EXHIBIT 10.11
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON THE EXERCISE OF
THE WARRANTS HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW.
NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION
OR OTHER QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT (AS DEFINED
HEREIN IN SECTION 8) IN FAVOR OF PNC BANK, NATIONAL ASSOCIATION, AS AGENT FOR
CERTAIN BANKS. NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN
INSTRUMENT, NO PAYMENT ON ACCOUNT OF ANY OBLIGATION ARISING FROM OR IN
CONNECTION WITH THE WITHIN INSTRUMENT OR ANY RELATED AGREEMENT (WHETHER OF
PRINCIPAL, INTEREST OR OTHERWISE) SHALL BE MADE, PAID, RECEIVED OR ACCEPTED
EXCEPT IN ACCORDANCE WITH THE TERMS OF THE SUBORDINATION AGREEMENT.
CECO Environmental Corp.
PROMISSORY NOTE
$500,000 December 7, 1999
FOR VALUE RECEIVED, the undersigned, CECO Environmental Corp. (the
"Company"), a New York corporation, hereby promises to pay to the order of ICS
Trustee Services Ltd. or registered assigns ("Holder"), the principal sum of
FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) on the Maturity Date, as defined in
Section 1 below. This Note is part of a series of Notes of like tenor and effect
to this Note in the aggregate principal amount of $5,000,000 to be issued in
connection with a mezzanine financing by the Company (the "1999 Subordinated
Notes").
1. Maturity. This Note shall be due and payable upon the earlier to
occur of the following events (the "Maturity Date"): (i) six and one-half (6
1/2) years from the date hereof; (ii) six (6) months after repayment of the
Superior Debt (as defined in Section 8 below); or (iii) the closing (any such
closing referred to as the "Closing") of a Sale Transaction. For purposes of
this Note, a Sale Transaction shall mean (i) a merger, consolidation, corporate
reorganization, or sale of shares of stock of the Company as a result of which
there is a change in control and/or the shareholders of the Company on the date
hereof ("Current Shareholders") own 50% or less of the outstanding shares of the
Company on a fully-diluted basis immediately after the transaction and,
including as outstanding for purposes of such calculation, any warrants, options
or other instruments convertible or exchangeable into equity securities of the
Company issued to persons other than the Current Shareholders in connection with
the transaction or (ii) the sale of (A) fifty percent or more of the assets of
the Company or (B) any subsidiary, division or line of business of the Company
for total consideration in excess of $5 million.
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2. Interest. Interest shall accrue on the unpaid principal balance
hereof and on any interest payment that is not made when due at the simple
compounded rate of twelve percent (12%) per annum from the date hereof. Accrued
Interest shall be due and payable on June 30 and December 31 of each year
commencing June 30, 2000 and on the Maturity Date. Notwithstanding the
foregoing, interest due under this note on June 30, 2000 and December 31, 2000,
will be paid in accordance with the terms of the Subordination Agreement. It
shall not be a default hereunder and interest will not accrue on any portion of
such interest payments deferred pursuant to the Subordination Agreement
("Deferred Interest") so long as the Deferred Interest is paid at the time and
in the manner allowed by the Subordination Agreement. In the Event of Default
(as defined herein), interest shall accrue on all unpaid amounts due hereunder
including without limitation, interest, at the rate of fifteen percent (15%) per
annum. If a judgment is entered against the Company on this Note, the amount of
the judgment so entered shall bear interest at the highest rate authorized by
law as of the date of the entry of the judgment.
3. Payments. Payments of both principal and interest shall be made at
the principal executive office of the Company, or such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
So long as no Event of Default has occurred in this Note, all
payments hereunder shall first be applied to interest, then to principal. Upon
the occurrence of an Event of Default in this Note, all payments hereunder shall
first be applied to costs pursuant to Section 13.5, then to interest and the
remainder to principal.
4. Registration, Transfer and Exchange of Notes. The Company will keep
at its principal office a register in which it will provide for the registration
of and transfer of this Note, at its own expense (excluding transfer taxes). If
any Note is surrendered at said office or at the place of payment named in the
Note for registration of transfer or exchange (accompanied in the case of
registration of transfer or exchange by a written instrument of transfer in form
satisfactory to the Company duly executed by or on behalf of the holder), the
Company, at its expense, will deliver in exchange one or more new Notes in
denominations of $10,000 or larger multiples of $1,000, as requested by the
holder for the aggregate unpaid principal amount. Any Note or Notes issued in a
transfer or exchange shall carry the same rights to increase Notes surrendered.
