EXHIBIT 10.3.6
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS SUBORDINATED LOAN AND SECURITY AGREEMENT is made as of the 5th day
of April, 2001, by and between Q.E.P. CO., INC., a Delaware corporation, Q.E.P.
- O'TOOL, INC., a California corporation, XXXXXX TOOL CORPORATION, an Indiana
corporation, WESTPOINT FOUNDRY, INC., an Indiana corporation, XXXXXXX
CONSOLIDATED INDUSTRIES, INC., a Delaware corporation, XXXXXXX JAPAN KK, an
entity organized in Japan, XXXXXXX HOLDING INTERNATIONAL, INC., a Delaware
corporation, XXXXXXX COMPANY CANADA LIMITED, an entity organized in Ontario,
Canada, XXXXXXX HOLLAND B.V., an entity organized in The Netherlands, XXXXXXX U.
K. LIMITED, an entity organized in England, XXXXXXX DEUTSCHLAND GmbH, an entity
organized in Germany, XXXXXXX S.A.R.L. , an entity organized in France, Q.E.P.
STONE HOLDINGS, INC., a Florida corporation, Q.E.P. AUST. PTY. LIMITED, an
entity organized in Australia, Q.E.P CO. AUST. PTY. LIMITED, an entity organized
in Australia, Q.E.P. CHILE LIMITADA, an entity organized in Chile, Q.E.P HOLDING
B.V., an entity organized in Xxx Xxxxxxxxxxx, X.X.X. XX. XXX XXXXXXX LIMITED, an
entity organized in New Zealand, Q.E.P. ZOCALIS HOLDING L.L.C., a Delaware
limited liability company, Q.E.P. ZOCALIS S.R.L., an entity organized in
Argentina, and BOIARDI PRODUCTS CORPORATION, an Ohio corporation (all of the
foregoing hereinafter collectively called the "Borrower" and each individually a
"Borrower"), and THE HILLSTREET FUND, L.P., a Delaware limited partnership,
(together with its permitted successors and assigns, "Lender").
NOW, THEREFORE, in consideration of the respective undertakings stated
herein, the parties agree as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions. The following capitalized terms are defined as
follows:
"Account" or "Accounts" shall have the same meaning as defined
in the UCC.
"Account Debtor" shall have the same meaning as defined in the
UCC.
"Affiliate" means any Person which directly or indirectly
controls, or is controlled by, or is under common control with, any Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. The term
"Affiliate" does not include the Lender.
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"Agreement" or "this Agreement" means this Subordinated Loan
and Security Agreement (including all Exhibits and Schedules annexed hereto) as
originally executed, or if supplemented, amended, or restated from time to time,
as so supplemented, amended, or restated.
"Assignment of Life Insurance" means a collateral assignment
of the Life Insurance on terms acceptable to Lender.
"Bank Accounts" shall have the meaning as defined in Article 9
of the UCC.
"Business Day" means any day on which commercial banking
institutions are open for business in Cincinnati, Ohio, other than a Saturday,
Sunday or a legal holiday.
"Capital Expenditures" means any amounts paid or incurred in
connection with the purchase of plant, machinery, Equipment or similar
expenditures (including any lease of any of the foregoing) which are required to
be capitalized and depreciated in accordance with GAAP.
"Capital Leases" means capital leases, conditional sales
contracts and other title retention documents relating to the acquisition of
capital assets (as classified in accordance with GAAP).
"Capital Stock" means any and all equity interests and
participations in any entity including, without limitation, corporate stock,
whether common or preferred, subscription rights, warrants, convertible
securities and other forms of equity interests such as partnership interests and
interests in limited liability companies.
"Change of Control" means the time at which (i) any Person
(including a Person's Affiliates and associates) or group (as that term is
understood under Section 13(d) of the Exchange Act and the rules and regulations
thereunder), other than (a) Management Shareholders and Affiliates thereof (the
"Control Group") or a group controlled by the Control Group, or (b) any Person
or group entitled to file on Schedule 13G pursuant to Rule 13d-1 under the
Exchange Act, becomes, or files a Schedule 13-D or 14D-1 (or any successor
schedule, form or report under the Exchange Act) disclosing that such Person or
group has become, the beneficial owner (as defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of a percentage
(based on voting power, in the event different classes of stock shall have
different voting powers) of the voting stock of QEP equal to at least the lesser
of (x) twenty-five percent (25%), and (y) the percentage of such voting stock at
the time held by the Control Group, or (ii) there shall be consummated any
consolidation or merger of QEP to which QEP's common stock (or other capital
stock) would be converted into cash, securities or other property, other than a
merger or consolidation of QEP in which the holders of such common stock (or
such other capital stock) immediately prior to the merger have the same
proportionate ownership, directly or indirectly, of common stock of the
surviving corporation immediately after the merger as they had of QEP's common
stock immediately
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prior to such merger, or (iii) all or substantially all of QEP's assets shall be
sold, leased, conveyed or otherwise disposed of as an entirety or substantially
as an entirety to any Person (including an Affiliate or associate of QEP) in one
or a series of transactions, or (iv) either (A) Xxxxx Xxxxx shall cease to
perform his duties as Chief Executive Officer of QEP, or (B) Xxxx X. Xxxxxxxxx
shall cease to perform his duties as Chief Financial Officer of QEP, and a
replacement reasonably satisfactory to Lender is not found within Two Hundred
Seventy (270) days thereafter for any of such individuals.
"Closing Date" means the Business Day on which all conditions
precedent specified in Article 7 hereof shall have been satisfied in full.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means all property of Borrower, whether now owned
by Borrower or hereafter acquired or existing, and wherever located including,
without limitation:
(a) all Accounts;
(b) all Inventory;
(c) all Equipment;
(d) all General Intangibles;
(e) all Investment Property;
(f) all Instruments and Documents;
(g) all Bank Accounts;
(h) all Related Collateral;
(i) all accessions and additions to, substitutions for, and
replacements of any Collateral; and
(j) products and proceeds of any and all of the foregoing.
The term "Collateral" shall also refer to any other property
in which Lender is granted a Lien to secure any of the Obligations pursuant to
an agreement supplemental hereto or otherwise (whether or not such agreement
makes reference to this Agreement or the Obligations of Borrower hereunder).
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"Compliance Certificate" means the report required by Section
5.1(e) hereof, including schedules furnished by Borrower in the form of Exhibit
A hereto.
"Computation Date" means the last day of each February, May,
August and November.
"Consolidated" means, with respect to any accounting matter or
amount, such matter or amount computed on a consolidated basis for QEP and its
Subsidiaries, if any, in accordance with GAAP.
"Contractual Obligation" means, with respect to any Person,
any provision or requirement of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.
"Copyrights" means all present and future copyrights,
registrations therefor, reversions thereof, and renewals and extensions of
copyrights in all works of authorship (including software source code and
documentation) in which Borrower or a Subsidiary of Borrower has any interest.
"Default" means any of the events set forth in Article 9
hereof which with giving of notice, the lapse of time, or both, would constitute
an Event of Default.
"Default Rate" means four percentage points (4.0%) in excess
of the otherwise applicable interest rate on the Loan (but in no event more than
the rate permitted by applicable law).
"EBITDA" means for any period, and calculated on a
Consolidated Basis, without duplication, Net Income; plus (i) for such period,
such amount of the Interest Expense as has been expensed by the Borrower in the
determination of Net Income; plus (ii) any income, ad valorem, and franchise
taxes paid in cash and included in the determination of Net Income; plus (iii)
amortization and depreciation deducted in determining Net Income for such
period.
"Employee Benefit Plan" means any employee benefit plan within
the meaning of Section 3(3) of ERISA, other than a multiemployer plan.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, permits, orders, writs, judgments, injunctions,
decrees, determinations, awards and consent decrees relating to hazardous
substances and environmental matters applicable to Borrower's business and
facilities (whether or not owned by it), including, without limitation, the
Resource Conservation and Recovery Act of 1976 ("RCRA"); the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"); the
Toxic Substance Control Act; the Clean
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Water Act; and the Clean Air Act, all as amended from time to time; state and
federal superfund and environmental cleanup programs; and U.S. Department of
Transportation hazardous materials transportation regulations.
"Equipment" shall have the meaning as defined in the UCC.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, in relation to any Person, any trade
or business (whether or not incorporated) which is a member of a group of which
that Person is a member and is under common control within the meaning of the
regulations promulgated under Section 414 of the Code.
"Event of Default" has the meaning set forth in Article 9
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
may be amended from time to time.
"Existing Subordinate Debt" means those certain 8%
Subordinated Debentures Due April 1, 2001 dated October 21, 1997 in the
approximate principal amount of Six Million One Hundred Twenty-Two Thousand Two
Hundred Ninety-Seven and 00/100 Dollars ($6,122,297.00) outstanding as of March
31, 2001.
"Fair Market Value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free-market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
a Borrower acting reasonably and in good faith and shall be evidenced by a board
resolution (certified by the secretary or assistant secretary of a Borrower)
delivered to Lender.
"Financial Statements" means the audited Consolidated balance
sheets of QEP and its Subsidiaries as of February 28, 1998, February 28, 1999
and February 29, 2000, and the related statements of income, retained earnings
and cash flow for the twelve (12) month period then ended, and the unaudited
income statements and cash flow statements for the year ended February 28, 2001,
previously delivered to the Lender hereunder, together with forecasted monthly
financials and borrowings under the Senior Loan Agreement and all other
financial statements Borrower is required to deliver in accordance with the
terms hereof.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
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"General Intangibles" shall have the meaning as defined in the
UCC and shall include, without limitation, all licenses, patents, patent
licenses, trademarks, trademark licences, rights in intellectual property,
goodwill, trade names, service marks, trade secrets, Copyrights and permits.
"Guarantee Obligation" means, with respect to any Person, any
direct or indirect liability, contingent or otherwise, with respect to any
Indebtedness, lease or other obligation of another if the primary purpose or
intent thereof in incurring the Guarantee Obligation is to provide assurance to
the obligee of such obligation of another that such obligation of another will
be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof. The amount of any Guarantee Obligation
shall be deemed to be the maximum amount for which the guaranteeing Person may
be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, or if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof.
"Head Office" means the head office of Lender located at 000
Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000.
"Indebtedness" means, without duplication, all liabilities of
a Person as determined under GAAP and all obligations which such Person has
guaranteed or endorsed or is otherwise secondarily or jointly liable for, and
shall include, without limitation, (a) all obligations for borrowed money or
purchased assets, (b) obligations secured by assets whether or not any personal
liability exists, (c) the capitalized amount of any capital or finance lease
obligations, (d) the unfunded portion of pension or benefit plans or other
similar liabilities, (e) obligations as a general partner, (f) contingent
obligations pursuant to guaranties, including but not limited to all Guarantee
Obligations, endorsements, letters of credit and other secondary liabilities,
and (g) obligations for deposits.
"Indebtedness for Borrowed Money" means (a) all liabilities
for borrowed money, for the deferred purchase price of property or services, and
under leases which are or should be, under GAAP, recorded as Capital Leases, in
each case in respect of which a Person is directly or indirectly, absolutely or
contingently liable as obligor, guarantor, endorser or otherwise, or in respect
of which such Person otherwise assures a creditor against loss and (b) all
liabilities of the type described in clause (a) above which are secured by (or
for which the holder has an existing right, contingent or otherwise, to be
secured by) any Lien upon property owned by such Person, whether or not such
Person has assumed or become liable for the payment thereof.
"Instruments and Documents" means all "instruments,"
"documents," "deposit accounts," and "chattel paper," as defined in Section
9-105 of the UCC, all securities, and includes (without limitation) all
warehouse receipts and other documents of title, policies and certificates of
insurance, checking, savings, and other bank accounts, certificates of deposit,
checks, notes, drafts,
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bills, and acceptances, now or hereafter acquired, to the extent not included
in Accounts or Investment Property.
"Intercreditor Agreement" means that Intercreditor and
Subordination Agreement dated as of the Closing Date among QEP, Lender and
Senior Lender, in form and substance satisfactory to Lender, and as amended from
time to time.
"Interest Expense" means, for any period, the aggregate amount
of interest required to be paid or accrued during such period on all
Indebtedness outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of Capital
Leases and including commitment fees, agency fees, facility fees, balance
deficiency fees and similar fees or expenses in connection with the borrowing of
money.
"Interest Payment Dates" shall mean the first Business Day of
each month.
"Inventory" shall have the meaning as defined in the UCC.
"Investment Property" means all now owned or hereafter
acquired securities, financial assets, securities entitlements and investment
property of Borrower, as such terms are defined in Article 9 of the UCC.
"Landlord Waiver and Consent" means the Landlord Waiver and
Consent in the form of Exhibit B hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
security interest, lien, charge or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing).
