1
Exhibit 10.3
THE WARRANT REPRESENTED BY THIS AMENDED AND RESTATED WARRANT AGREEMENT, AND THE
SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH WARRANT OR THE SHARES OF
COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, OR UNLESS THE HOLDER HEREOF
ESTABLISHES TO THE REASONABLE SATISFACTION OF GEO SPECIALTY CHEMICALS, INC. THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
GEO SPECIALTY CHEMICALS, INC.
AMENDED AND RESTATED WARRANT AGREEMENT
WITH CHARTER OAK PARTNERS
-------------------------
This AMENDED AND RESTATED WARRANT AGREEMENT (the "Agreement") is
entered into as of July 31, 1998, by and between GEO Specialty Chemicals, Inc.,
an Ohio corporation (the "Company"), and Charter Oak Partners, a
Connecticut partnership ("Holder"). This Agreement amends and restates the
Warrant Agreement (the "1997 Warrant Agreement"), dated March 25, 1997,
entered into by and between the Company and Holder.
WITNESSETH:
-----------
WHEREAS, in connection with, and as a condition to the execution of,
the Share Purchase Agreement, dated March 25, 1997, by and between the Company
and Holder, the Company, desiring to provide Holder with the potential for an
increased percentage ownership of the Company, agreed to issue warrants to
Holder to purchase shares of the Company's Class A Common Stock, $1.00 par
value per share (the "Common Shares");
WHEREAS, at the time of the 1997 Warrant Agreement, the Common Shares
were held by the following shareholders in the following percentages:
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
Charter Oak Partners 82.31 79.00%
Chemical Specialty Enterprises, L.P. 21.88 21.00%
WHEREAS, subsequent to the execution and delivery of the 1997 Warrant
Agreement, Holder transferred (i) 0.466 and 0.137 Common Shares to Xxxxxx X.
Xxxx, Xx. and A. Xxxxxxx Xxxxxx, respectively, each of whom is a designee of
Holder serving on the Board of Directors of the Company; and (ii) 1.646 Common
Shares to Xxxxxx X. Xxxxxx as a result of the exercise by Xxxxxx of an option
held by him from Holder (the "Charter Oak Transfers");
2
WHEREAS, in connection with the acquisition by the Company of the
TRIMET Technical Products Division of Mallinckrodt, Inc. ("TRIMET"), the
shareholders of the Company and Charter Oak Capital Partners made an aggregate
equity contribution of $6,000,000 (the "Equity Contribution"), on a pro
rata basis assuming that an 8% equity interest had been granted to Charter Oak
pursuant to this Agreement, and received in exchange therefor an aggregate of
31.646 Common Shares;
WHEREAS, as a consequence of the Charter Oak Transfers and the Equity
Contribution, the Common Shares are now held by the following shareholders in
the following percentages:
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
Charter Oak Partners 85.431 62.89%
Charter Oak Capital Partners 21.478 15.81%
GEO Chemicals, Ltd. 25.994 19.14%
Xxxxxx X. Xxxxxx 2.146 1.58%
Xxxxxx X. Xxxx, Xx. 0.608 0.45%
A. Xxxxxxx Xxxxxx 0.178 0.13%
WHEREAS, the Company and Holder desire to amend and restate the 1997
Warrant Agreement to reflect the changes in the ownership of the Common Shares
effected since March 25, 1997.
NOW, THEREFORE, in consideration of the premises herein contained the
parties agree as follows:
AGREEMENT
---------
1. GRANT OF WARRANT. The Company hereby acknowledges and confirms that
on March 25, 1997 it issued a warrant to Holder, which as of the date of this
Agreement is to be subject to the terms and conditions hereof and shall entitle
Holder to purchase that number of Common Shares of the Company as calculated
pursuant to Section 3 below (the "Warrant") at a purchase price per share
(the "Warrant Price") equal to $.01, payable as set forth in Section 2
below. The Company shall at all times maintain and reserve a sufficient number
of authorized but unissued Common Shares, so that the Warrant may be exercised
without additional authorization of Common Shares after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Shares; and the Common Shares issued upon exercise of the Warrant in
accordance with its terms shall be duly authorized, fully paid and
nonassessable. The Company will not take any action which would have the effect
of preventing or disabling the Company from delivering to Holder, upon exercise
of the Warrant pursuant to the terms hereof, the Common Shares then deliverable
or otherwise performing its obligations under this Warrant Agreement.
2
3
2. EXERCISE OF WARRANT.
(a) Subject to the provisions of Sections 4 and 6 hereof, the Warrant
may be exercised, in whole or in part, upon the following Triggering Events:
(i) Upon each of the years ending December 31, 1998, 1999,
2000 and 2001, if the Company's earnings before interest, taxes,
depreciation and amortization, as measured pursuant to generally
accepted accounting principles ("EBITDA"), does not then equal or
exceed $24,500,000, $26,000,000, $27,500,000 and $29,000,000,
respectively; and
(ii) Upon the death, disability or termination from employment
by the Company, with Cause, as defined in that certain Amended and
Restated Shareholders Agreement, dated as of the date hereof and
entered into by and among the Company, Xxxxxx, XXX Chemicals, Ltd.,
Xxxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X.
