwise to publicly disclose.
9.2 Annual Information. While the Credit Agreement is in effect, the
Company will deliver to each holder hereof copies of the annual financial
statements required to be delivered to the Agent under the Credit Agreement as
and when the same are delivered to such Agent. Thereafter, the Company shall
provide to such holder hereof, as and when required to be filed with the
Commission, copies of all annual financial statements, annual reports to
stockholders and proxy statements required to be filed with the Commission.
9.3 Filings. The Company will deliver to each holder hereof promptly
upon their becoming available one copy of each report, notice or proxy statement
sent by the Company to its stockholders generally, and of each regular or
periodic report pursuant to the Exchange Act, and any registration statement,
prospectus or written communication (other than transmittal letters) pursuant to
the Securities Act filed by the Company with the Commission or any securities
exchange on which shares of Common Stock are listed.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each holder of this
Warrant that as of the Closing Date:
10.1 Organization and Capitalization of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The authorized capital of the Company consists of
7,500,000 shares of Common Stock, par value $.01 per share and 500,000 shares of
preferred stock $.01 par value per share, none of which preferred stock has been
issued. No unissued shares of Common Stock are reserved for any purpose other
than for issuance upon the exercise of this Warrant. Except as set forth on
Disclosure Schedule (3.8) of the Credit Agreement as of the date hereof, there
are no outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which the Company may be required to issue, sell,
repurchase or redeem any shares of Common Stock or other equity securities, and
there are no preemptive rights in effect with respect to the issuance of any
shares of Common Stock. All the outstanding shares of Common Stock have been
duly authorized, validly issued without violation of any preemptive or similar
rights and are fully paid and nonassessable.
10.2 Authority. The Company has full corporate power and authority to
execute and deliver this Warrant and to perform all of its obligations
hereunder, and the execution, delivery and performance hereof has been duly
authorized by all necessary corporate action on its part. This Warrant has been
duly executed on behalf of the Company and constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with its terms.
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10.3 No Legal Bar. Neither the execution, delivery or performance of
this Warrant will (a) conflict with or result in a violation of the Articles of
Incorporation or By-Laws of the Company, (b) conflict with or result in a
violation of any law, statute, regulation, order or decree applicable to the
Company or any Affiliate of the Company, (c) require any consent or
authorization or filing with, or other act by or in respect of any governmental
authority or (d) result in a breach of, constitute a default under or constitute
an event creating rights of acceleration, termination or cancellation under any
mortgage, lease, contract, franchise, instrument or other agreement to which the
Company is a party or by which it is bound.
10.4 Validity of Shares. The Company has duly authorized the issuance
of shares of Common Stock pursuant to this Warrant and has reserved sufficient
shares of Common Stock to be issued upon exercise of this Warrant. The Common
Stock, when paid for and delivered pursuant to the terms of this Warrant, will
constitute duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock of the Company.
10.5 Incorporation of Representations and Warranties of Credit
Agreement. The representations and warranties made by the Company in the Credit
Agreement are incorporated herein by reference and shall be deemed to be made
herein.
ARTICLE 11
VARIOUS COVENANTS OF THE COMPANY
11.1 No Impairment or Amendment. The Company shall not by any action
including, without limitation, amending its Articles 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 of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in taking of all such actions as may be necessary or appropriate to protect
the rights of each holder hereof against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the then Current Warrant Price therefor upon such exercise immediately prior to
such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, (c)
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant, (d) not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon the voluntary or involuntary dissolution, liquidation or winding
up of the Company, (e) not undertake any reverse stock split, combination,
reorganization or other reclassification of its capital stock which would have
the effect of making this Warrant exercisable for less than __% of the shares of
Common Stock Outstanding , and (f) not, without the written consent of Majority
Holders, amend its Articles of Incorporation.
Upon the request of the holder hereof, the Company will at any time
during the period
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this Warrant is outstanding acknowledge in writing, in form satisfactory to each
holder, the continuing validity of this Warrant and the Company's obligations
hereunder.
11.2 Reservation of Common Stock; Qualification.
(a) From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of this
Warrant such number of its authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of this
Warrant. All shares of Common Stock which shall be so issuable, when
issued upon exercise of this Warrant and payment therefor in accordance
with the terms of this Warrant, shall be duly authorized and validly
issued and fully paid and nonassessable, and not subject to preemptive
rights.
(b) Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of
the shares of Common Stock issuable upon exercise of this Warrant, the
Company shall take any corporate action which may be necessary in order
that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Current Warrant
Price.
(c) If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or
qualification with any governmental authority or other governmental
approval or filing under any federal or state law before such shares
may be so issued, the Company will in good faith and as expeditiously
as possible and at its expense endeavor to cause such shares to be duly
registered or qualified.