The Holder agrees that prior to making any sale, transfer, pledge, assignment,
hypothecation, or other disposition (each, a "Transfer") of the Note, the Holder
shall give written notice to the Company describing the manner in which any such
proposed Transfer is to be made and providing such additional information and
documentation regarding the Transfer as the Company reasonably requests. If the
Company so requests, the Holder shall at his expense provide the Company with an
opinion of counsel (which counsel must be reasonably satisfactory to the
Company, to the holder, in form and substance satisfactory to the Company) that
the proposed Transfer complies with applicable federal and state securities
laws. The Company shall have no obligation to Transfer any Notes unless the
holder thereof has complied with the foregoing provisions, and any such
attempted Transfer shall be null and void.
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5. Registered Owner. Prior to due presentation for registration of
transfer, the Company may treat the person in whose name any Note is registered
as the owner and holder of such Note for the purpose of receiving payment of
principal of, and interest on, such Note and for all other purposes.
6. Prepayment.
6.1 Optional Prepayment. The Company, at its option and
without any premium, may prepay in whole or in part the principal
amount of this Note at 100% of the face value of the Note at any time;
provided, however, that if the Company intends to prepay any one or
more of the 1999 Subordinated Notes in part, it shall prepay the same
percentage of each outstanding 1999 Subordinated Note. The Company
shall, at the time of any such prepayment, pay to the holder of this
Note all interest accrued and unpaid to the Prepayment Date (defined
below). Notwithstanding the foregoing, once a notice of the Closing of
a Sale Transaction pursuant to Section 13.4 has been sent to the
Holder, the Company may not prepay this Note prior to the Closing of a
Sale Transaction, or until the Sale Transaction has been formally
abandoned.
6.2 Notice of Prepayment. At least five (5) but not more than
fifteen (15) days prior to the date fixed for any prepayment, written
notice shall be given to the holder of the Notes of the election of the
Company to prepay all or a specified portion of the principal amount of
the Note (the "Prepayment Notice.") The Prepayment Notice shall specify
the date upon ("Prepayment Date") and the place at which, payment may
be obtained and shall call upon the Holder to surrender the Note to the
Company in the manner and at the place designated. On the Prepayment
Date, the Holder shall surrender this Note to the Company in the manner
and at the place designated in the Prepayment Notice, and thereupon
prepayment shall be made to Holder and this Note shall be cancelled. In
the event that less than all of the principal amount of this Note is
prepaid, upon surrender of this Note to the Company, the Company shall
execute and deliver to Holder a new Note or Notes in principal amount
equal to the unpaid principal amount of this Note.
6.3 Cessation of Rights. From and after the Prepayment Date,
unless there has been a default under the Prepayment Notice, all
interest on the redeemed principal amount shall cease to accrue and all
rights of Holder as a Holder of this Note shall cease with respect to
the principal amount prepaid and, with respect to such amount, this
Note thereafter shall not be deemed to be outstanding for any purpose
whatsoever. By acceptance of this Note, Holder agrees to execute and
deliver such documents as may be reasonably requested from time to time
by the Company in order to implement the foregoing provisions of this
Section.
7. Warrant Coverage. Holder shall receive, on the date hereof, ten-year
warrants (the "Warrants) to purchase 100,000 shares of common stock of the
Company ("Common Stock"). The exercise price of the Warrants shall be $2.25 per
share of Common Stock of the Company ("Exercise Price") and shall become
exercisable six months after the date hereof. The Warrants shall contain the
terms and shall be in the form attached hereto, as Exhibit A.
The holders of the Warrant shall have registration rights in accordance
with the terms as set forth in the a Warrant Agreement in the form attached as
Exhibit B.
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8. Subordination. The indebtedness evidenced by this Note shall at all
times be wholly subordinate and junior in right of payment to all obligations of
the Company under or in connection with the Credit Agreement of even date
herewith ("Superior Debt") among the Company as guarantor, the borrowers CECO
Group Inc., CECO Filters, Inc., Air Purator Corporation, New Xxxx Co., Inc.,
U.S. Facilities Management, Inc., The Xxxx & Xxxx Manufacturing Company, and
kbd/Technic, Inc., and the lenders PNC Bank, National Association and various
other financial institutions, upon the terms and conditions contained in the
Subordination Agreement between Green Diamond Oil Corp., Xxxxxx Xxxxxxx, ICS
Trustee Services, Ltd., and PNC Bank, National Association and various other
financial institutions of even date herewith (the "Subordination Agreement").