Xxxx, Xx. and A. Xxxxxxx Xxxxxx, of Xxxxxx or Xxxxxx on or before 4:00
p.m. March 31, 2002 (the "Expiration Time").
(b) Holder may exercise all or a portion of the Warrant by delivering
to the Company at the principal office of the Company (i) a written notice of
exercise specifying the number of Common Shares that Holder wishes to purchase,
(ii) the aggregate purchase price for the Common Shares as to which the Warrant
is then being exercised, payable in cash or by bank cashier's check to the
Company, and (iii) a copy of this Warrant Agreement.
(c) As soon as practicable thereafter, the Company shall deliver to
Holder (i) a certificate or certificates representing the number of Common
Shares purchased by Holder and (ii) if the Warrant is being exercised in part, a
new Warrant Agreement, substantially in the form hereof, for any remaining
Common Shares available for purchase through this Warrant, but as to which this
Warrant is not being exercised.
(d) Upon the occurrence of a Liquidity Event, to the extent the Warrant
has not previously been exercised, the Warrant shall expire and become void. For
purposes of this Warrant, a "Liquidity Event" shall mean (i) a sale,
reorganization, consolidation or merger of the Company with another corporation
after which the Company is not the surviving entity, (ii) a sale or other
transfer of all or substantially all of the assets or equity securities of the
Company or (iii) the consummation of an underwritten public offering of the
Company's equity securities pursuant to a registration statement filed
under the Securities Act of 1933, with net proceeds therefrom in excess of
$10,000,000.
3. NUMBER OF COMMON SHARES SUBJECT TO WARRANT.
(a) For purposes of this Warrant, the number of fully diluted Common
Shares issuable to Holder under Section 2(a)(i) hereof shall be equal to the
following:
(i) If, for the year ending December 31, 1998, the Company's
EBITDA does not equal or exceed $24,500,000 (which calculation shall
include the EBITDA of TRIMET for
3
4
the seven months ended July 31, 1998, subject to a pro forma adjustment
of $525,000), then the number of Common Shares issuable to the Holder
upon exercise of this Warrant shall be such number of Common Shares
that will increase the Holder's ownership of the Outstanding Equity in
the Company by 2.0% of such Outstanding Equity (an "Additional Two
Percent"); provided that, along with the issuance of an Additional Two
Percent upon exercise of the Warrant by Holder, the Company shall issue
to the other shareholders of the Company, excluding GEO Chemicals, Ltd.
(the "Other Shareholders"), Common Shares in such amounts that the
percentage ownership of Common Shares of the Other Shareholders is not
affected by the issuance of an Additional Two Percent ("Offsetting
Common Shares");
(ii) If, for the year ending December 31, 1999, the Company's
EBITDA does not equal or exceed $26,000,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(iii) If, for the year ending December 31, 2000, the Company's
EBITDA does not equal or exceed $27,500,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(iv) If, for the year ending December 31, 2001, the Company's
EBITDA does not equal or exceed $29,000,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(v) Notwithstanding Sections 3(a)(i)-(iv) above, in the event
this Warrant is exercised pursuant to Section 3(b), the percentage
amounts contained in this Section 3(a) shall be reduced for each of the
fiscal periods in which Charter Oak exercised its Warrant pursuant to
Section 3(b) upon the death, disability or termination from employment
by the Company, with Cause, of Xxxxxx and/or Xxxxxx by 1.24%, in the
case of Xxxxxx'x death, disability or termination by the Company,
and/or by 0.76%, in the case of Xxxxxx'x death, disability or
termination by the Company;
(b) For purposes of this Warrant, the number of Common Shares issuable
to Holder under Section 2(a)(ii) hereof shall be equal to the following:
(i) In the event of Xxxxxx'x death, disability or termination
from employment by the Company, with Cause, the number of Common Shares
issuable to Holder under Section 2(a)(ii) hereof shall be such number
of Common Shares that will increase Holder's percentage of the
Outstanding Equity in the Company by 1.24% multiplied by the number of
fiscal periods described in Section 2(a)(i) ending subsequent to such
death, disability or termination (the "Xxxxxx Warrant Shares");
provided that, along with the issuance of the
4
5
Xxxxxx Warrant Shares upon exercise of the Warrant by Holder, the
Company shall issue Offsetting Common Shares to the Other Shareholders;
provided further that, for the year in which the death, disability or
termination occurs, Charter Oak will not be entitled to an additional
1.24% of the Outstanding Equity for that fiscal year if (a) the event
occurs after July 1 of such year and (b) the Company's annualized
EBITDA results for the partial year exceed the EBITDA targets indicated
for the specified period in Section 3(a); and
(ii) In the event of Xxxxxx'x death, disability or termination
from employment by the Company, with Cause, the number of Common Shares
issuable to Holder under Section 2(a)(ii) hereof shall be such number
of Common Shares that will increase Holder's percentage of the
Outstanding Equity in the Company by 0.76% multiplied by the number of
fiscal periods described in Section 2(a)(i) ending subsequent to such
death, disability or termination (the "Eckma Warrant Shares"); provided
that, along with the issuance of the Xxxxxx Warrant Shares upon
exercise of the Warrant by Holder, the Company shall issue Offsetting
Common Shares to the Other Shareholders; provided further that, for the
year in which the death, disability or termination occurs, Charter Oak
will not be entitled to an additional 0.76% of the Outstanding Equity
for that fiscal year if (a) the event occurs after July 1 of such year
and (b) the Company's annualized EBITDA results for the partial year
exceed the EBITDA targets indicated for the specified period in Section
3(a); and
(c) For purposes of this Section 3, the term "Outstanding Equity" shall
mean, for each of the Common Share issuances under Section 2(a) and 2(b), that
number of Common Shares equal to the currently outstanding Common Shares plus
(i) any Common Shares issued pursuant to Section 2(a) prior to the applicable
Triggering Event and (ii) any Common Shares issued pursuant to Section 2(a) upon
the occurrence of the applicable Triggering Event.