"Life Insurance" means one or more policies of life insurance
and any substitute or replacement policies thereof, owned by Borrower (i) on the
life of Xxxxx Xxxxx in the aggregate face amount of not less than One Million
and 00/100 Dollars ($1,000,000.00), and (ii) on the life of Xxxx X. Xxxxxxxxx in
the aggregate face amount of not less than One Million and 00/100 Dollars
($1,000,000.00), and which such policies shall be free of any policy loans and
encumbrances whatsoever, except the lien in favor of the Lender hereunder.
"Loan Documents" means this Agreement, the Subordinated Note,
the Security Documents, the Pledge Agreement, the Intercreditor Agreement and
all other documents,
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instruments, financing statements, certificates and other agreements executed
in connection with the Loan.
"Loan Year" means each period of twelve (12) consecutive
months, commencing on the Closing Date and on each anniversary thereof.
"Loan" means the term loan to be made to Borrower by Lender
pursuant to Article 2 hereof.
"Management Shareholders" mean Xxxxx Xxxxx and Xxxx X.
Xxxxxxxxx.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property, condition (financial or otherwise) of
Borrower taken as a whole, or (b) the Collateral taken as a whole.
"Maximum Credit Liability" for any Borrower, other than QEP,
shall mean, as of any date of determination thereof, the sum of (i) with respect
to the proceeds of the Loan which are used to make or the issuance of which
constitutes a Valuable Transfer to such Borrower, the amount of such Loan plus
(ii) with respect to the proceeds of the Loan which are not used to make or the
issuance of which does not constitute a Valuable Transfer to such Borrower, the
lesser of (A) the outstanding amount of such Loan as of such date or (B) the
greater of (I) ninety-five percent (95%) of the Subsidiary net worth at the time
of the Loan or (II) ninety-five percent (95%) of the Subsidiary net worth of
such Borrower at the earliest of (x) such date, (y) the date of the commencement
of a case under Title 11 of the United States Code (or any successor provision)
in which such Borrower is a debtor or (z) the date enforcement hereunder is
sought.
"Net Income" means the Consolidated net income of Borrower
determined in accordance with GAAP.
"Obligations" means, without limitation, the Loan and all
other debts, obligations, or liabilities of every kind and description of
Borrower to Lender, now due or to become due, direct or indirect, absolute or
contingent, presently existing or hereafter arising, joint or several, secured
or unsecured, whether for payment or performance, regardless of how the same
arise or by what instrument, agreement or book account they may be evidenced, or
whether evidenced by any instrument, agreement or book account including,
without limitation, all loans (including any loan by renewal or extension), all
overdrafts, all guarantees, all bankers acceptances, all agreements, all letters
of credit issued by the Lender for Borrower and the applications relating
thereto, all indebtedness of Borrower to Lender, all undertakings to take or
refrain from taking any action and all indebtedness, liabilities and obligations
owing from Borrower to others which the Lender may obtain by purchase,
negotiation, discount, assignment or otherwise. Obligations shall also include
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all interest and other charges chargeable to Borrower or due from Borrower to
the Lender from time to time and all costs and expenses referred to in Section
11.8 hereof.
"Permitted Liens" means the liens and interests in favor of
the Lender granted in connection herewith and
(a) liens under the Senior Loan Documents;
(b) liens against Borrower to secure taxes, assessments and
other government charges in respect of obligations not overdue or liens
on properties to secure claims for labor, material or supplies in
respect of obligations not overdue;
(c) liens with respect to Permitted Purchase Money
Indebtedness;
(d) deposits or pledges made by Borrower in connection with,
or to secure payment of workmen's compensation, unemployment insurance,
old age pensions or other social security obligations;
(e) liens against Borrower on properties in respect of
judgments or awards that have been in force for less than the
applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which Borrower shall at the time in
good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending
such appeal or review;
(f) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties of Borrower in
existence less than ninety (90) days from the date of creation thereof
in respect of obligations not overdue; and
(g) encumbrances on real estate of Borrower consisting of
easements, rights of way, zoning restrictions, restrictions on the use
of real property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which Borrower is a party,
and other minor liens or encumbrances, none of which interferes with
the use of the property affected in the ordinary conduct of the
business of Borrower, and which defects do not individually or in the
aggregate have a Materially Adverse Effect.
"Permitted Purchase Money Indebtedness" means all liabilities
of Borrower with respect to the purchase of assets or services or the
capitalized amount of any capital or finance lease obligation in an aggregate
amount outstanding at any one time not to exceed One Million and 00/100 Dollars
($1,000,000.00) above the amounts outstanding as of the Closing Date.
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"Person" means an individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Pledge Agreement" means the pledge agreement pursuant to
which Borrower shall grant, as additional collateral security for the Loan, a
security interest in the Pledged Interests, substantially in the form of Exhibit
C hereto.
"Pledged Interests" means the Capital Stock of each of the
Subsidiaries of QEP; provided, however, with respect to each foreign Subsidiary
of QEP, such pledge shall be limited to sixty-five percent (65%) of the Capital
Stock of such Subsidiary.
"Principal Office" means the principal office of QEP at 0000
Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000 and the principal offices, if any, of
each of the other Borrowers as set forth on Schedule 4.12 hereto.
"Principal Payment Dates" means the first day of each April,
July, October and January beginning July 1, 2005.
"QEP" means Q.E.P., Co., Inc., a Delaware corporation.
"Reference Period" means, with respect to any particular
Computation Date, the period of four (4) consecutive fiscal quarters of
Borrower, ending on such Computation Date. The fiscal quarters of Borrower end
on the last day of February, May, August and November.
"Related Collateral" means all goodwill of Borrower; cash;
deposit accounts; claims under insurance policies (whether or not proceeds of
other Collateral); rights of set off; rights under judgments; tort claims and
choses in action; computer programs and software, books and records (including,
without limitation, all electronically recorded data); contract rights; and all
contracts and agreements to or of which they are parties or beneficiaries,
whether any of the foregoing be now existing or hereafter arising, now or
hereafter received by or belonging to Borrower.
"Requirements of Law" means, with respect to any Person, the
Articles or Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" means the President, Chief Executive
Officer or Chief Financial Officer of QEP.
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"Restricted Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of QEP or any Subsidiary now or hereafter outstanding; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock of Borrower or any Subsidiary now or hereafter outstanding, other than
that certain redemption of the outstanding stock of QEP held by Xxxxx X. Xxxxx,
such purchase not to exceed One Thousand Two Hundred Fifty (1,250) shares per
month, pursuant to the resolution of QEP's Board of Directors and as more fully
described in the proxy statement of QEP dated May 28, 2000, as such redemption
arrangement exists as of the date of this Agreement; (c) any payment or
prepayment of principal of, premium, if any, or interest on, redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any indebtedness other than with respect to payments
permitted pursuant to Section 6.2 hereof; and (d) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, other than the Warrants,
options or other rights to acquire shares of any class of Capital Stock of QEP
or any Subsidiary now or hereafter outstanding.
"SEC" means the Securities Exchange Commission of the United
States of America.
"Security Documents" means all of the documents and
instruments evidencing the collateral security of the Lender, including without
limitation, all UCC Financing Statements with respect to the Collateral, the
Assignment of Life Insurance, the Landlord Waiver and Consent and the Pledge
Agreement.
"Seller Notes" mean (i) that certain promissory note in the
principal amount of Nine Hundred Thousand and 00/100 Dollars ($900,000.00) dated
as of September 10, 1999,executed by QEP in favor of Xxxx X. Xxxxxxx, (ii) that
certain promissory note in the principal amount of One Million Six Hundred
Thousand and 00/100 Dollars ($1,600,000.00) outstanding as of March 31, 2001
executed by QEP in favor of Stone Mountain Manufacturing, Inc. and (iii) the
payment obligation pursuant to that certain Agreement for the Purchase and Sale
of Shares by and between Q.E.P. Zocalis Holding LLC and Zocalis S.R.L. in the
amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00).
"Senior Debt" means that portion of the principal amount owing
to the Senior Lender under the Senior Loan Documents from time to time, together
with all interest, fees and other amounts payable on or with respect thereto,
not to exceed Twenty-Four Million and 00/100 Dollars ($24,000,000.00) (or such
higher amount (i) as may be incurred as a result of increased borrowings under
the revolving credit loans of the Senior Lender to Borrower, not in excess of
the lesser of the then existing Borrowing Base or Commitment (as such terms are
defined in the Senior Loan Agreement), and provided that the method of computing
the Borrowing Base has not changed without the consent of the Lender and (ii) as
may from time to time be permitted to exist pursuant to the terms of the
Intercreditor Agreement) and any refinance, replacement, amendment or
modification thereof permitted in accordance with the Intercreditor Agreement.
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"Senior Lender" means Fleet Capital Corporation or its
permitted successors and assigns.
"Senior Loan Agreement" means that certain Amended and
Restated Loan Agreement dated as of October 20, 1997, as amended, by and between
Borrower and Senior Lender, as the same may be amended, supplemented, replaced
or refinanced from time to time in compliance with terms of the Intercreditor
Agreement.
"Senior Loan Documents" means the Senior Loan Agreement, and
all other documents which create, evidence or secure the Senior Debt from time
to time as any of the same may be amended, supplemented, replaced or refinanced
from time to time in compliance with the terms of the Intercreditor Agreement.
"Senior Loans" means the loans made to Borrower pursuant to
the terms of the Senior Loan Agreement.
"Subordinated Note" means the Subordinated Term Promissory
Note referred to in Section 2.2 hereof to evidence the Loan, substantially in
the form of Exhibit D hereto.
"Subsidiary" means, with respect to any Person, a corporation,
partnership, limited liability company, or other entity of which shares of stock
or other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership, limited liability company, or other
entity are at the time owned, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to any Subsidiary or all Subsidiaries of QEP (including each Borrower other than
QEP), whether now in existence or hereafter organized.
"Uniform Commercial Code" or "UCC" means the Uniform
Commercial Code in each case in effect in the jurisdiction where the Collateral
is located.
"UCC Financing Statements" mean the UCC financing statements
naming Borrower as debtor, and Lender as secured party or creditor, which UCC
financing statements describe all or some portion of the Collateral and which
together perfect Lender's security interest in the Collateral.
"Valuable Transfers" shall mean, in respect of any Borrower,
(i) all loans, advances or capital contributions made to or for the benefit of
such Borrower with proceeds of the Loan, (ii) all debt securities or other
obligations of such Borrower acquired by such Borrower or retired by such
Borrower with proceeds of the Loan, (iii) the fair market value of all property
acquired with
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proceeds of the Loan, and transferred, absolutely and not as collateral, to
such Borrower, and (iv) all equity securities of such Borrower acquired by such
Borrower with proceeds of the Loan.
"Warrant" or "Warrants" means one or more of the warrants to
be issued by QEP to Lender, substantially in the form as of Exhibit E hereto.
"Warrant Agreement" means the warrant agreement dated as of
the Closing Date between QEP and Lender substantially in the form of Exhibit F
hereto.
Section 1.2 Rules of Construction.
(a) Use of Capitalized Terms. For purposes of this Agreement,
unless the context otherwise requires, the capitalized terms used in
this Agreement shall have the meanings herein assigned to them, and
such definitions shall be applicable to both singular and plural forms
of such terms. In addition, all terms defined in the Uniform Commercial
Code shall have the meanings given therein unless otherwise defined
herein.
(b) Construction. All references in this Agreement to the
single number and neuter gender shall be deemed to mean and include the
plural number and all genders, and vice versa, unless the context shall
otherwise require.
(c) Headings. The underlined headings contained herein are for
convenience only and shall not affect the interpretation of this
Agreement.
(d) Entire Agreement. This Agreement and the other Loan
Documents shall constitute the entire agreement of the parties with
respect to the subject matter hereof.
(e) Severability. Any provision of this 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.
(f) Governing Law. This Agreement and the Subordinated Note
and the rights and obligations of the parties under this Agreement and
the Subordinated Note shall be governed by, and construed and
interpreted in accordance with, the law of the State of Ohio.
(g) Accounting Terms and Determinations. Unless otherwise
defined or specified herein, all accounting terms used in this Loan
Agreement shall be construed in accordance with GAAP.
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ARTICLE 2
LOAN TERMS AND AMOUNTS
Section 2.1 Loan Commitment. Subject to the terms and conditions of
this Agreement, the Lender hereby agrees to make a term loan to Borrower in the
amount of Four Million Five Hundred Thousand and 00/100 Dollars ($4,500,000.00)
(the "Loan").
Section 2.2 Subordinated Promissory Note. The absolute and
unconditional obligation of Borrower to repay to Lender the principal of the
Loan and the interest thereon shall be evidenced by a subordinated term
promissory note executed by Borrower substantially in the form of Exhibit D
hereto (the "Subordinated Note"). The Subordinated Note shall include the
following terms:
(a) Term. The Subordinated Note shall be dated as of the
Closing Date and shall mature and be due and payable in full on April
5, 2007.
(b) Interest Rate. Except as provided in Sections 2.2(e) and
2.4 hereof, the Subordinated Note shall bear interest (computed on the
basis of the actual number of days elapsed over a 360-day year) on the
daily outstanding principal balance thereunder at a rate per annum
equal to fifteen percent (15%).
