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Exhibit 10.4
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 GEO CHEMICALS, LTD.
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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 GEO Chemicals, Ltd.
("Holder"), an Ohio limited liability company and
successor-in-interest by merger to Chemicals Specialties Enterprises, L.P.
("CSE"). This Agreement amends and restates the Warrant Agreement
(the "1997 Warrant Agreement"), dated March 25, 1997, entered into
by and between the Company and CSE.
WITNESSETH:
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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 Charter Oak Partners ("Charter Oak"), a Connecticut partnership,
the Company, desiring to provide Holder with the potential for an increased
percentage ownership of the Company upon the occurrence of certain liquidity
events and based upon the return achieved by Charter Oak in its investment in
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, Charter Oak transferred (i) 0.466 and 0.137 Common Shares to Xxxxxx
X. Xxxx, Xx. and A. Xxxxxxx Xxxxxx, respectively, each of whom is a Charter Oak
designee 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 Charter Oak (the "Charter Oak Transfers");
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WHEREAS, in connection with the acquisition by the Company of the
TRIMET Technical Products Division of Mallinckrodt, Inc., 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 its warrant agreement with the Company, 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
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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
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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.
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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 occurrence of a Liquidity Event
(as hereinafter defined) on or before 4:00 p.m. March 31, 2007 (the
"Expiration Time") if, at the time of the Liquidity Event, Charter
Oak's Internal Rate of Return (as hereinafter defined) for its investment
in the Company's Common Shares exceeds 30 percent.
(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 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) 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. The Common Shares shall be deemed issued
immediately prior to the occurrence of the Liquidity Event.
(d) For purposes of this Warrant, a "Liquidity Event" shall mean one or
any combination of related or unrelated transactions of the following types that
return to Charter Oak an amount equivalent to their total equity investment in
the Company ($20,220,000) plus an amount to provide Charter Oak with an Internal
Rate of Return in excess of thirty percent (30%), after taking account of the
Charter Oak Transfers and all other transfers of Common Shares by Charter Oak to
its permitted transferees under Section 2.6 of the Shareholders Agreement of the
Company dated as of the date hereof (the "Shareholders Agreement"); (i) a sale,
reorganization, consolidation or merger of the Company with another corporation,
(ii) a sale or other transfer of some or all of the assets (other than in the
ordinary course of business) of the Company or (iii) a sale of some or all of
Charter Oak's equity securities of the Company (other than the sale or
distribution by Charter Oak to a director pursuant to Section 8.1(d) of the
Shareholders Agreement) or (iv) the consummation of a public offering of the
Company's equity securities pursuant to a registration statement filed under the
Securities Act of 1933.
(e) For the purposes of this Warrant, Charter Oak's "Internal Rate of
Return" shall mean the net compound annual internal rate of return on Common
Shares invested by Charter Oak in the Company. For the purpose of calculating
the Internal Rate of Return, partial years will be utilized to measure the time
between the date(s) of investment and date(s) of Liquidity Event(s), and any
such investment shall be given effect only for the partial year for which it has
been in place. In addition, included in the calculation of the Internal Rate of
Return will be (i) to the extent Common Share dividends are received by Charter
Oak, all of such dividends, (ii) any fees and interest that are paid to Charter
Oak, and (iii) any net proceeds received by Charter Oak as a result of the sale
or refinancing of assets of the Company other than in the ordinary course of
business of the Company.
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(f) To the extent the Warrant is not exercised or otherwise expires or
becomes void prior to the Expiration Time, it shall expire and become void, and
all rights thereunder and all rights under this Warrant Agreement shall cease at
the Expiration Time.
3. NUMBER OF COMMON SHARES SUBJECT TO WARRANT. The Warrant shall
entitle Holder to purchase that number of Common Shares (the "Warrant Shares")
representing the percentage of the outstanding equity of the Company, including
the Warrant Shares and the Offsetting Common Shares (as defined below),
equivalent to the percentage by which Charter Oak's Internal Rate of Return
exceeds 30 percent after giving effect to the issuance of the Warrant Shares and
the Offsetting Common Shares, up to a maximum of five percent. Concurrently with
the issuance by the Company of the Warrant Shares upon exercise of the Warrant
by Holder, the Company shall issue to the other shareholders of the Company,
excluding Charter Oak and Xxxx and Xxxxxx (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 the Warrant Shares (the
"Offsetting Common Shares").
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 SHARES. The Company may issue fractional Common Shares
upon exercise of the Warrant.
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, 2007.
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.
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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:
GEO Chemicals, Ltd.
Attn: Xx. Xxxxxx X. Xxxxxx
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
(ii) If to the Company, to:
GEO Specialty Chemicals, Inc.
Attn: Xx. Xxxxxx X. Xxxxxx, President
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
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(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 Delaware, 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 together 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]
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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
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Name: Xxxxxx X. Xxxxxx
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Title: President and Chief Executive Officer
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GEO CHEMICALS, LTD.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
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Title: Member
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