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Exhibit 10.11
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBJECT TO CERTAIN RIGHTS OF OFFSET
DESCRIBED IN SECTION 10.8 OF A STOCK PURCHASE AGREEMENT DATED AS OF JULY 31,
1996, TO WHICH MAKER AND PAYEE ARE PARTIES. THIS NOTE AND THE INDEBTEDNESS
EVIDENCED HEREBY ARE ALSO SUBJECT TO THE TERMS AND PROVISIONS OF AN
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF JULY 31, 1996, TO WHICH
WASTEQUIP, INC., MAKER, PAYEE AND SANWA BUSINESS CREDIT CORPORATION ARE PARTIES.
MAKER WILL MAIL TO THE HOLDER HEREOF A COPY OF SUCH INTERCREDITOR AND
SUBORDINATION AGREEMENT WITHOUT CHARGE WITHIN FIVE DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR ADDRESSED TO MAKER. ANY PERMITTED ASSIGNEE, TRANSFEREE
OR PLEDGEE HEREUNDER SHALL TAKE THIS NOTE SUBJECT TO THE TERMS HEREOF AND THE
TERMS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT.
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAW, OR QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED. NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH SAID ACTS AND ANY APPLICABLE STATE SECURITIES LAW,
OR IT IS ESTABLISHED TO THE SATISFACTION OF WASTEQUIP, INC. THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
7% CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
July 31, 1996
Cleveland, Ohio $1,250,000
Wastequip Manufacturing Company, an Ohio corporation
("Maker"), hereby promises, pursuant to the terms, conditions and provisions set
forth herein, to pay to the order of Xxxxx X. May, Sr. ("Payee"), at 00000 Xxxx
Xxxx Xxxxxx #00, Xxxxxx, Xxxxxxxx 00000 (or at such other address as Payee may
designate), the principal amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000) (unless this Note shall have been surrendered for
conversion as hereinafter provided) together with interest thereon calculated
from the date hereof in accordance with the provisions of this Note.
1. PAYMENT. The principal amount due hereunder shall be payable
to Payee in four (4) consecutive, equal annual installments of Three Hundred
Twelve Thousand Five Hundred Dollars ($312,500) each, commencing on July 31,
2000, and continuing on each succeeding July 31st, until the entire indebtedness
evidenced hereby, together with accrued interest, has been paid in full.
Commencing on the date hereof, interest will accrue at the rate of seven percent
(7%) per annum (calculated on the basis of a year of 360 days) on the unpaid
principal amount of this Note
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outstanding from time to time; PROVIDED, HOWEVER, that if an Event of Default
(as such term is defined in Section 6 below) occurs, then interest on any amount
of principal which was not paid when due (whether at stated maturity, by
acceleration or otherwise), shall accrue at the rate of nine percent (9%) per
annum (calculated on the basis of a year of 360 days). Interest accrued on the
unpaid principal balance of this Note shall be paid in annual installments
commencing July 31, 1997, and continue on each succeeding July 31st thereafter
until the entire indebtedness evidenced hereby, together with accrued interest,
has been paid in full. Any accrued interest which for any reason has not
theretofore been paid will be paid in full on the date on which the final
principal payment on this Note is paid. This Note is issued pursuant to a Stock
Purchase Agreement by and between Maker and Payee dated as of July 31, 1996 (the
"Stock Purchase Agreement").
2. FORM OF PAYMENTS; PAYMENT CERTIFICATE. Any payment to be
made hereunder shall be made in lawful money of the United States of America or
by wire transfer of immediately available funds in the manner agreed to by Maker
and Payee. At the time Maker makes any payment hereunder, it shall deliver to
Payee a certificate signed by the President of Maker certifying that Maker is
not then in default under any Senior Indebtedness (as such term is defined in
the Intercreditor and Subordination Agreement described in Section 3 of this
Note).
3. SUBORDINATION. This Note and the indebtedness evidenced
hereby are subject to the terms and provisions of an Intercreditor and
Subordination Agreement, of even date herewith (the "Subordination Agreement"),
by and among Wastequip, Inc., an Ohio corporation and the sole shareholder of
Maker ("Wastequip"), Maker, Payee and Sanwa Business Credit Corporation ("Bank")
including, without limitation, the terms and conditions by which the payment of
principal and interest on this Note is expressly subordinated to the prior
payment of all Senior Indebtedness as defined in the Subordination Agreement
(the "Senior Indebtedness"). Payee covenants and agrees that, upon written
request from Wastequip or Maker, Payee shall, within three (3) days of receipt
of such written request, execute an intercreditor and subordination agreement,
in substantially the same form as the Subordination Agreement, in favor of the
holder of any Senior Indebtedness, whether such Senior Indebtedness is now
existing or is hereafter created, incurred, assumed, acquired or guaranteed. Any
permitted assignee or transferee of this Note, by the taking of such Note, shall
be deemed to have agreed to be bound by the provisions contained herein and in
the Subordination Agreement.