(c) Interest Payment Dates. Except as provided in Section
2.2(e) hereof, interest on the Subordinated Note shall be payable
monthly on each Interest Payment Date commencing May 1, 2001, and
ending on the date the Loan is due (whether by maturity, acceleration
or otherwise).
(d) Principal Payments. Prior to July 1, 2005, provided that
Lender has not accelerated the Loan pursuant to Section 9.9 hereof,
Borrower shall not be obligated to make any payment of principal on the
Loan. Beginning July 1, 2005, installments of principal on the
Subordinated Note shall be payable on each Principal Payment Date in an
amount equal to Five Hundred Sixty Two Thousand Five Hundred and 00/100
Dollars ($562,500.00), and on the date the Loan is due (whether by
maturity, acceleration or otherwise), in an amount sufficient to pay in
full the entire unpaid principal and accrued interest.
(e) Deferred Interest. If Borrower does not generate EBITDA of
at least Nine Million and 00/100 Dollars ($9,000,000.00) in any of the
five (5) fiscal years of Borrower following February 28, 2001, then
Borrower shall pay to Lender on April 5, 2006 an additional interest
payment equal to three percent (3%) of the daily outstanding principal
balance of the Subordinated Note (computed on the basis of the actual
number of days elapsed over a 360-day year) for each, if any, of the
proceeding five (5) Loan Years in which the above EBITDA threshold was
not met, compounded for each such Loan Year such that
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the effect of such additional interest payment shall be the same as if
the Interest Rate in effect for any such fiscal year was a rate per
annum equal to eighteen percent (18%). As an illustration only, if
Borrower did not meet the above EBITDA threshold in the third Loan Year
and the daily outstanding principal balance of the Subordinated Note
for such third Loan Year was Two Million and 00/100 Dollars
($2,000,000.00), a deferred interest payment of Sixty Thousand and
00/100 Dollars ($60,000.00), in addition to all other interest,
principal and other payments owing pursuant to this Agreement, would be
due and payable on April 5, 2006 with respect to such third Loan Year.
Section 2.3 Fees.
(a) Closing Fees. At Closing, HillStreet Capital Partners,
Ltd. shall receive its closing fee in the amount of Two Hundred
Thousand and 00/100 Dollars ($200,000.00) less any deposits made by
Borrower, payable in immediately available funds or as Lender otherwise
directs.
(b) Other Fees. Borrower shall, promptly upon request,
reimburse the Lender for all loan administration, travel and related
out-of-pocket expenses, including attorney fees and expenses.
Section 2.4 Interest on Overdue Payments; Default Rate. If any payment
of interest or principal is not paid when due, or upon the occurrence of an
Event of Default, the Lender, at its option, may charge and collect from
Borrower interest at the Default Rate.
Section 2.5 Prepayments.
(a) Permitted Prepayments - Prepayment from Life Insurance. In
the event Borrower receives proceeds from payment of the Life
Insurance, the proceeds shall be applied in the manner set forth in
Section 2.7 hereof.
(b) Optional Prepayment. Borrower shall have no right to
prepay the Loan during the first or second Loan Year. If Borrower shall
prepay the Loan in whole or in part during the third through sixth Loan
Year, Borrower shall pay to Lender, as liquidated damages and
compensation for the costs of being prepared to make funds available to
Borrower under this Agreement, and not as a penalty, an amount
determined by multiplying (x) the average outstanding balance of
principal for the immediately proceeding twelve (12) month period times
(y) six percent (6%) during the third Loan Year, five percent (5%)
during the fourth Loan Year, and four percent (4%) during the fifth and
sixth Loan Year (the "Prepayment Fee"); provided, however, that if such
prepayment occurs as a result of any event described in Section 2.5(a)
hereof, no Prepayment Fee shall be required.
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Section 2.6 Time and Place of Payments. Notwithstanding anything in
this Agreement or any of the other Loan Documents to the contrary, each payment
payable by Borrower to Lender under this Agreement or any of the other Loan
Documents, shall be made directly to the Lender, at Lender's Head Office, not
later than 12:00 p.m. local time, on the due date of each such payment in
immediately available and freely transferrable funds.
Section 2.7 Application of Funds. Unless otherwise provided in this
Article 2, the funds received by the Lender shall be applied toward the
Obligations as follows:
(a) First, to the payment of all fees, charges and other sums
(with the exception of principal and interest) due and payable to the
Lender under the Subordinated Note, this Agreement or the other Loan
Documents at such time including, without limitation, all costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Lender in or incidental to the collection of the
Obligations hereunder or the exercise, protection, or enforcement by
the Lender of all or any of the rights, remedies, powers and privileges
of the Lender under this Agreement, the Subordinated Note, or any of
the other Loan Documents and in and towards the provision of adequate
indemnity to the Lender against all taxes or Liens which by law shall
have, or may have priority over the rights of the Lender in and to such
funds;
(b) Second, to the payment of the interest that is due and
payable on the principal of the Subordinated Note at the time of such
payment;
(c) Third, to the payment of principal then due on the
Subordinated Note; and
(d) Fourth, the surplus remaining (if any) to Borrower or such
other Person or Persons as may be determined by Borrower or any court
of competent jurisdiction.
Section 2.8 Use of Proceeds. Borrower represents, warrants and
covenants to the Lender that all proceeds of the Loan shall be used by Borrower
to refinance the Existing Subordinate Debt and the reasonable costs related
thereto.
Section 2.9 Payments to be Free of Deductions. Each payment payable by
Borrower to the Lender under this Agreement, the Subordinated Note, or any of
the other Loan Documents shall be made in accordance with Section 2.6 hereof,
without set-off or counterclaim and free and clear of and without any deduction
of any kind for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, restrictions or conditions of any nature now or hereafter imposed
or levied by any political subdivision or any taxing or other authority therein,
unless Borrower is compelled by law to make any such deduction or withholding.
Section 2.10 Allocation of Liability.
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(a) Notwithstanding anything herein to the contrary, each
Borrower's liability (other than QEP's') under the Note shall be limited to the
Maximum Credit Liability for each Borrower as determined at the earlier of the
date of commencement of a case under Title 11 of the United States Code (or any
successor provision) in which such Borrower is a debtor or the date enforcement
is sought hereunder or under the Note; provided, however, that each Borrower
shall be jointly and severally liable for all advances, charges, costs and
expenses, including reasonable attorneys' fees incurred or paid by Lender in
exercising any right, power or remedy conferred by this Agreement or any
enforcement thereof.
(b) Each Borrower agrees that in the event of (i) the
dissolution or insolvency of any Borrower, (ii) the inability of any Borrower to
pay its debts as they become due, (iii) an assignment by any Borrower for the
benefit of its creditors, or (iv) the institution of any bankruptcy or other
proceeding by or against any Borrower alleging that such Borrower is insolvent
or unable to pay its debts as they become due, and whether or not such event
shall occur at a time when the Obligations are not then due and payable, the
other Borrowers shall pay the Obligations promptly upon demand as if the
Obligations were then due and payable. Each Borrower agrees that upon the filing
by or against any other Borrower of any proceeding under any present or future
provision of the United States Bankruptcy Code, or any other similar federal or
state statute, other Borrowers shall have no right to contribution,
indemnification, or any recourse whatsoever against the bankrupt Borrower for
any liability incurred by the other Borrowers under the terms of the Loan
Documents. Each Borrower agrees that this provision shall continue to be
effective or be reinstated, as the case may be, if at any time any payment, or
any part thereof, of principal, interest or any other amount with respect to the
Obligations is rescinded or must otherwise be restored by Lender upon the
bankruptcy or reorganization of any Borrower, any other Person or otherwise.
Each Borrower further agrees that, to the extent that any Borrower
makes a payment, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or otherwise
required to be repaid to another Borrower, its trustee, receiver or any other
party, including without limitation, under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such payment or
repayment, the obligation or part thereof which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the date such initial payment, reduction or satisfaction occurred.
ARTICLE 3
SECURITY INTERESTS
Section 3.1 Grant of Security Interest. To secure the payment and
performance of all of the Obligations, but subject to the prior Liens of Senior
Lender, Borrower hereby grants to the
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Lender a continuing security interest in and assigns to the Lender all of the
Collateral. The Collateral shall also include the property and rights subject to
the Assignment of Life Insurance with respect to the Life Insurance in a form
reasonably satisfactory to the Lender.
Section 3.2 Additional Collateral. Subject to the prior Liens of Senior
Lender, immediately upon Borrower's receipt of that portion of the Collateral
which is evidenced or secured by an agreement, letter of credit, instrument
and/or documents including, without limitation, promissory notes, documents of
title, warehouse receipts and trade acceptances (the "Additional Collateral"),
Borrower shall deliver the original thereof to Lender, together with appropriate
endorsements, the documents required to draw thereunder (as may be relevant to
letters of credit) and/or other specific evidence (in form and substance
acceptable to Lender) of assignment thereof to Lender.
Section 3.3 Additional Security for the Loan. As additional collateral
security for the Obligations, Borrower shall deliver to Senior Lender, as
collateral agent for Lender pursuant to the terms and conditions of the
Intercreditor Agreement, the Pledged Interests on or before the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, Borrower
hereby represents and warrants to the Lender on the date hereof that:
Section 4.1 Organization, Authority and Qualification.
(a) QEP and each of its Subsidiaries are entities duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has all requisite power and
authority to own and operate its properties and to carry on its
business as now conducted. Schedule 4.1(a) sets forth all jurisdictions
in which QEP and each of its Subsidiaries are qualified to conduct
business. The execution, delivery and performance of this Agreement and
the Subordinated Note have been duly authorized by all necessary
corporate actions of each Borrower. There is no prohibition, either in
law, in its charter documents, Certificate of Incorporation (or
analogous organizational document), or bylaws, or in any order, writ,
injunction or decree of any court or arbitrator presently in effect
having applicability to any Borrower which in any way prohibits or
would be violated by the execution and performance of this Agreement
and the Subordinated Note in any respect. This Agreement and the
Subordinated Note are and will be valid, binding and enforceable
obligations of each Borrower. Each Borrower has adequate power and
authority and has full legal right to enter into this Agreement and
each of the other Loan Documents, and to
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perform, observe and comply with all of its agreements and obligations
under each of such documents, including, without limitation the
borrowings contemplated hereby. QEP and each of its Subsidiaries is
duly qualified or licensed and in good standing and duly authorized to
do business in each jurisdiction in which the character of the
properties owned or leased or the nature of the activities conducted
makes such qualification or licensing necessary and in which the
failure to be so qualified would have a Material Adverse Effect on the
conduct of the business of QEP or any of its Subsidiaries.
(b) The authorized Capital Stock of QEP and each of its
Subsidiaries is as set forth on Schedule 4.1(b) hereto. Except for the
Warrant Agreement, the Warrant, or as described on Schedule 4.1(b)
hereto, there are no outstanding options, rights or warrants issued by
QEP or any of its Subsidiaries for the acquisition of the Capital Stock
of QEP or any of its Subsidiaries, nor any outstanding securities or
obligations convertible into Capital Stock.
(c) QEP has no Subsidiaries except those as set forth on
Schedule 4.1(c) hereto. Except as set forth on Schedule 4.1(c) hereto,
the Capital Stock of each Subsidiary is owned by QEP free and clear of
all Liens other than securities laws restrictions, the Liens pursuant
to the Senior Loan Documents and those Liens in favor of Lender
hereunder.
(d) Except as set forth on Schedule 4.1(c) hereto, neither QEP
nor any of its Subsidiaries own or hold of record (whether directly or
indirectly) any shares of any class in the capital of any corporation,
nor does QEP or any of its Subsidiaries own or hold (whether directly
or indirectly) any legal and/or beneficial equity interest in any
partnership, limited liability company, business trust or joint venture
or in any other unincorporated trade or business enterprise.
Section 4.2 No Legal Bar. The execution, delivery and performance of
this Agreement, the Subordinated Note and the other Loan Documents and the
consummation of the transactions contemplated thereby, will not violate any
Requirements of Law or any Contractual Obligation of any Borrower.
Section 4.3 No Litigation. No litigation, investigation or proceeding
of or before any arbitrator or governmental authority is pending or threatened
by or against any Borrower or against any of its properties or revenues,
existing or future, (a) with respect to this Agreement, the Subordinated Note,
any of the other Loan Documents or any of the transactions contemplated hereby
or thereby, or (b) which, if adversely determined, would have a Material Adverse
Effect. Schedule 4.3 sets forth all outstanding ligation pending or threatened
against each Borrower, if any.
Section 4.4 Financial Condition. The Financial Statements delivered to
Lender fairly present the assets, liabilities and financial condition and
history of Borrower and each Subsidiary,
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as of the dates thereof, and in accordance with GAAP (except that any unaudited
Financial Statements may not contain any or all of the footnotes required by
GAAP and are subject to year-end audit adjustments). There exist no equity or
long-term investments in or outstanding advances to any Person not reflected in
the Financial Statements and, except for trade payables arising in the ordinary
course of business, Borrower has no Indebtedness and no Guarantee Obligations
other than as reflected in such Financial Statements.