11.3 Taking of Record. In the case of all dividends or other
distributions by the Company to the holders of its Common Stock with respect to
which any provision of Article 4 refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
11.4 Listing on Securities Exchange. If the Company shall list any
shares of Common Stock on any securities exchange it will, at its expense, list
thereon, maintain and increase when necessary such listing of, all Issued
Warrant Shares and, to the extent permissible under the applicable securities
exchange rules, all Issuable Warrant Shares so long as any shares of Common
Stock shall be so listed. The Company will also so list on each securities
exchange, and will maintain such listing of, any other securities which the
holders of this Warrant shall be entitled to receive upon the exercise thereof
if at the time any securities of the same class shall be listed on such
securities exchange by the Company.
11.5 Availability of Information. The Company will cooperate with
each holder hereof or of Issued Warrant Shares in supplying such information as
may be necessary for such holders to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the
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sale of this Warrant or such Issued Warrant Shares.
11.6 Certain Expenses. The Company shall pay all expenses in
connection with, and all taxes (other than stock transfer taxes) and other
governmental charges that may be imposed in respect of, the issue, sale and
delivery of the Warrant, the Issuable Warrant Shares and the Issued Warrant
Shares.
ARTICLE 12
MISCELLANEOUS
12.1 Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of any holder hereof shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to each holder hereof such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by such holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
12.2 Limitation of Liability. No provision hereof, in the absence
of affirmative action by each holder hereof to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of such holder hereof,
shall give rise to any liability of such holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
12.3 Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any holder hereof or holder of Issued Warrant
Shares, at its last known address appearing on the books of the Company
maintained for such purpose.
(b) If to the Company, at:
Selfix, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
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Much, Shelist, Freed, Denenberg, Ament,
Xxxx & Xxxxxxxxxx PC
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxxx
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or five (5) business days after the same shall have been deposited
in the United States mail, certified, or one (1) business day after the same has
been deposited with a reputable overnight courier with instructions to deliver
the same on the next Business Day. Failure or delay in delivering copies of any
notice, demand, request, approval, declaration, delivery or other communication
to the person designated above to receive a copy shall in no way adversely
affect the effectiveness of such notice, demand, request, approval, declaration,
delivery or other communication.
12.4 Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Company, each holder hereof and (to the extent provided herein) each holder of
Issued Warrant Shares, and shall be enforceable by any such holder.
12.5 Remedies. The Company stipulates that the remedies at law of each
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
12.6 Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and Majority
Holders; provided that this Warrant may not be modified or amended to reduce the
number of shares of Common Stock for which this Warrant is exercisable or to
increase the price at which such shares may be purchased upon exercise of this
Warrant (before giving effect to any adjustment as provided herein) without the
prior written consent of each holder hereof.
12.7 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of
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such provision or the remaining provisions of this Warrant.
12.8 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
12.9 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE INTERNAL
LAWS AND DECISIONS OF THE STATE OF ILLINOIS, APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.
12.10 Jurisdiction. The Company and each holder hereof consent and
agree that the State or Federal Courts located in the City of Chicago, Illinois
shall have exclusive jurisdiction to hear and determine any claims or disputes
between the Company and such holder in connection with this Warrant that are not
resolved by an investment banking firm or [accounting firm] in accordance with
the terms hereof, and the Company and each holder hereof hereby submit to the
jurisdiction of such courts.
12.11 WAIVER OF JURY TRIAL. TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND ARBITRATION, THE COMPANY AND THE HOLDERS
HEREOF AGREE THAT IF ANY DISPUTE IN CONNECTION WITH THIS WARRANT IS NOT RESOLVED
BY AN INVESTMENT BANKING FIRM IN ACCORDANCE WITH THE TERMS HEREOF, THE COMPANY
AND EACH SUCH HOLDER WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE IN CONNECTION HEREWITH.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: February 27, 1997.
HOME PRODUCTS INTERNATIONAL, INC.
By:
Name:
Title:
Attest:
By:
Its:
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EXHIBIT A
NOTICE OF EXERCISE
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ Shares of Common Stock of Home
Products International, Inc. and herewith makes payment therefor in the amount
of $__________ as follows:
$________________ by wire transfer;
$________________ by certified or official bank check enclosed
herewith;
$________________ by deducting from the shares delivered upon
exercise hereof a number of shares having an
aggregate Appraised Value on the date of exercise
equal to the aggregate Current Warrant Price for
all shares as to which this Warrant is then being
exercised;
[$________________ by application of the Obligations as provided in
Section 2.6 of this Warrant;]
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to _______________________ whose address is
____________________ _________________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned
[_______________]. The Common Stock as to which the Warrant is exercised
consists of the following numbers of shares from the following Tranches at the
following respective Current Warrant Prices:________________________________.
___________________________________
(Name of Registered Owner)
___________________________________
(Signature of Registered Owner)
___________________________________
(Street Address)
___________________________________
101
(City) (State) (Zip Code)
102
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint _________________________
attorney-in-fact to register such transfer on the books of Home Products
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated: Print Name:
Signature:
Witness:
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