4. PREPAYMENT. Subject to the terms and provisions set forth
herein and in the Subordination Agreement, this Note may be prepaid in whole or
in part at any time without bonus, penalty or premium. Maker shall give Payee at
least 30 days advance written notice of any intent to prepay all or a portion of
this Note and shall deliver to Payee a copy of the consent of the holders of any
Senior Indebtedness to such prepayment on or prior to the date of such
prepayment. Any prepayment shall be credited first against accrued interest due
and payable hereunder, with any remaining balance credited against principal
installments in direct order of maturity.
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5. ADJUSTMENT OF NOTE AND RIGHT OF SETOFF. The terms and
provisions of this Note and the rights of Payee are subject to the rights of
setoff set forth in Section 10.8 of the Stock Purchase Agreement.
6. EVENT OF DEFAULT; ACCELERATION. Each of the following shall
constitute an "Event of Default" under this Note:
(a) if Maker shall: (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property; (ii)
admit in writing its general inability to pay its debts as they become due;
(iii) make a general assignment for the benefit of creditors; (iv) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect); (v) be adjudicated a bankrupt or insolvent; (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors;
(vii) acquiesce to, or fail to have dismissed, within 30 days, any petition
filed against it in any involuntary case under such bankruptcy laws; or
(b) if Maker shall fail to pay the principal or interest due
hereunder as the same becomes due and payable, which failure: (i) is not
permitted by the setoff provisions of Section 10.8 of the Stock Purchase
Agreement; (ii) is not required by the Subordination Agreement; or (iii) is not
remedied by Maker within 10 business days after its receipt of written notice
from Payee with respect thereto.
Subject to the terms and provisions of the Subordination Agreement, if an Event
of Default occurs, Payee, at its option, may declare the outstanding principal
balance of and all accrued but unpaid interest on this Note to be immediately
due and payable by giving written notice thereof to Maker. In addition, if an
Event of Default occurs, Payee shall be reimbursed for its reasonable attorneys'
fees and collection costs.
7. CONVERSION.
7.1 OPTIONAL CONVERSION. Subject to the terms and provisions
of this Note, Payee shall be entitled, at its option, at any time, to convert
all or any portion (in increments of $10,000) of the outstanding principal
balance due under this Note into duly authorized and validly issued, fully paid
and nonassessable Class A Common Shares, without par value, of Wastequip ("Class
A Shares") at a conversion price (the "Conversion Price") of $25.00 per share
(subject to adjustment as set forth in Subsection 7.3 below).
7.2 EXERCISE OF OPTIONAL CONVERSION PRIVILEGE.
(a) SURRENDER AND ELECTION. In order to exercise the
conversion privilege, Payee shall (i) surrender this Note to Wastequip at its
principal office (or such other place as Wastequip may reasonably designate)
either duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to Wastequip, duly executed by Payee or its authorized
representative; (ii) provide written notice to Wastequip that Payee elects to
convert this Note in
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whole or in part, specifying the amount to be converted; and (iii) surrender to
Wastequip, in accordance with clause (i) above, that certain Subordinated
Guaranty, of even date herewith, executed by Wastequip in favor of Payee (the
"Subordinated Guaranty") unless the Subordinated Guaranty continues to be in
effect with respect to the 9% Nonconvertible Subordinated Promissory Note in the
principal amount of Five Hundred Thousand Dollars ($500,000) issued by Maker to
Payee concurrently with the issuance of this Note.
(b) DELIVERY BY WASTEQUIP. As promptly as practicable after
the receipt of such notice and the surrender of this Note and the Subordinated
Guaranty, as applicable, Wastequip shall issue and deliver to Payee a
certificate or certificates for the number of Class A Shares issuable upon the
conversion of all or a portion of this Note. In the event Payee elects to
convert only a portion of this Note, Wastequip and Maker shall, simultaneously
with the delivery of such share certificates, deliver to Payee a substitute Note
and Subordinated Guaranty, which shall be in a form identical to this Note and
the original Subordinated Guaranty except that the principal amount of the
substitute Note shall be reduced accordingly and the substitute Subordinated
Guaranty shall reflect such reduction in the principal amount of this Note.
(c) TIMING. The optional conversion of this Note shall be
deemed to have occurred (the "Conversion Date") on the later to occur of the
date on which notice in accordance with paragraph (a) of this Subsection 7.2 is
received by Wastequip or the date upon which this Note is surrendered. Payee
shall be deemed to be a holder of record with respect to the Class A Shares
issuable upon the conversion of this Note from and after such date. No
adjustment or payment shall be made for interest, if any, which may be accrued
on the portion of this Note which is converted, nor shall any adjustment be made
for dividends on any Class A Shares, except as set forth in Subsection 7.3
below. Any portion of this Note surrendered in exercise of this conversion
privilege hereunder shall be cancelled and not again issued.