Section 4.5 No Change. Since February 28, 2001, there has been no
development or event which has had or would reasonably be expected to have a
Material Adverse Effect.
Section 4.6 No Default. Other than as set forth on Schedule 4.6 hereto,
Borrower is not in default under or with respect to any of its Contractual
Obligations, except where the default would not have a Material Adverse Effect.
Other than as set forth on Schedule 4.6 hereto, no Default or Event of Default
has occurred and is continuing.
Section 4.7 Ownership of Property; Liens. Borrower has good and
marketable title to all its property as listed on the Financial Statements, and
none of such property is subject to any Lien except Permitted Liens.
Section 4.8 Intellectual Property. Borrower possess all licenses,
patents, permits, trademarks, trademark applications, trade names, copyrights,
technology, know-how and processes necessary for the conduct of its businesses
as currently conducted, and all such licenses, patents, permits, trademarks,
trademark applications, trade names, and copyrights are listed on Schedule 4.8
hereto and made a part hereof. Except as set forth on Schedule 4.8 hereto, no
claim has been asserted and is pending by any Person challenging or questioning
the use of any such property or rights or the validity or effectiveness of any
such property or rights, nor is there any known basis for any such claim. Except
as set forth on Schedule 4.8 hereto, the use of such property and rights by
Borrower does not infringe on the rights of any Person.
Section 4.9 Compliance with Laws. Borrower is in compliance with all
Requirements of Law, including all Environmental Laws applicable to it, except,
in each case, where the failure to comply would not have a Material Adverse
Effect.
Section 4.10 Taxes. With respect to QEP and each Subsidiary, except as
set forth on Schedule 4.10 hereto, each Borrower has filed or caused to be filed
all tax returns which are required to be filed and have paid all taxes shown to
be due and payable on said returns or on any assessments made against it or any
of its properties and all other taxes, fees or other charges imposed on it or
any of its property by any governmental authority (other than any taxes, fees or
other charges the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of each
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Borrower); no tax Lien has been filed, and, to the knowledge of Borrower, no
claim is being asserted, with respect to any such tax, fee or other charge.
Section 4.11 Environmental Matters. Except as set forth on Schedule
4.11 hereto, Borrower is in compliance with, and has no liability to any Person
in respect of, all Environmental Laws except where any such non-compliance or
liabilities would not have a Material Adverse Effect on Borrower or the
Collateral.
Section 4.12 Place of Business. Each Borrower maintains its places of
business, owns Collateral, and maintains its books of account and records,
including all records concerning the Collateral, only at the locations set forth
on Schedule 4.12 hereto.
Section 4.13 General Collateral Representations:
(a) Borrower is the sole owner of and has good and marketable
title to the Collateral, free from all Liens, other than the Permitted
Liens, including the Liens of the Senior Lender, and has full right and
power to grant the Lender a security interest therein. All information
which has been furnished to the Lender concerning the Collateral was
complete, accurate and correct in all material respects when furnished,
and all information which may be furnished to the Lender in the future
concerning the Collateral will be complete, accurate and correct in all
material respects when furnished.
(b) No 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 (i) by Borrower in favor of
Senior Lender pursuant to the Senior Loan Agreement, (ii) by Borrower
in favor of Lender pursuant to this Agreement, or (iii) in respect of
the items of Collateral subject to the Permitted Liens.
(c) Except as provided for in Section 5.12 hereof, the
provisions of this Agreement are sufficient to create in favor of the
Lender, as of the Closing Date, a valid and continuing lien on, and
security interest in, the types of the Collateral hereunder in which a
security interest may be created under Article 9 of the UCC. Except as
provided in Section 5.12 hereof, Financing Statements on Form UCC-1
have been duly executed on behalf of Borrower and the description of
such Collateral set forth therein is sufficient to perfect security
interests in such Collateral in which a security interest may be
perfected by the filing of Financing Statements under the UCC. When
such Financing Statements are duly filed in the filing offices listed
on Schedule 4.13 hereto, and the requisite filing fees are paid, such
filings will be sufficient to perfect security interests in such of the
Collateral described in the Financing Statements as can be perfected by
filing in such offices, which perfected security interests will be
prior to all other Liens in favor of others and rights of others
(except for the
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Liens of the Senior Lender and purchase money security interests as
permitted in accordance with this Agreement), and as against any owner
of real estate where any of the Equipment is located and as against any
purchaser of such real property and any present or future creditor
obtaining a Lien on such real estate, except with respect to those
premises set forth on Schedule 4.13 hereto, where validly executed
Landlord Waiver and Consent agreements shall be required to establish
the validity of Lender's security interest in Collateral located at
such premises as against such owner. All action necessary to protect
and perfect a security interest in each item of the Collateral has been
or will be duly taken, or in the case of Equipment covered by
certificates of title will be taken within ninety (90) days of the
Closing Date, or in the case of the Pledged Interests, when such
Pledged Interests are delivered to Senior Lender, pursuant to the
Intercreditor Agreement, on or before the Closing Date.
Section 4.14 Accounts. As to each and every Account of Borrower,
Borrower has full right and power to grant the Lender a security interest
therein and the security interest granted in such Account to the Lender in
Article 3 hereof, when perfected, will be a valid second security interest,
subordinate only to the liens granted under the Senior Loan Documents, which
will inure to the benefit of the Lender without further action, subject to the
provisions of Section 4.13(c) hereof.
Section 4.15 Equipment. Except as set forth on Schedule 4.15,
substantially all Equipment is located at the locations set forth on Schedule
4.12 hereto. No Equipment is now stored with a bailee, warehouseman or similar
party. All Equipment necessary for the conduct of Borrower's business is
currently usable or currently saleable in the normal course of Borrower's
business, other than obsolete Equipment reflected on the Financial Statements.
Section 4.16 ERISA. Schedule 4.16 hereto contains a list of all
Employee Benefit Plans maintained by Borrower. Borrower and its ERISA Affiliates
are in compliance with any applicable provisions of ERISA and the regulations
thereunder, and the Code, with respect to all such Employee Benefit Plans.
Section 4.17 Undisclosed Liabilities. Borrower has no material
obligation or liability (whether accrued, absolute, contingent, unliquidated, or
otherwise, whether due or to become due) arising out of transactions entered
into at or prior to the Closing Date, or any action or inaction at or prior to
the Closing Date, except (a) liabilities reflected on the Financial Statements;
(b) liabilities incurred in the ordinary course of business (none of which are
liabilities for breach of contract, breach of warranty, torts, infringements,
claims or lawsuits); (c) liabilities or obligations disclosed in the Schedules
hereto; (d) liabilities or obligations incurred pursuant to the Loan Documents,
and the agreements, documents and instruments contemplated thereby; (e) the
Senior Loan Agreement and the other Senior Loan Documents; and (f) the Seller
Notes.
Section 4.18 Disclosure.
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(a) All factual information furnished by or on behalf of
Borrower in writing to Lender on or before the Closing Date (including
all information contained in the Loan Documents) for purposes of or in
connection with this Agreement or any transaction contemplated hereby
is true and complete in all material respects on the date as of which
such information is dated or certified and does not contain any untrue
statement of a material fact.
(b) The projections and pro forma financial information
contained in the factual information referred to in clause (a) above
(including the pro forma consolidated financial statements delivered
hereunder) were or are based on good faith estimates and assumptions
believed to be reasonable at the time made, it being recognized by
Lender that such projections as to future events are not to be viewed
as facts and that actual results during the period or periods covered
by any such projections may differ significantly from the projected
results.
Section 4.19 Solvency. Each Borrower is solvent and will continue to be
solvent after creation of the Obligations hereunder and under the Senior Loan
Documents and the Seller Notes, the security interests of Lender and Senior
Lender and the other transactions contemplated hereby and by the Senior Loan
Documents, including that portion of the Loan for which it is liable. Each
Borrower is able to pay its debts as they mature and after the date of the
making of the Loan hereunder will have sufficient capital to carry on its
business and will not be left with an unreasonably small capital with which to
engage in its business.
Section 4.20 Survival of Representations and Warranties. The foregoing
representations and warranties are made by each Borrower (unless expressly
stated to the contrary) and with the knowledge and intention that Lender will
rely thereon, and the breach thereof shall survive the execution and delivery of
this Agreement and the making of the Loan hereunder.
ARTICLE 5
AFFIRMATIVE COVENANTS
So long as the Subordinated Note remains outstanding and unpaid or any
other Obligation is owing to the Lender (other than QEP's obligations with
respect to the Warrants, Warrant Stock (as defined in the Warrant Agreement) and
Warrant Agreement), Borrower agrees as follows:
Section 5.1 Financial Statements.
(a) Year End Report. As soon as available, but in any event
within ninety (90) days after the end of each fiscal year of Borrower,
Borrower shall deliver to Lender copies
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of the Consolidated audited financial statements of Borrower and any
Subsidiary, including the balance sheets, as at the end of such year
and the related statements of income, cash flow and retained earnings
for such year, in each case containing in comparative form the figures
for the previous year. The Consolidated audited financial statements of
Borrower shall be accompanied by an audit opinion of independent
certified public accountants of nationally or regionally recognized
standing, stating that such financial statements fairly present the
respective financial positions of Borrower and any Subsidiary and the
results of operations and changes in cash flows for the fiscal year
then ended in conformity with GAAP. As soon as available, but in any
event thirty (30) days prior to the last day of each fiscal year of
Borrower, Borrower shall deliver Consolidated and consolidating
financial projections and a management-prepared budget for Borrower
prepared on a monthly basis for the next year.
(b) Quarterly Reports. As soon as available, but in any event
not later than forty-five (45) days after the end of each quarter,
Borrower shall deliver to Lender copies of the Consolidated balance
sheets of Borrower and any Subsidiary as of the end of such quarter and
the related unaudited statements of income, cash flow and retained
earnings for such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer
of Borrower and prepared in accordance with GAAP applied on a basis
consistent with the preceding years' statements (subject to normal
year-end audit adjustments).
(c) Monthly Reports. As soon as available, but in any event
not later than thirty (30) days after the end of each month, Borrower
shall deliver to Lender copies of the Consolidated balance sheets of
Borrower and any Subsidiary as of the end of such month and the related
unaudited statements of income, cash flow and retained earnings for
such month and the portion of the fiscal year through the end of such
month, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer of Borrower and
prepared in accordance with GAAP applied on a basis consistent with the
preceding years' statements (subject to normal year-end audit
adjustments).
(d) Reports to Management. Simultaneously with the delivery of
the financial statements described in Sections 5.1(a), 5.1(b) and
5.1(c), Borrower shall also deliver to Lender copies of reports to
management and management letters, if any, prepared by the accountants
to Borrower, each certified as true and correct by a Responsible
Officer.
(e) Compliance Certificates. Simultaneously with the delivery
of the financial statements described in Section 5.1(b), Borrower shall
furnish to Lender a Compliance Certificate executed by a Responsible
Officer of Borrower (i) setting forth in reasonable detail the
calculations supporting and used to determine Borrower's compliance
with the financial covenants referenced in Article 7 hereof, along with
supporting schedules and (ii)
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stating that such Responsible Officer has no knowledge of any Default
or Event of Default, except as specified in such Compliance
Certificate.
(f) SEC Documents. Borrower shall promptly furnish to Lender
copies of all filings and other documents delivered to the SEC and all
notices or other correspondence received by Borrower from the SEC.
(g) Senior Loan Correspondence. Borrower shall promptly
furnish to Lender copies of all material reports and notices delivered
to Senior Lender pursuant to the Senior Loan Documents.
Section 5.2 Conduct of Business and Maintenance of Existence. Borrower
shall continue to engage in business of the same general type in all material
respects as now conducted by it and preserve, renew and keep in full force and
effect its existence and take all reasonable action to maintain all rights,
privileges and franchises necessary for the normal conduct of its business.
Borrower shall comply with all Contractual Obligations and Requirements of Law,
except where failure to do so would not have a Material Adverse Effect on
Borrower or the Collateral taken as a whole.
Section 5.3 Maintenance of Property; Insurance. Borrower shall keep all
property useful and necessary in its business in good working order and
condition; maintain all workers' compensation insurance required by law;
maintain with financially sound and reputable insurance companies insurance on
all of its real and personal property in amounts consistent with past practices
of Borrower in amounts sufficient to insure one hundred percent (100%) of the
actual replacement costs thereof (subject to normal deductibles and/or
self-insured retentions in amounts not in excess of the amounts in place as of
the date of this Agreement) 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, or, in case of an Event of Default, as Lender may reasonably
specify from time to time, that Lender may reasonably request from time to time,
and furnish to Lender, promptly after written request, any information as to the
insurance carried. If Borrower fails to do so, the Lender may obtain such
insurance and charge the cost thereof to Borrower's account and add it to the
Obligations. Borrower agrees that, if any loss should occur, the proceeds of all
such insurance policies may be applied to the payment of all or any part of the
Obligations, as Lender may direct, subject to the terms of the Intercreditor
Agreement, Lender shall be named an additional named insured, lender loss payee
and mortgagee on such insurance policies, as the case may be, to the extent that
such policies insure the Collateral. In the event of any casualty, and as may be
limited by the terms of the Intercreditor Agreement, Borrower shall be entitled
to retain insurance proceeds for the purpose of repairing or replacing the
insured property, provided that Borrower promptly executes and delivers to
Lender such documents, instruments, financing statements or other agreements as
may be necessary to perfect the security interest of Lender in all such
property. All policies shall provide for at least thirty (30) days' written
notice of cancellation to Lender, except premium nonpayment cancellation which
shall be ten (10) days' written notice.