4. ASSIGNMENT. Subject to the provisions of Section 9 below, Holder may
sell, transfer or assign all or a portion of this Warrant.
5. RECOGNITION. Notwithstanding the rights of Holder pursuant to the
provisions of Section 4 above, the Company shall only be required to recognize
the holder of the Warrant as identified upon the Warrant registration books and
records as maintained by the Company.
6. CONTRAVENTION OF LAWS. If at any time while all or any portion of
this Warrant is outstanding, the exercise of the Warrant and the issuance of
Common Shares pursuant thereto is deemed to be illegal or in contravention of
then applicable state or federal laws, the Company shall be excused from
performing any of its obligations or complying with the terms and conditions of
this Warrant Agreement until the date that the exercise of this Warrant or the
issuance of Common Shares pursuant thereto is not in contravention of then
applicable state or federal law. In connection with the foregoing, the Company
shall use its reasonable best efforts to maintain the effectiveness of this
Warrant under then applicable state or federal law.
7. FRACTIONAL SHARE. The Company may issue fractional Common Shares
upon the exercise of the Warrant.
5
6
8. TERMINATION. The Warrant granted hereby, to the extent not
previously exercised or voided pursuant to the terms of this Warrant Agreement,
shall terminate on March 31, 2002 or at such later time as the EBITDA results
for the fiscal year ended December 31, 2001 are available.
9. INVESTMENT REPRESENTATION. Holder hereby represents and warrants to
the Company that the Warrant is, and any Common Shares issued upon its exercise
will be, purchased by Holder for his own account and not with a view to the
public distribution thereof and will not be transferred except in a transaction
registered or exempt from registration under the Securities Act, and a legend to
such effect shall be noted on such shares.
10. MISCELLANEOUS.
(a) VALIDITY. The invalidity or unenforceability of any provision of
this Warrant Agreement shall not affect the validity or enforceability of any
other provision of this Warrant Agreement, which shall remain in full force and
effect; and, except as otherwise provided herein to the contrary, the failure or
invalidity of any portion of the consideration for which the Warrant is being
granted shall not reduce the amount of, or render invalid or unenforceable, all
or any portion of the Warrant
(b) ENTIRE AGREEMENT. Except as otherwise provided herein, this Warrant
Agreement contains the entire agreement between the parties with respect to the
transactions provided for herein and supersedes all prior arrangements or
understandings with respect thereto, written or oral. The terms of this Warrant
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Warrant Agreement,
expressed or implied, is intended to confer upon any other person (other than an
assignee or transferee of Holder pursuant to the provisions hereof) any rights
or remedies of any nature whatsoever under or by reason of this Warrant
Agreement.
(c) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when actually delivered in person by cable or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
(i) If to Holder, to:
Charter Oak Partners
Attn: Xx. Xxxxxxx X. Xxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx X
X.X. Xxx 0000
Xxxxxxxx, XX 00000
6
7
(ii) If to the Company, to:
GEO Specialty Chemicals, Inc.
Attn: Xx. Xxxxxx X. Xxxxxx, President
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
(iii) In each case with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx Xxxx & Xxxxx LLP
0000 Xxx Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
A party may change its address for notice purposes by written notice to
the other party hereto.
(d) GOVERNING LAW. This Warrant Agreement and the Warrant granted
hereby shall be governed by and construed in accordance with the laws of the
State of Ohio, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
(e) COUNTERPARTS. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
(f) DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Warrant Agreement.
[signature page to follow]
7
8
IN WITNESS WHEREOF, the parties hereunto have caused this instrument to
be executed, all as of the day and year first above written.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
CHARTER OAK PARTNERS
By: /s/ Xxxxxxx X. Xxxx
------------------------------------------
Name: Xxxxxxx X. Xxxx
----------------------------------------
Title: Director of Private Investments
---------------------------------------
8