7.3 ADJUSTMENT OF CONVERSION PRICE.
(a) ADJUSTMENT UPON DIVIDEND, SUBDIVISION OR COMBINATION.
Notwithstanding anything to the contrary set forth herein, in the event of (i)
the declaration and payment (prior to the Conversion Date) of dividends payable
in Class A Shares, or (ii) the subdivision or combination of outstanding Class A
Shares, the Conversion Price shall be adjusted so that Payee, upon conversion of
this Note after such event, shall be entitled to receive the number of Class A
Shares which Payee would have owned or been entitled to receive if this Note had
been converted immediately prior to the happening of such event. Any adjustment
made pursuant to this Subsection 7.3(a) shall become effective immediately after
the record or effective date of the event giving rise to such an adjustment.
(b) ADJUSTMENT UPON GRANT OF OPTIONS OR WARRANTS.
Notwithstanding anything to the contrary set forth herein, in the event of the
issuance by Wastequip prior to the Conversion Date of rights or warrants to all
holders of its Class A Shares entitling them to subscribe for or purchase Class
A Shares at a price per share which is less than the Conversion
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Price, the number of Class A Shares into which each $1,000 principal amount of
this Note shall thereafter be convertible shall be determined by multiplying the
number of Class A Shares into which such $1,000 principal amount was theretofore
convertible by a fraction, (x) the numerator of which shall be (A) the number of
Class A Shares outstanding on the record date for the determination of
shareholders entitled to receive such rights or warrants PLUS (B) the number of
additional Class A Shares which are offered for subscription or purchase, and
(y) the denominator of which shall be (A) the number of Class A Shares
outstanding on such record date PLUS (B) the number of Class A Shares which the
aggregate subscription or offering price of the total number of Class A Shares
offered pursuant to such rights or warrants would purchase at the Conversion
Price. Any such adjustment shall become effective as of the Conversion Date.
7.4 NOTICE OF ADJUSTMENT. Whenever the Conversion Price is
adjusted as herein provided, Wastequip shall cause a notice to be mailed to
Payee stating that such an adjustment has been effected and setting forth the
adjusted Conversion Price and the date on which such adjustment became or shall
become effective.
7.5 MINIMUM ADJUSTMENT. No adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in the Conversion Price; PROVIDED, HOWEVER, that any
adjustments which by reason of this Subsection 7.5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 7 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 7 notwithstanding, Wastequip shall be entitled to make such upward
adjustments in the Conversion Price, in addition to those required by Subsection
7.3, as it in its discretion shall determine to be advisable in order that any
dividend, subdivision or combination of shares, or distribution of rights or
warrants to purchase shares, or exchange of shares pursuant to any merger or
consolidation, hereafter made by Wastequip to its shareholders shall not be
taxable to them.
7.6 NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of all or any
portion of this Note; rather, an amount equal to such fraction multiplied by the
Conversion Price, as adjusted, shall be paid to Payee in cash by Wastequip.
7.7 RECLASSIFICATIONS, MERGERS, CONVEYANCES OF ASSETS, ETC.
In the event of the occurrence of any of the following (each, an "Event of
Change"):
(a) a reclassification of outstanding Class A Shares of
Wastequip (other than a change in par value or as a result of a subdivision or
combination); or
(b) a consolidation or merger of Wastequip with or into
another entity (other than a consolidation or merger in which Wastequip is the
continuing entity and which does not result in any reclassification of
outstanding Class A Shares); or
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(c) a conveyance, transfer or lease to another person or
entity of all or substantially all of the properties and assets of Wastequip,
Wastequip, or such entity or person into which Wastequip is merged or
consolidated or to whom Wastequip's assets are transferred, as the case may be,
shall execute and deliver a supplemental agreement providing that Payee shall
have the right thereafter, during the period this Note is convertible and
otherwise in accordance with the terms hereof, to convert this Note into the
kind and amount of shares of stock, other securities, cash and other property
receivable upon such Event of Change by a holder of the number of Class A Shares
into which this Note could have been converted immediately prior to such Event
of Change, assuming that such holder (i) is not a person or entity with or into
which Wastequip consolidated or merged or which merged into Wastequip or to
which such conveyance, transfer or lease was made, as the case may be (a
"Constituent Person"), or an affiliate of a Constituent Person, and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of shares
of stock, other securities, cash and other property receivable upon such Event
of Change. If the kind or amount of shares of stock, other securities, cash and
other property receivable upon such Event of Change is not the same for each
Class A Share held immediately prior to such Event of Change by persons or
entities other than a Constituent Person or an affiliate thereof and in respect
of which such rights of election shall not have been exercised (a "non-electing
share"), then for purposes hereof, the kind and amount of shares of stock, other
securities, cash and other property receivable upon such Event of Change by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares. Such supplemental agreement
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7. The provisions of
this Subsection 7.7 shall similarly apply to successive Events of Change.