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Section 5.4 Liability Insurance. Borrower shall, at all times, maintain
in full force and effect such liability insurance with respect to its activities
and other insurance as may be reasonably required by Lender, such insurance to
be provided by insurer(s) reasonably acceptable to Lender; and, if requested by
Lender, such insurance shall name Lender as an additional insured.
Section 5.5 Inspection of Property; Books and Records. Borrower shall
maintain in all material respects complete and accurate books of accounts and
records in which full, true and correct entries in conformity with GAAP and all
Requirements of Law in all material respects shall be made of all dealings and
transactions in relation to the Collateral and the operations of the Borrower;
and grant to the Lender, or its representatives, full and complete access to the
Collateral and all books of account, records, correspondence and other papers
relating to the Collateral during normal business hours and Borrower grant to
Lender the right to inspect, examine, verify and make abstracts from the copies
of such books of account, records, correspondence and other papers, and to
investigate during normal business hours such other records, activities and
business of the Borrower as they may deem reasonably necessary or appropriate at
the time.
Section 5.6 Notices. Borrower shall promptly give notice to Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation relating to any Indebtedness of Borrower, and any (ii)
litigation, investigation or proceeding which may exist at any time
between Borrower and any governmental authority, which in either case,
if not cured or if adversely determined, as the case may be, would
reasonably be expected to have a Material Adverse Effect;
(c) the commencement, existence or written threat of any
action or proceeding by or before any governmental or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand
jury or arbitrator, in each case whether foreign or domestic, against
or affecting Borrower, which action or proceeding, as the case may be,
would reasonably be expected to have a Material Adverse Effect; and
(d) any change in the business, operations, property,
condition (financial or otherwise) of Borrower which would reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence referred
to therein and stating what action Borrower proposes to take with respect
thereto.
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Section 5.7 Environmental Laws. Borrower shall comply with all
Environmental Laws and obtain and comply with and maintain any and all licenses,
approvals, registrations or permits required by any Environmental Law except
where failure to obtain or comply will not have a Material Adverse Effect on
Borrower or the Collateral.
Section 5.8 Inventory. With respect to the Inventory, Borrower shall
use commercially reasonable efforts to:
(a) sell or dispose of the Inventory only to buyers in the
ordinary course of business and consistent with past practice (which
may include disposing of obsolete inventory or Inventory of de minimus
value in the ordinary course of business and in accordance with past
practices of Borrower); and
(b) promptly notify Lender of any change in location of any of
the Inventory and, prior to any such change, execute and deliver to
Lender such UCC financing statements satisfactory to Lender as Lender
may request.
Section 5.9 Equipment. Borrower shall use commercially reasonable
efforts to:
(a) keep and maintain the Equipment in good operating
condition and repair, excluding normal wear and tear, and shall make
all necessary replacements thereof so that the value, utility and
operating efficiency thereof shall at all times be maintained and
preserved in materially the same condition as on the Closing Date,
except to the extent items of Equipment become obsolete in the ordinary
course of business, and not permit any such items to become a fixture
to real estate or accession to other personal property, to the extent
that such occurrence may be reasonably prevented by Borrower; and
(b) upon an Event of Default or as reasonably requested by
Lender, immediately on demand thereof by Lender, deliver to Lender any
and all evidence of ownership of any of the Equipment (including,
without limitation, certificates of title and applications for the
title).
Section 5.10 Collateral. Borrower shall use commercially reasonable
efforts to maintain the Collateral, as the same is constituted from time to
time, free and clear of all Liens, except Permitted Liens, and defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein and pay all costs and expenses (including
reasonable attorney's fees) incurred in connection with such defense.
Section 5.11 Employee Benefit Plans. Borrower will and will cause each
of its ERISA Affiliates to (a) comply with all requirements imposed by ERISA and
the Code applicable from time
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to time to any Employee Benefit Plans of Borrower or any ERISA Affiliates; (b)
make full payment when due of all amounts which under the provisions of such
Employee Benefit Plans or under applicable law, are required to be paid as
contributions thereto; (c) file on a timely basis all reports, notices and other
filings required by any governmental agency with respect to any such Employee
Benefit Plans; (d) furnish to all participants, beneficiaries, and employees
under any such Employee Benefit Plan, within the periods prescribed by law, all
reports, notices and other information to which they are entitled under
applicable law, and (e) take no action which would cause any such Employee
Benefit Plan to fail to meet any qualification requirement imposed by the Code.
Section 5.12 Further Documents. Borrower shall:
(a) at or prior to the Closing Date, cause Lender's Lien to be
noted on each document of ownership or title as to which evidence of
Lender's Lien is necessary or, in Lender's or Lender's counsel's
opinion, advisable to be shown in order to perfect Lender's Lien on the
Collateral covered by such document;
(b) at or prior to the Closing Date (except as provided in
Sections 5.12(c) and 5.12(d) below), execute and deliver such financing
statements, documents and instruments, and perform all other acts as
Lender deems reasonably necessary or desirable, to carry out and
perform the intent and purpose of this Agreement, and pay, upon demand,
all expenses (including reasonable attorney's fees) incurred by Lender
in connection therewith;
(c) on or prior to April 30, 2001, with respect to each
Borrower that is not an entity organized under the laws of the United
States, and from whom Senior Lender is requiring a security interest,
execute and deliver to Lender such financing statements, documents and
instruments, opinions of counsel, and perform all other acts as Lender
deems reasonably necessary or desirable, in order to perfect Lender's
security interest, junior only in priority to the interests of the
Senior Lender and any purchase money security interests as may be
permitted by this Agreement, in any and all Collateral which is in the
possession or under the control of each such Borrower; and
(d) on or prior to April 30, 2001, Lender shall have received
all third-party consents necessary to perfect Lender's security
interest in the Collateral, including, without limitation, the Landlord
Waiver and Consent agreements (or an equivalent agreement based on the
terms and conditions agreed to by a landlord with respect to the
collateral under the Senior Loan Documents, reasonably acceptable to
Lender) for the locations identified in Schedule 4.13 hereto.
Section 5.13 Life Insurance. QEP shall obtain the Life Insurance, no
later than June 4, 2001, and assign the same to Lender as collateral security
hereunder pursuant to an Assignment of
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Life Insurance acceptable to Lender, and keep and maintain the Life Insurance in
accordance with the terms hereof until all of the Obligations are satisfied and
this Agreement is terminated.
Section 5.14 Trademarks, Copyrights and Other Intellectual Property.
Promptly upon the filing by QEP or any Subsidiary of any application for letters
patent or the registration of any trademarks, trade names or copyrights,
Borrower shall notify Lender in writing and furnish such documentation as Lender
may request to perfect Lender's security interest in such property.
Section 5.15 Other Information. Borrower shall furnish to Lender such
other financial and business information and reports in form and substance
satisfactory to Lender as and when Lender may from time to time reasonably
request.
Section 5.16 Board of Directors. For so long as the Obligations remain
outstanding, Lender shall be entitled to (i) designate one (1) Person as a
member of the Board of Directors of QEP and (ii0 designate one (1) other Person
to attend the meetings of the Board of Directors of QEP or of any committee
thereof and Lender shall be entitled to receive at least ten (10) days prior
written notice of all such meetings. For so long as the Warrant Agreement and/or
the Warrants remain effective and/or outstanding, Lender shall be entitled to
designate one (1) Person to attend the meetings of the Board of Directors of
QEP, or of any committee thereof, and Lender shall be entitled to receive at
least ten (10) days prior written notice of all such meetings. Borrower shall
promptly reimburse the Lender-designated member of the Board of Directors and
Lender-designated observer for all reasonable out-of-pocket expenses incurred in
attending the above meetings, in accordance with normal company practices, and
the legal expenses incurred in fulfilling the customary fiduciary or other
duties and responsibilities of such Person.
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees with Lender and warrants that, as long as
the Loan shall remain unpaid or unexercised, as the case may be:
Section 6.1 Limitations on Restricted Payments. Without the prior
written consent of Lender, Borrower shall not, at any time, enter into,
participate in, or make any Restricted Payment.
Section 6.2 Limitations on Indebtedness. Borrower will not at any time
create, incur or assume, or become or be liable (directly or indirectly) in
respect of, any Indebtedness, other than:
(a) the Obligations incurred pursuant to this Agreement;
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(b) the Obligations incurred pursuant to the Seller Notes;
(c) the obligations incurred relative to the Senior Loan
Documents;
(d) Guarantee Obligations permitted under Section 6.3 hereof;
(e) current liabilities of Borrower incurred in the ordinary
course of business (i) not incurred through the borrowing of money, or
(ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal
purchases of goods and services;
(f) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, worker's
compensation, materials and supplies to the extent any of the foregoing
shall not otherwise be payable in accordance herewith;
(g) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
Borrower shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(h) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(i) Indebtedness in respect of performance, surety, statutory,
insurance, appeal or similar bonds obtained in the ordinary course of
business;
(j) except to the extent prohibited by Section 6.6 hereof,
Indebtedness of Borrower incurred to refinance or replace Indebtedness
of such Person permitted hereunder; provided, that (i) the principal
amount (or committed principal amount) of such refinancing Indebtedness
shall not exceed the outstanding principal amount (or committed
principal amount) of the Indebtedness being refinanced, (ii) the terms
of such refinancing are not more onerous taken as a whole to such
Person than the terms of the Indebtedness being refinanced, and (iii)
Lender shall have consented to the incurrence of such refinancing
Indebtedness;
(k) Indebtedness of Borrower incurred to make payments due
under the Warrant Agreement or the Warrant;
(l) Permitted Purchase Money Indebtedness; and
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(m) Indebtedness of Borrower with respect to that certain
Guarantee Obligation of QEP to the Royal Bank of Canada in the
principal amount of Six Hundred Fifty Thousand and 00/100 Dollars
($650,000.00) and the underlying mortgage obligation of Xxxxxxx Company
Canada Limited regarding such Guarantee Obligation.
Section 6.3 Limitation on Guarantee Obligations. Borrower shall not
create, incur, assume or suffer to exist any Guarantee Obligation except in the
ordinary course or for (i) product warranties; (ii) return or replacement
guaranties and similar assurances made by Borrower with respect to products sold
to customers in the ordinary course of business and in accordance with the past
practices of Borrower; and (iii) endorsements of checks for deposit in the
normal course of business.
Section 6.4 Limitation on Fundamental Changes. Without the prior
written consent of Lender, Borrower shall not merge, consolidate or amalgamate,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or make any material change in its business or its present method
of conducting business.
Section 6.5 Limitation on Dispositions of Assets. Without the prior
written consent of Lender, Borrower shall not convey, sell, lease, license,
assign, transfer or otherwise dispose of a substantial part (more than ten
percent (10%) in the aggregate during the term hereof) of its property, business
or assets (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, except for the sale of Inventory and
obsolete Equipment or the disposal of de minimum amounts of Equipment and
Inventory in the ordinary course of business and except for dispositions
permitted under the definition of Restricted Payments.
Section 6.6 Limitation on Investments, Loans and Advances. Borrower
shall not make or permit to exist any advances or loans to, or guarantee or
become contingently liable, directly or indirectly, in connection with the
obligations, leases, stock or dividends of, or own, purchase or make any
commitment to purchase any stock, bonds, notes, debentures or other securities
of, or any interest in, or make any capital contributions to (all of which are
sometimes collectively referred to herein as "Investments") any Person except
for (a) purchases of direct obligations of the federal government, (b) deposits
in commercial banks, (c) commercial paper of any U.S. corporation having the
highest ratings then given by the Xxxxx'x Investors Services, Inc. or Standard &
Poor's Corporation, (d) endorsement of negotiable instruments for collection in
the ordinary course of business, (e) advances to employees for business travel
and other expenses incurred in the ordinary course of business, (f) any
extension of trade credit in the ordinary course of business and investments in
customer accounts for Inventory sold or services rendered in the ordinary course
of business, (g) any investments in cash equivalents, (h) investments received
in connection with the bankruptcy of suppliers and customers or received
pursuant to a plan of reorganization, in each case, in settlement of delinquent
obligations or disputes; and (i) transactions contemplated by, or required of
Borrower, under the Warrant or Warrant Agreement.