9. Repayment of Notes. In the event the Company completes an equity
financing or offering or a series of equity financing or offerings for a total
consideration in excess of $10,000,000, then twenty-five percent (25%) of all
such consideration in excess of $10,000,000 shall be used immediately, upon
receipt by the Company, to pre-pay the 1999 Subordinated Notes, provided such
prepayment shall be made proportionately among the 1999 Subordinated Notes until
the 1999 Subordinated Notes are paid in full.
10. Covenants of the Company. The Company covenants and agrees that it
shall not, without the prior written approval of the Holders of a majority of
the aggregate principal amount outstanding of the 1999 Subordinated Notes
("Majority Holders"):
10.1 Obtain or incur any indebtedness or other monetary
obligations that are senior to or on parity with the Notes, other than
the Superior Debt.
10.2 Allow, suffer or cause to exist any lien, claim, security
interest or encumbrance on the Company's property or assets, other than
with respect to the Superior Debt and purchase money indebtedness
incurred in the ordinary course of business.
10.3 Enter into any arrangement or agreement involving the
merger or consolidation of the Company.
10.4 Use the proceeds from the sale of the 1999 Subordinated
Notes other than in the ordinary course of its business for general
corporate purposes including lending monies to any of its subsidiaries.
The Company also covenants and agrees that it shall operate its
business in the ordinary course.
11. Events of Default.
11.1 Occurrences of Events of Default. Each of the following
events shall constitute an "Event of Default" for purposes of this
Note:
(a) if the Company fails to pay any amount payable,
under this Note when due;
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(b) if the Company breaches any of its
representations, warranties or covenants set forth in this
Note or the Warrant Agreement;
(c) the commencement of an involuntary case against
the Company or its subsidiary or any of its subsidiaries under
any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or the appointing of a receiver,
liquidator, assignee, custodian, trustee or similar official
of the Company or for any substantial part of the Company or
one of its subsidiary's property, or ordering the winding-up
or liquidation of the Company or one of its subsidiary's
affairs;
(d) if the Company or any of its subsidiaries shall
commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian or similar official of the
Company or its subsidiary or for any substantial part of the
Company or one of its subsidiary's property, or shall make any
general assignment for the benefit of creditors, or shall take
any corporate action in furtherance of any of the foregoing;
or
(e) if the Company's business shall fail, as
determined in good faith by the Majority Holders and evidenced
by the Company's inability to pay its ongoing debts as such
debts become due.
11.2 Acceleration Upon Event of Default. If any Event of
Default shall have occurred and be continuing, for any reason
whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or
otherwise), the unpaid principal amount of, and the accrued interest
on, the Notes shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by the Company.
12. Investment Representations of the Holder. With respect to the
purchase of this Note, the Common Stock issuable upon the exercise of the
Warrants (collectively, the "Securities"), the Holder hereby represents and
warrants to the Company as follows:
12.1 Experience. The Holder has substantial experience in
evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests.
12.2 Investment. The Holder is acquiring the Securities for
investment for its own account, not as a nominee or agent, and not with
the view to, or for resale in connection with, any distribution
thereof. The Holder understands that the Securities have not been, and
will not be, registered under the Securities Act of 1933, as amended
("Securities Act"), by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of the Holder's representations as
expressed herein. The holder is an "accredited investor" within the
meaning of Regulation D, Section 501(a), promulgated by the Securities
and Exchange Commission.
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12.3 Rule 144. The Holder acknowledges that the Securities
must be held indefinitely unless subsequently registered under the
Securities Act, or unless an exemption from such registration is
available. The Holder understands that at this time the Company is not
under any obligation to register any of the Securities. The Holder is
aware of the provisions of Rule 144 promulgated under the Securities
Act that permit limited resale of securities purchased in a private
placement subject to satisfaction of certain conditions.
12.4 No Public Market. The Holder understands that no public
market now exists for any of the Securities issued by the Company and
that the Company has made no assurances that a public market will ever
exist for the Securities.
12.5 Access to Data. The Holder has had an opportunity to
discuss the Company's business, management and financial affairs with
the Company's management and has also had an opportunity to ask
questions of the Company's officers, which questions were answered to
its satisfaction.
13. Miscellaneous.
13.1 Invalidity of Any Provision. If any provision or part of
any provision of this Note shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Note and
this Note shall be construed as if such invalid, illegal or
unenforceable provisions or part hereof had never been contained
herein, but only to the extent of its invalidity, illegality or
unenforceability.
13.2 Governing Law. The Note shall be governed in all
respects by the laws of the State of New York, excluding its conflict
of laws.