Wastequip shall notify Payee of the execution of any such supplemental
agreement.
7.8 MISCELLANEOUS.
(a) RESERVATION OF SHARES. Wastequip shall at all times from
and after the Conversion Date reserve and keep available out of its authorized
but unissued shares, for the purpose of effecting the conversion of this Note,
such number of its duly authorized and unissued Class A Shares as shall from
time to time be sufficient to effect the conversion of this Note in its
entirety.
(b) NO LIENS. Wastequip covenants that all Class A Shares
shall, upon issuance to Payee, be validly issued, fully paid and nonassessable.
(c) TAXES AND CHARGES. The issuance of certificates for
Class A Shares upon the conversion of this Note shall be made without charge to
Payee for such certificates or for any tax in respect of the issuance or
delivery of such certificates or the securities represented thereby, and such
certificates shall be issued in the name of, or in such names as may be directed
by, Payee; PROVIDED, HOWEVER, that Wastequip shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a
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name other than that of Payee, and Wastequip shall not be required to issue or
deliver such certificates unless or until the person or entity requesting the
issuance thereof shall have paid to Wastequip the amount of such tax (and
Wastequip agrees to pay such tax to the proper authority when due) or shall have
established to the satisfaction of Wastequip that such tax has been paid.
(d) NO REGISTRATION. Payee acknowledges, understands and
agrees that any Class A Shares issued in accordance herewith will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold, transferred or otherwise disposed of unless a registration
statement under the Securities Act with respect to such shares has become
effective, or unless Payee establishes to the satisfaction of Wastequip that an
exemption from such registration is available.
8. OPTIONAL ACCELERATION UPON PUBLIC OFFERING. Upon the Closing
of a Public Offering (as such term is hereinafter defined), in the event Payee
has not previously converted the entire principal amount of this Note into Class
A Shares, Payee, at its option, may declare the outstanding principal balance of
and all accrued but unpaid interest on this Note to be immediately due and
payable by giving written notice thereof to Maker within 30 days of such Closing
of a Public Offering. The "Closing of a Public Offering" shall mean the
consummation of the sale by Wastequip of its Common Shares at a price per share
at least equal to the Conversion Price (as adjusted) pursuant to an effective
registration statement under the Securities Act, provided that such sale yields
net proceeds to Wastequip of at least Ten Million Dollars ($10,000,000) and is
made pursuant to a firm commitment underwriting.
9. NOTICES. All notices, correspondence or other documents to
be delivered in connection herewith shall be delivered as follows:
(a) If to Maker or Wastequip, to:
Wastequip Manufacturing Company
c/o Wastequip, Inc.
00000 Xxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
With a copy to:
Xxxxxx, Halter & Xxxxxxxx
0000 XxXxxxxx Xxxxxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxx X. XxXxxxx, Esq.
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(b) If to Payee, to:
Xxxxx X. May, Sr.
00000 Xxxx Xxxx Xxxxxx #00
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
000 Xxxxxx Xxxxxx #000
Xxxxxx, Xxxxxxxx 00000
or to such other address as may have been designated in a prior notice. Notices
shall be deemed to have been given two business days after being mailed if sent
by registered or certified mail, or upon delivery to such address if delivered
in person, mailed by regular mail, or sent by courier, telecopy or facsimile.
10. GOVERNING LAW. This Note shall be interpreted, and the
rights and liabilities of the parties determined, in accordance with the laws of
the United States, where applicable, and the laws of the State of Ohio, without
regard to the conflict of laws provisions thereof.
11. SECTION TITLES. The section titles contained in this Note
are intended for convenience of reference only and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties.
12. CANCELLATION. After all principal and accrued interest at
any time owed on this Note have been paid in full, in accordance with the terms
hereof, this Note shall be surrendered to Maker for cancellation and shall not
be reissued.
13. ASSIGNMENT. Payee shall not give, sell, assign, transfer (by
operation of law or otherwise, including transfers pursuant to divorce or
separation, but excluding testamentary disposition), pledge, mortgage,
hypothecate or otherwise dispose of this Note without the prior written approval
of Maker.
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14. AMENDMENT AND MODIFICATION. This Note may not be amended or
modified without the prior written consent of the holder or holders of the
Senior Indebtedness.
Wastequip Manufacturing Company
("Maker")
By: /s/ Xxxxxxx X. Xxxxxx
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Title: Chief Financial Officer
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ACKNOWLEDGMENT
The undersigned hereby acknowledges and irrevocably agrees to
be bound by the terms and provisions of Section 7 of this Note.
Wastequip, Inc.
("Wastequip")
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Title: Chief Financial Officer
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