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Section 6.7 Limitation on Payments and Modifications of Debt
Instruments. Borrower shall not:
(a) make any optional payment or prepayment on any
Indebtedness for Borrowed Money (other than Obligations under this
Agreement, obligations under the Senior Loan Documents and prepayments
of accounts payable in the ordinary course of business to obtain
discounts by the terms of payment); or
(b) amend, modify or change or consent or agree to any
amendment, modification or change to any of the terms relating to the
payment or prepayment of principal of or interest on, any such
Indebtedness for Borrowed Money (other than the Senior Debt as may be
permitted pursuant to the Intercreditor Agreement), or any capital or
finance lease obligations, without the consent of Lender.
Section 6.8 Limitation on Creation or Acquisition of Subsidiaries.
Borrower shall not create or form any new Subsidiary without the prior consent
of Lender, which consent shall not be unreasonably withheld and any such newly
created subsidiary shall be joined as a party to this Agreement if so requested
by Lender.
Section 6.9 Corporate Documents. Without the prior consent of Lender,
which consent shall not be unreasonably withheld, Borrower shall not make any
material change, amendment or modification to its Certificate of Incorporation,
or such other organization and documents, or Bylaws without the prior written
consent of Lender.
Section 6.10 Dividends and Similar Transactions. Except as otherwise
permitted under Section 6.1 hereof, Borrower shall not declare or pay any
dividends or make any other payments on its capital stock; issue, redeem,
repurchase or retire any of its capital stock; grant or issue any warrant, right
or option pertaining thereto or other security convertible into any of the
foregoing except for such grants and issuances of Capital Stock or other
securities convertible into Capital Stock in compliance with the terms of the
Warrant or Warrant Agreement; or make any distribution to its stockholders.
Section 6.11 Management Compensation. Neither Borrower nor any
Subsidiary shall (i) increase or enter into an agreement to increase the
Compensation of any management employee of Borrower or (ii) grant or enter into
any agreement to grant any stock options, during such periods in which an Event
of Default has occurred and while such event is continuing. As used herein,
"Compensation" shall mean all forms of direct and indirect remuneration and
include, without limitation, salaries, commissions, bonuses, fee, securities,
property, insurance benefits, personal benefits and contingent forms of
remuneration.
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Section 6.12 Change of Control. Without the prior written consent of
Lender, QEP shall not enter into any agreement, obligation or other arrangement
resulting in or otherwise permit to occur, a Change of Control.
ARTICLE 7
FINANCIAL COVENANTS
Borrower covenants and agrees that until payment is made of the Loan
and the performance in full of all its obligations hereunder, Borrower shall
maintain full compliance with the financial covenants and requirements set forth
in Article 7 of the Senior Loan Agreement, as such financial covenants exist in
form and substance as of the date of this Agreement, unless amended with the
prior consent of Lender as may be permitted pursuant to the Intercreditor
Agreement. Such financial covenants are incorporated by reference hereto and the
covenants and Borrower's agreement to comply with such covenants shall survive
the termination of, amendment to, or the partial or complete extinguishment of
Borrower's obligations under the Senior Loan Agreement.
ARTICLE 8
CONDITIONS PRECEDENT
Section 8.1 Conditions Precedent to Loan. The obligation of Lender to
make the Loan to Borrower under this Agreement on the Closing Date is subject to
the satisfaction of the following conditions precedent (in form, substance and
action as is satisfactory to Lender, in its sole discretion):
(a) Certified Copies of Charter Documents. Lender shall have
received from each Borrower a copy, certified by a duly authorized
officer of Borrower to be true and complete on and as of the Closing
Date, of each of the Certificate of Incorporation or other
organizational documents and Bylaws of Borrower each as in effect on
such date of certification (together with all, if any, amendments
thereto); provided, however, with respect to each Borrower that is not
an entity organized under the laws of the United States, such documents
shall be provided no later than May 4, 2001.
(b) Proof of Appropriate Action. Lender shall have received
from each Borrower a copy, certified by a duly authorized officer of
each Borrower to be true and complete on and as of the Closing Date, of
the records of all action taken by such Borrower to authorize the
execution and delivery of this Agreement and any other agreements
entered into on the Closing Date and to which it is a party or is to
become a party as contemplated or required
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by this Agreement, and its performance of all of its agreements and
obligations under each of such documents;
(c) Incumbency Certificates. Lender shall have received from
each Borrower an incumbency certificate, dated the Closing Date, signed
by the Secretary or Assistant Secretary of such Borrower and giving the
name and bearing a specimen signature of each individual who shall be
authorized (i) to sign, in the name and on behalf of such Borrower this
Agreement and each of the other Loan Documents to which such person is
or is to become a party on the Closing Date, and (ii) to give notices
and to take other action on behalf of such Borrower under such
documents;
(d) Representations and Warranties. Each of the
representations and warranties made by and on behalf of Borrower to
Lender in this Agreement and in the other Loan Documents shall be true
and correct when made, shall, for all purposes of this Agreement, be
deemed to be repeated on and as of the Closing Date, and shall be true
and correct in all material respects on and as of such date;
(e) Loan Documents, Etc. The Subordinated Note and each of the
other Loan Documents, the Warrant Agreement and Warrant, shall have
been duly and properly authorized, executed and delivered to the Lender
by the respective party or parties thereto and shall be in full force
and effect on and as of the Closing Date;
(f) Intercreditor and Subordination Agreement. Lender shall
have received the Intercreditor Agreement in form and substance
satisfactory to Lender;
(g) Senior Loan Documents. Lender shall have received from
Borrower the Senior Loan Documents and such other information with
respect to the Senior Debt reasonably requested by Lender and Lender
shall be satisfied with the terms and conditions reflected therein;
(h) Insurance. Lender shall have received evidence that
Borrower's properties and assets are fully insured in such amounts,
against such risks, and with such insurers as may be reasonably
satisfactory to Lender, with loss payable to Lender, together with the
policies (containing a standard mortgagee clause, if appropriate) or
certificates evidencing such insurance;
(i) Performance, Etc. Borrower shall have duly and properly
performed, complied with and observed its covenants, agreements and
obligations contained in each of the Loan Documents. No event shall
have occurred on or prior to the Closing Date, and no condition shall
exist on the Closing Date, which constitutes a Default or an Event of
Default;
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(j) Legal Opinion. Lender shall have received a written legal
opinion of counsel to each Borrower, addressed to Lender, dated the
Closing Date, which shall be acceptable to Lender; provided, however,
with respect to each Borrower that is not an entity organized under the
laws of the United States, such opinions shall be provided no later
than May 4, 2001.
(k) Consents. Other than as expressly provided in Section 5.12
hereof, Lender shall have received from Borrower copies of all consents
necessary for the completion of the transactions contemplated by this
Agreement, the Subordinated Note, each of the Loan Documents, and all
Instruments and Documents incidental thereto;
(l) Financial Statements; Forecasts; Projected Borrowings.
Lender shall have received from QEP the Financial Statements of QEP and
its Subsidiaries and such other Financial Statements requested by
Lender and Lender shall be satisfied with the results of all entities
reflected therein including, without limitation, the unaudited year
ended February 28, 2001 financial results and non-recurring special
charges for QEP and all its Subsidiaries. Lender shall also have
received QEP's quarterly financial projections for the year ended
February 28, 2002 and Borrower's projected borrowings under Borrower's
revolving credit facility under the Senior Loan Documents and Lender
shall be satisfied with all information reflected therein;
(m) Legality of Transactions. It shall not be unlawful (i) for
Lender to perform any of its agreements or obligations under any of the
Loan Documents to which Lender is a party on the date of such Loan, or
(ii) for QEP or any Subsidiary to perform any of its respective
agreements or obligations under any of the Loan Documents to which they
are a party on such date;
(n) Officer's Certificate. Lender shall have received from
Borrower a certificate dated as of the Closing Date, signed by a duly
authorized officer on behalf of Borrower and certifying that all of the
representations and warranties made by and on behalf of Borrower to
Lender in this Agreement and in the other Loan Documents were true and
correct in all material respects when made, and remain true and correct
on and as of the Closing Date;
(o) Due Diligence. Lender shall have conducted and completed
to Lender's full satisfaction due diligence with respect to Borrower
including, without limitation, (i) a review of all material contracts,
employment agreements, tax audit information and any other information
deemed material by Lender or its advisors; (ii) a survey of Borrower's
existing customers and suppliers; and (iii) a review of existing or
potential environmental contingent liabilities;
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(p) Post-Closing Availability. After giving effect to the
consummation of the transactions contemplated hereby (including,
without limitations, the payment of all closing fees hereunder).
Borrower shall have available under its revolving credit facility under
the Senior Indebtedness an amount no less than One Million and 00/100
Dollars ($1,000,000.00);
(q) Changes; None Adverse. From February 28, 2001 to the
Closing Date, no changes have occurred in the assets, liabilities,
financial condition, business, operations or prospects of Borrower
which, individually or in the aggregate, are materially adverse to
Borrower or any of its Subsidiaries;
(r) Life Insurance. Borrower shall have initiated the process
of obtaining the Life Insurance and assigned the same to Lender as
collateral security hereunder pursuant to an Assignment of Life
Insurance acceptable to Lender; and
(s) Compliance Certificate. Lender shall have received from
Borrower a Compliance Certificate, signed by a duly authorized officer
of Borrower, effective as of the Closing Date.
ARTICLE 9
EVENTS OF DEFAULT
Any one or more of the events as set forth in Section 9.1 through
Section 9.8 below (whether voluntary or involuntary or effected by operation of
law or otherwise) shall be an Event of Default.
Section 9.1 Payments. Failure by Borrower to pay any Obligation when
due and payable.
Section 9.2 Representations and Warranties. Any representation or
warranty made by QEP, or a Subsidiary, or any officer of any Borrower, in this
Agreement or in any Loan Document, including any certificate, document or
financial or other statement furnished by any Borrower at any time in connection
herewith or therewith shall prove to have been untrue in any material respect.
Section 9.3 Covenants. Default by any Borrower in the observance or
performance of any covenant or agreement contained herein or in any Loan
Document, which Default shall not have been cured within thirty (30) days after
the initial occurrence of such Default.
Section 9.4 Effectiveness of Loan Documents. Any Loan Document shall
cease to be legal, valid, binding or enforceable in accordance with the terms
thereof in any material respect, or any of the Liens intended to be created by
any Loan Document ceases to be or are not valid and
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perfected liens having the priority contemplated thereby, which defect shall not
have been cured within thirty (30) days of notice of the occurrence of such
defect or lack of validity or enforceability.
Section 9.5 Cross-Default to Other Indebtedness. Borrower shall default
in any payment of principal of or interest on any of its Indebtedness in excess
of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) (other than any
such default in respect of the Subordinated Note) or in the payment of any
Guarantee Obligation relating to Indebtedness in excess of Fifty Thousand and
00/100 Dollars ($50,000.00), beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee Obligation
was created or default in the observance or performance of any other agreement
or condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice or the passage
of time or both, if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable.
Section 9.6 Commencement of Bankruptcy or Reorganization Proceeding.
(a) Any Borrower shall commence any case, proceeding or other
action (i) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it as bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, wind-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets; or
(b) There shall be commenced against any Borrower any such
case, proceeding or other action which results in the entry of an order
for relief or any such adjudication or appointment or remains
undismissed, undischarged or unbonded for a period of sixty (60) days;
or
(c) There shall be commenced against any Borrower any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or
(d) Any Borrower shall suspend the operation of its business
(which business was active in a material respect as of the date of this
Agreement) or take any action in furtherance
-38-
of, or indicating its consent to, approval of, or acquiescence in, any
of the acts set forth above in this Section 9.6 hereof; or
(e) Any Borrower shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they
become due.
Section 9.7 Material Judgments. One or more judgments or decrees shall
be entered against QEP or any Subsidiary involving in the aggregate a liability
(not covered by insurance) of One Hundred Fifty Thousand and 00/100 Dollars
($150,000.00) or more and all such judgments or decrees shall not have been
vacated, satisfied, discharged or bonded pending appeal within thirty (30) days
from the entry thereof.
Section 9.8 Change of Control. A Change of Control shall occur.
Section 9.9 Remedies. Upon the occurrence of an Event of Default as
described in this Article 9, which Event of Default has not been waived or cured
to the satisfaction of Lender, the Lender, at its option, may:
(a) declare the Obligations of Borrower immediately due and
payable, without presentment, notice, protest or demand of any kind for
the payment of all or any part of the Obligations (all of which are
expressly waived by Borrower) and exercise all of its rights and
remedies against QEP and any Subsidiary and any Collateral provided
herein or in any other agreement among Borrower and Lender or any other
party; and
(b) exercise all rights granted to a secured party under the
Uniform Commercial Code or otherwise.