13.3 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given (i) on the date of delivery if delivered personally,
(ii) one (1) business day after transmission by facsimile transmission
with a written confirmation copy sent by first class mail, or (iii)
five (5) days after mailing if mailed by first class mail, to the
following addresses:
If to the Company: CECO Environmental Corp.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
XXXXXX
Attention: Xxxxxxx XxXxxxxx
And if to the Holder, to the address or facsimile number of
Holder as set forth on the Company's records, or such other address as
the Holder has provided to the Company by notice duly given.
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13.4 Notice of a Sale Transaction. The Company shall give all
Holders of Notes notice of the Closing of a Sale Transaction at least
thirty (30) days prior to such Closing.
13.5 Collection. If the indebtedness represented by the Note
or any part thereof is collected at law or in equity or in bankruptcy,
receivership or other judicial proceedings or if the Note is placed in
the hands of attorneys for collection after the occurrence of an Event
of Default, the Company agrees to pay, in addition to the outstanding
principal and accrued interest payable hereon, reasonable attorneys'
fees and costs incurred by the Holder, or on behalf of the Holder by a
representative of the Holder.
13.6 Successors and Assigns. The rights and obligations of the
Company and the Holder shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the
parties.
13.7 Waivers. The Company and any endorsers, sureties,
guarantors, and all others who are, or may become liable for the
payment hereof severally: (a) waive presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and notice
of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the
payment of this Note, (b) consent to all extensions of time, renewals,
postponements of time of payment of this Note or other modifications
hereof from time to time prior to or after the maturity date hereof,
whether by acceleration or in due course, without notice, consent or
consideration to any of the foregoing, (c) agree to any substitution,
exchange, addition, or release of any of the security for the
indebtedness evidenced by this Note or the addition or release of any
party or person primarily or secondarily liable hereon, (d) agree that
Holder shall not be required first to institute any suit, or to exhaust
its remedies against the Company or any other person or party to become
liable hereunder or against the security in order to enforce the
payment of this Note and (e) agree that, notwithstanding the occurrence
of any of the foregoing (except by the express written release by
Holder of any such person), the Company shall be and remain, directly
and primarily liable for all sums due under this Note.
13.8 Time. Time is of the essence in this Note.
13.9 Captions. The captions of sections of this Note are for
convenient reference only, and shall not affect the construction or
interpretation of any of the terms and provisions set forth in this
Note.
13.10 Number and Gender. Whenever used in this Note, the
singular number shall include the plural, and the masculine shall
include the feminine and the neuter, and vice versa.
13.11 Remedies. All remedies of the Holder shall be cumulative
and concurrent and may be pursued singly, successively, or together at
the sole discretion of the Holder and may be exercised as often as
occasion therefor shall arise. No act of omission or commission of the
Holder, including specifically any failure to exercise any right,
remedy or recourse shall be effective unless it is set forth in a
written document executed by the Holder and then only to the extent
specifically recited therein. A waiver or release with reference to one
event shall not be construed as continuing as a bar to or as a waiver
or release of any subsequent right, remedy, or recourse as to any
subsequent event.
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13.12 No Waiver by Holder. The acceptance by Holder of any
payment under this Note which is less than the amount then due or the
acceptance of any amount after the due date thereof, shall not be
deemed a waiver of any right or remedy available to Holder nor nullify
the prior exercise of any such right or remedy by Holder. None of the
terms or provisions of this Promissory Note may be waived, altered,
modified or amended except by a written document executed by Holder and
then only to the extent specifically recited therein. No course of
dealing or conduct shall be effective waive, alter, modify or amend any
of the terms or provisions hereof. The failure or delay to exercise any
right or remedy available to Holder shall not constitute a waiver of
the right of the Holder to exercise the same or any other right or
remedy available to Holder at that time or at any subsequent time.
13.13 Submission to Jurisdiction. BORROWER, AND ANY ENDORSERS,
SURETIES, GUARANTORS AND ALL OTHERS WHO ARE, OR WHO MAY BECOME, LIABLE
FOR THE PAYMENT HEREOF SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A)
AGREE THAT ANY SUIT, ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS NOTE OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED PURSUANT TO, OR IN CONNECTION WITH THIS NOTE SHALL BE BROUGHT
AND MAINTAINED IN THE COURTS IN AND FOR NEW YORK COUNTY, NEW YORK, OR
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; (B) CONSENT TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH IT OR
THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION, OR
PROCEEDING IN ANY OF SUCH COURTS.
13.14 Waiver of Trial by Jury. HOLDER AND BORROWER HEREBY
KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING
OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN
EVIDENCED BY THIS NOTE.
CECO ENVIRONMENTAL CORP.
By: /s/ Xxxxxxx XxXxxxxx
-----------------------------
Xxxxxxx XxXxxxxx, President
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