Upon the occurrence of an Event of Default, which Event of Default has not been
waived or cured to the satisfaction of Lender, Lender may take possession of the
Collateral, or any part thereof, and Borrower hereby grants Lender authority to
enter upon any premises on which the Collateral may be situated, and remove the
Collateral from such premises or use such premises, together with the materials,
supplies, books and records of Borrower, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. Borrower
shall, upon demand by Lender, assemble the Collateral and make it available at a
place designated by Lender which is reasonably convenient to all parties. Unless
the Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Lender will give Borrower
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sales or other intended disposition thereof is to
be made. The requirement of reasonable notice shall be met if such notice is
mailed, postage prepaid, to the address of Borrower set forth in Section 11.3
hereof at least ten (10) days prior to the time of such sale or disposition.
-39-
Section 9.10 Set-off. Lender shall have the right, without prior notice
to Borrower, any such notice being expressly waived to the extent permitted by
applicable law, to set-off and apply against any of the Obligations, whether
matured or unmatured, any amount owing from Lender to Borrower at, or at any
time after, the happening of any Event of Default, which Event of Default has
not been waived or cured to the satisfaction of Lender, and such right of
set-off may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, custodian or execution, judgment or attachment creditor of Borrower,
or against anyone else claiming through or against Borrower or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receivers, or execution, judgment or attachment creditor, notwithstanding the
fact that such right of set-off shall not have been exercised by Lender prior to
the making, filing or issuance, or service upon Lender of, or of notice of, any
such petition, assignment for the benefit of creditors, appointment or
application for the appointment of a receiver, or issuance of execution,
subpoena, order or warrant. Lender agrees promptly to notify Borrower after any
such set-off and application made by Lender; provided, that the failure to give
such notice shall not affect the validity of such set-off and application.
Section 9.11 Rights Cumulative; Waiver. The rights, options and
remedies of Lender shall be cumulative and no failure or delay by Lender in
exercising any right, option or remedy shall be deemed a waiver thereof or of
any other right, option or remedy, or waiver of any Event of Default hereunder,
nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. Lender shall not be deemed to have waived any
of Lender's rights hereunder or under any other agreement, instrument or paper
signed by Borrower unless such waiver shall be in writing and signed by Lender.
ARTICLE 10
COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT
Section 10.1 Notification of Debtors; Grant of Powers. Lender shall
have the right at any time after the occurrence of an Event of Default which has
not been waived or cured to the satisfaction of Lender, to notify Account
Debtors of its security interest in the Accounts and to require payments to be
made directly to Lender at such address or in such manner as Lender may deem
appropriate. Upon request of Lender at any time after the occurrence of an Event
of Default which has not been waived or cured to the satisfaction of Lender,
Borrower will so notify the Account Debtors and will indicate on all xxxxxxxx to
the Account Debtors that the Accounts are payable to Lender. To facilitate
direct collection, Borrower hereby appoints Lender and any officer or employee
of Lender as Lender may from time to time designate, as attorney-in-fact for
Borrower if after the occurrence of an Event of Default which has not been
waived or cured to the satisfaction of Lender to (a) receive, open and dispose
of all mail addressed to Borrower and take therefrom any
-40-
payments on or proceeds of Accounts, (b) take over Borrower's post office boxes
or make other arrangements, in which Borrower shall cooperate, to receive
Borrower's mail, including notifying the post office authorities to change the
address for delivery of mail addressed to Borrower to such address as the Lender
shall designate, (c) endorse the name of Borrower in favor of Lender upon any
and all checks, drafts, money orders, notes, acceptances or other evidences or
payment or Collateral that may come into Lender's possession, (d) sign and
endorse the name of Borrower on any invoice or xxxx of lading relating to any of
the Accounts, on verifications of Accounts sent to any Account Debtor, to drafts
against Account Debtors, to assignments of Accounts and to notices to Debtors,
and (e) do all acts and things necessary to carry out this Agreement, including
signing the name of Borrower on any instruments required by law in connection
with the transactions contemplated hereby and on Financing Statements as
permitted by the Uniform Commercial Code. Borrower hereby ratifies and approves
all acts of such attorneys-in-fact, and neither Lender nor any other such
attorney-in-fact shall be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law, excluding acts of Lender or
such attorney-in-fact that are willful, malicious or grossly negligent. This
power, being coupled with an interest, is irrevocable if after the occurrence of
an Event of Default which has not been waived or cured to the satisfaction of
Lender, so long as any of the Obligations remain unsatisfied.
Section 10.2 Disclaimer of Liability. Lender shall not, under any
circumstances, be liable for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any Accounts or any
instruments received in payment thereof or for any damage resulting therefrom,
unless caused by Lender's willful, malicious or grossly negligent acts. Lender
may, without notice to or consent from Borrower, xxx upon or otherwise collect,
extend the time of payment of, or compromise or settle for cash, credit or
otherwise upon any terms, any of the Accounts or any securities, instruments or
insurance applicable thereto and/or release the obligor thereon. Lender is
authorized to accept the return of the goods represented by any of the Accounts,
without notice to or consent by Borrower, or without discharging or in any way
affecting the Obligations hereunder. Lender shall not be liable for or
prejudiced by any loss, depreciation or other damage to Accounts or other
Collateral unless caused by Lender's willful, malicious or grossly negligent
act, and Lender shall have no duty to take any action to preserve or collect any
Account or other Collateral.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Amendments and Waivers. Borrower and Lender may amend this
Agreement, the Subordinated Note, or the other Loan Documents to which they are
parties, and Lender may waive future compliance by Borrower with any provision
of this Agreement, the Subordinated Note, or such other Loan Documents, but no
such amendment or waiver shall be effective unless in a
-41-
written instrument executed by an authorized officer of Lender and Borrower and
provided any such amendment does not violate the terms of the Intercreditor
Agreement.
Section 11.2 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
Section 11.3 Notices. All notices, consents, requests and demands to or
upon the respective parties hereto shall be in writing and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or when deposited in the mail, postage prepaid, or, in the
case of facsimile, telex or telegraphic notice, when sent, addressed as follows:
If to the Lender: The HillStreet Fund, L.P.
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxxxxxx
With a copy to: Xxxxxxx, Muething & Xxxxxxx, P.L.L.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
If to Borrower: Q.E.P. Co., Inc.
0000 Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
With a copy to: Holland & Knight, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Telephone: (305) 3h74-8500
-42-
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Notices of changes of address shall be given in the same manner.
Section 11.4 Power of Attorney. Borrower acknowledge and agree that its
appointment of Lender as its attorney and agent-in-fact after the occurrence of
an Event of Default for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Obligations are satisfied and this Agreement is terminated.
Section 11.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower, Lender and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender.
Section 11.6 Assignment; Participation. Lender may assign, or sell a
participation interest in, its rights and obligations under this Agreement, the
Subordinated Note and the other Loan Documents. In the case of an assignment,
upon receipt of notice of such assignment, Borrower shall deliver such documents
necessary to evidence or perfect such assignment. Any such assignee shall be
deemed a party hereto, and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such agreement, such assignee shall have
the rights and obligations of a Lender hereunder.
Section 11.7 Expenses. Borrower shall be responsible for payment of
Lender's out-of-pocket costs and expenses incurred in connection with the
preparation of this Agreement and the making of the Loan hereunder, including
the fees and expenses of Lender's counsel, and for all UCC search, filing,
recording and other costs connected with the perfection of the Lender's security
interest in the Collateral, (excluding any stamp, excise, or mortgage tax, levy
or other taxes payable in connection with the consummation of the transactions
contemplated hereby), whether or not the transactions contemplated hereby are
consummated. Lender may, at its sole option, engage Xxxx Xxxxxx or his
designated successor or replacement as a special consultant to Lender with
respect transactions contemplated by this Agreement and the Loans hereunder; so
long as the Subordinated Note remains outstanding and unpaid or any other
Obligation is owing to Lender, Borrower agrees to reimburse Lender for the
reasonable fees and expenses incurred by Lender in connection with any such
engagement.
Section 11.8 Post-Closing Expenses and Collection. All costs and
expenses incurred by Lender after the closing of the transactions contemplated
by this Agreement, in the administration of the Loan, Warrant Agreement, or the
Warrant, and to obtain, enforce or preserve the security interests granted by
this Agreement and to collect the Obligations, all costs to maintain and
preserve the Collateral and all attorneys' fees and legal expenses incurred in
obtaining or enforcing payment
-43-
of any of the Obligations or foreclosing the Lender's security interest in any
of the Collateral, whether through judicial proceedings or otherwise, or in
enforcing or protecting its rights and interests under this Agreement or under
any other instrument or document delivered pursuant hereto, or in protecting the
rights of any holder or holders with respect thereto, or in defending or
prosecuting any actions or proceedings arising out of or relating to this
Agreement, shall be paid by Borrower to Lender, upon demand, or, at Lender's
election, charged to Borrower's account and added to the Obligations, and Lender
may take judgment against Borrower for all such costs, expense and fees in
addition to all other amounts due from Borrower hereunder.
Section 11.9 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
Section 11.10 Governing Law; Jurisdiction and Venue. LENDER ACCEPTS
THIS AGREEMENT AT CINCINNATI, OHIO BY ACKNOWLEDGING AND AGREEING TO IT THERE.
ANY DISPUTE BETWEEN BORROWER, LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE,
SHALL BE RESOLVED IN ACCORDANCE WITH THE SUBSTANTIVE INTERNAL LAWS AND STATUTES
OF LIMITATION (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE
OF OHIO.
Lender and Borrower hereby designate all courts of record sitting in
Cincinnati, Ohio, both state and federal, as forums where any action, suit or
proceeding in respect of or arising out of this Agreement, the Subordinated
Note, Loan Documents, or the transactions contemplated by this Agreement shall
be prosecuted as to all parties, its successors and assigns, and by the
foregoing designations Lender and Borrower consent to the jurisdiction and venue
of such courts. BORROWER WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF
ANY OTHER STATE TO OBJECT TO JURISDICTION WITHIN THE STATE OF OHIO FOR THE
PURPOSES OF LITIGATION TO ENFORCE SUCH OBLIGATIONS OF SUCH BORROWER.
Section 11.11 Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE LENDER TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE
OPPORTUNITY TO CONSULT COUNSEL, BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING
IN ANY WAY FROM THE OBLIGATIONS.
Section 11.12 Other Waivers. Borrower waives notice of nonpayment,
demand, notice of demand, presentment, protest and notice of protest with
respect to the Obligations, or notice of
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acceptance hereof, notice of Loan made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
[Remainder of page intentionally left blank. Signature pages to follow.]
IN WITNESS WHEREOF, the parties have duly executed this Subordinated
Loan and Security Agreement by their duly authorized officers as of the date
first above written.
LENDER:
THE HILLSTREET FUND, L.P.
By: HillStreet Capital, Inc.
Its: Investment Manager
By:
-------------------------------------
Xxxxxxxxx X. Xxxxxxxxx, President
BORROWERS:
Q.E.P. CO., INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. - O'TOOL, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXX TOOL CORPORATION
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
WESTPOINT FOUNDRY, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX CONSOLIDATED INDUSTRIES, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX JAPAN KK
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX HOLDING INTERNATIONAL, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX COMPANY CANADA LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX XXXXXXX B.V.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX U. K. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX DEUTSCHLAND GMBH
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX S.A.R.L.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. STONE HOLDINGS, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. AUST. PTY. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P CO. AUST. PTY. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. CHILE LIMITADA
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P HOLDING B.V.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. CO. NEW ZEALAND LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. ZOCALIS HOLDING L.L.C.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. ZOCALIS S.R.L.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
BOIARDI PRODUCTS CORPORATION
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
STATE OF CONNECTICUT )
: SS:
COUNTY OF HARTFORD )
The foregoing Subordinated Loan and Security Agreement was acknowledged
before me this 5th day of April, 2001 by Xxxx X. Xxxxxxxxx, a duly authorized
Officer of each of the Borrowers set forth above, on behalf of each such
Borrower.
------------------------------------------------
Notary Public/Commissioner of the Superior Court
SUBORDINATED TERM PROMISSORY NOTE
$4,500,000.00 Cincinnati, Ohio
April 5, 2001
THIS SUBORDINATED TERM PROMISSORY NOTE ("Note") is made and entered
into as of the date hereof byQ.E.P. CO., INC., a Delaware corporation, Q.E.P. -
O'TOOL, INC., a California corporation, XXXXXX TOOL CORPORATION, an Indiana
corporation, WESTPOINT FOUNDRY, INC., an Indiana corporation, XXXXXXX
CONSOLIDATED INDUSTRIES, INC., a Delaware corporation, XXXXXXX JAPAN KK, an
entity organized in Japan, XXXXXXX HOLDING INTERNATIONAL, INC., a Delaware
corporation, XXXXXXX COMPANY CANADA LIMITED, an entity organized in Ontario,
Canada, XXXXXXX HOLLAND B.V., an entity organized in The Netherlands, XXXXXXX U.
K. LIMITED, an entity organized in England, XXXXXXX DEUTSCHLAND GmbH, an entity
organized in Germany, XXXXXXX S.A.R.L. , an entity organized in France, Q.E.P.
STONE HOLDINGS, INC., a Florida corporation, Q.E.P. AUST. PTY. LIMITED, an
entity organized in Australia, Q.E.P CO. AUST. PTY. LIMITED, an entity organized
in Australia, Q.E.P. CHILE LIMITADA, an entity organized in Chile, Q.E.P HOLDING
B.V., an entity organized in Xxx Xxxxxxxxxxx, X.X.X. XX. XXX XXXXXXX LIMITED, an
entity organized in New Zealand, Q.E.P. ZOCALIS HOLDING L.L.C., a Delaware
limited liability company, Q.E.P. ZOCALIS S.R.L., an entity organized in
Argentina, and BOIARDI PRODUCTS CORPORATION, an Ohio corporation (all of the
foregoing hereinafter collectively called the "Borrower" unless otherwise
specifically indicated), to the order of THE HILLSTREET FUND, L.P., a Delaware
limited partnership (hereinafter, together with its successors and assigns,
called "Lender").
This Note has been executed and delivered in connection with a certain
Subordinated Loan and Security Agreement dated as of April 5, 2001, by and
between the Borrower and Lender (the "Loan Agreement") and is subject to the
terms and conditions of the Loan Agreement. All capitalized terms used herein
shall have the meanings assigned to them in the Loan Agreement unless the
context hereof requires otherwise.
Borrower, for value received, promises to pay to the order of Lender
the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($4,500,000.00), together with interest at an annual rate equal to fifteen
percent (15.0%); provided, however, that the Loan Agreement provides for, and
Borrower shall pay to Lender, (i) if required pursuant to the terms of the Loan
Agreement, interest at the Default Rate in accordance with the terms of the Loan
Agreement, and (ii) if required pursuant to the Loan Agreement, Deferred
Interest in accordance with the terms of the Loan Agreement. Interest shall be
due and payable monthly in arrears commencing on May 1, 2001, and on the first
Business Day of each month thereafter. Deferred Interest, if
-2-
required, shall be due and payable on April 5, 2006. All interest under this
Note shall be computed on the basis of the actual number of days elapsed over an
assumed year consisting of three hundred sixty (360) days.
Borrower shall pay to Lender, commencing on July 1, 2005, and on the
first day of each October, January, April and July thereafter until this Note is
paid in full, quarterly installments of principal in the amount of FIVE HUNDRED
SIXTY-TWO THOUSAND FIVE HUNDRED AND 00/100 DOLLARS ($562,500.00); provided,
that, in any event, the last installment payable shall be in an amount
sufficient to pay in full the entire unpaid principal and accrued interest of
this Note, including any additional amounts payable hereunder or under the Loan
Agreement. All of the indebtedness evidenced by this Note shall, if not sooner
due and payable as provided in the Loan Agreement, be in any event absolutely
and unconditionally due and payable in full by Borrower on April 5, 2007. This
Note is subject to prepayment provisions as set forth in the Loan Agreement.
If any payment of principal, interest or other charge due hereunder is
not paid when due, or an Event of Default shall occur and be continuing under
the Loan Agreement, this Note shall, at the option of Lender, become immediately
due and payable, upon demand by Lender, except that if there shall be an Event
of Default under Section 9.6 of the Loan Agreement, this Note shall
automatically and immediately be due and payable without demand.
The Borrower hereby: (i) waives presentment, demand, notice of demand,
protest, notice of protest and notice of nonpayment and any other notice
required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note, or any indorsement or guaranty
of this Note; and (ii) consents to any and all delays, extensions, renewals or
other modifications of this Note or waivers of any term hereof or the failure to
act on the part of Lender or any indulgence shown by Lender, from time to time
and in one or more instances (without notice to or further assent from
Borrower), and agrees that no such action, failure to act or failure to exercise
any right or remedy, on the part of Lender shall in any way affect or impair the
obligations of the Borrower or be construed as a waiver by Lender of, or
otherwise affect, any of Lender's rights under this Note, under any indorsement
or guaranty of this Note.
Anything herein to the contrary notwithstanding, the obligations of
Borrower under this Note, the Loan Agreement, any other Loan Documents or any
other documents executed contemporaneously therewith shall be subject to the
limitation that payments of interest shall not be required to the extent that
receipt of any such payment by the Lender would be contrary to the provisions of
law applicable to the Lender limiting the maximum rate of interest that may be
charged or collected by the Lender. Without limiting the generality of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Note which are made for the purposes of determining whether
such rate of interest exceeds the maximum rate of interest permitted by
applicable law shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of this Note, all
interest at any time contracted for, charged or received in connection with the
indebtedness evidenced by this Note.
The provisions of this Note shall be governed by and interpreted in
accordance with the laws of the State of Ohio.
As a specifically bargained inducement for the holder to extend credit
to Borrower, and after having the opportunity to consult counsel, the
undersigned and all indorsers hereby expressly waive the right to trial by jury
in any lawsuit or proceeding related to this Note or arising in any way from any
indebtedness or other transactions involving the holder and the undersigned.
The undersigned hereby designate all courts of record sitting in
Cincinnati, Ohio and having jurisdiction over the subject matter, state and
federal, as forums where any action, suit or proceeding in respect of or arising
from or out of this Note, its making, validity or performance, may be prosecuted
as to all parties, their successors and assigns, and by the foregoing
designation the undersigned consent to the jurisdiction and venue of such
courts.
TIME IS OF THE ESSENCE IN THE PERFORMANCE OF THE OBLIGATIONS OF THIS
NOTE.
[Remainder of page intentionally left blank. Signature page follows.]
IN WITNESS WHEREOF, the parties have duly executed this Subordinated
Term Promissory Note by their duly authorized officers as of the date first
above written.
Q.E.P. CO., INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. - O'TOOL, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXX TOOL CORPORATION
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
WESTPOINT FOUNDRY, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX CONSOLIDATED INDUSTRIES, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX JAPAN KK
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX HOLDING INTERNATIONAL, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX COMPANY CANADA LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX HOLLAND B.V.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX U. K. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX DEUTSCHLAND GMBH
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
XXXXXXX S.A.R.L.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. STONE HOLDINGS, INC.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. AUST. PTY. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P CO. AUST. PTY. LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. CHILE LIMITADA
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P HOLDING B.V.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. CO. NEW ZEALAND LIMITED
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. ZOCALIS HOLDING L.L.C.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
Q.E.P. ZOCALIS S.R.L.
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
BOIARDI PRODUCTS CORPORATION
By:
-------------------------------------
Xxxx X. Xxxxxxxxx
Its Director
Duly Authorized
STATE OF CONNECTICUT )
: SS:
COUNTY OF HARTFORD )
The foregoing Subordinated Term Promissory Note was acknowledged before
me this 5th day of April, 2001 by Xxxx X. Xxxxxxxxx, a duly authorized Officer
of each of the Borrowers set forth above, on behalf of each such Borrower.
------------------------------------------------
Notary Public/Commissioner of the Superior Court
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement") is made and entered into as of
April 5, 2001, by and between Q.E.P., CO., INC., a Delaware corporation, (the
"Company"), and THE HILLSTREET FUND, L.P., a Delaware limited partnership
("Holder" and sometimes referred to as the "Initial Holder").
WHEREAS, the Initial Holder, and Company are parties to a Subordinated
Loan and Security Agreement dated as of even date herewith, as the same may be
amended or supplemented from time to time (the "Loan Agreement"); and
WHEREAS, as a condition to the obligations of the Initial Holder under
the Loan Agreement, the Company is required to (a) enter into this Agreement,
and (b) issue to the Initial Holder Warrants (as defined below and in the form
of Exhibit A) to purchase certain shares of Common Stock (as defined below) upon
an exercise of said warrants at the price and upon the terms and conditions
specified herein and therein (said warrants and all warrants subsequently issued
by the Company to the Initial Holder, its successors and assigns including any
Holder (as defined below), pursuant hereto or to any of said warrants, whether
upon transfer, exchange or replacement thereof or otherwise, being hereinafter
referred to collectively as the "Warrants", and each individually as a
"Warrant");
NOW, THEREFORE, the parties agree as follows:
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, or in the Loan Agreement the following terms shall have the following
respective meanings:
"Applicable Holders" shall mean (i) in the case of a registration
pursuant to Section 7 hereof, those Holders signing a Request who desire to
register and sell some or all of their Warrant Stock pursuant to such Request,
together with any additional Holders who, not later than fifteen (15) days after
receipt of notice of a Request, elect in writing to Company to join in such
Request, or (ii) in the case of a registration pursuant to Section 8 hereof,
those Holders requesting inclusion of Warrant Stock in such registration and
whose Warrant Stock will be included in such registration.
"Capital Transaction" shall mean any of the following: (i) one or more
mergers, consolidations, liquidations of the Company, the liquidation of any
subsidiary of the Company that constitutes more than fifteen percent (15%) of
the assets or net income of the Company or other similar corporate actions
pursuant to which the Company or the Holders of Warrant Stock receive cash,
securities or other property; (ii) at least a majority of the
-2-
common equity of the Company or capital stock of the Company possessing the
voting power to elect a majority of the directors is sold by the holders thereof
or issued by the Company; (iii) all or substantially all of the assets of the
Company are sold, leased, conveyed or otherwise dispersed of as an entirety or
substantially as an entirety to any Person in one or a series of transactions;
and (iv) a registration statement with respect to the common equity of the
Company shall be filed under the Securities Act other than as a consequence of
an exercise of demand registration rights pursuant to Section 7 or 8 hereof.
"Certificate of Applicable Holders" shall mean (i) in the case of a
registration pursuant to Section 7 hereof, a resolution signed by the Holders of
a majority of the Warrant Stock designated in a particular Request and certified
by an officer of the Holder, or (ii) in the case of a registration pursuant to
Section 8 hereof, a resolution signed by the Holders of a majority of the
Warrant Stock that will be or was included in such registration.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Common Stock" shall mean the common stock of the Company, par value
[$0.01] per share.
"Company Documents" shall mean this Agreement and the Warrants, as any
of the same may be amended, modified, supplemented or restated from time to
time.
"Convertible Securities" shall mean evidence of indebtedness, shares of
stock or other securities which are directly or indirectly convertible into or
exchangeable for, with or without payment of additional consideration, shares of
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event.
"Entity Value" shall mean the greatest of (a) the fair market or total
value of the Company or any successor thereto as established as of any Capital
Transaction or Public Offering, (b) the Formula Value, or (c) the Appraised
Value.
"Exercise Price" of a share of Stock issuable upon the exercise of a
Warrant shall mean three and 63/100 dollars ($3.63).
"Expiration Date" shall mean April 5, 2011.
"Formula Value" shall mean the value of the Company as established by
the following formula: six (6) x EBITDA for the trailing twelve (12) month as
determined by reference to the unaudited income statement most recently
available of the Company (or the audited financial statements in the case of
months constituting the fiscal year or any part thereof for which audited
-3-
financial statements are available), prepared in accordance with GAAP (subject,
in the case of interim financial statements, to normal year end adjustments),
for the period ended as of the last day of the month ending immediately prior to
the date the Formula Value is being determined, less short and long term funded
indebtedness of the Company on any day of calculation, plus cash on any day of
calculation held by the Company.
"GAAP" shall mean generally accepted accounting principles in the
United States at the time in effect.
"Generally Accepted Accounting Principles" shall mean accounting
principles which are (i) consistent with the principles promulgated or adopted
for the United States by the Financial Accounting Standards Board and its
predecessors in effect from time to time, (ii) applied on a basis consistent
with prior periods, and (c) such that a certified public account would, insofar
as the use of accounting principles is pertinent, be in a position to deliver an
unqualified opinion as to financial statements in which such principles have
been properly applied.
"Holder" and "Holders" shall mean the Initial Holder and its registered
successors and assigns of the Warrants and of the Stock exchanged for the
Warrants pursuant to this Agreement.
"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.
"Lien" means any lien, mortgage, pledge, security interest, charge or
other encumbrance of any kind including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest.
"Official Body" shall mean any governmental or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Outstanding Common Stock" shall mean the total number of outstanding
shares of Common Stock of the Company on a fully diluted basis taking into
account all shares convertible into common shares and the common share
equivalent of all other securities, plus all shares of Common Stock that the
Company is obligated to issue at the time or in the future by any outstanding
warrant, option, convertible securities or other agreement of any nature on a
fully diluted basis taking into account all shares convertible into common
shares and the common share equivalent of all other securities.
"Person" shall include an individual, a company, a corporation, an
association, a partnership, a joint venture, an unincorporated trade or business
enterprise, a trust, an estate, or
-4-
other legal entity or a government (national, regional or local), court,
arbitrator or any agency, instrumentality or official of the foregoing.
"Principal Stockholder" means Xxxxx Xxxxx.
"Public Offering" shall mean any underwritten public offering of the
Common Stock.
"Put" shall have the meaning attributed to it in Section 6.1
"Put Exercise Date" shall mean the earlier to occur of (a) April 5,
2006, or (b) the consummation of any Capital Transaction.
"Put Exercise Notice" shall have the meaning attributed to it in
Section 6.1.
"Put Price" shall have the meaning attributed to it in Section 6.2.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and the declaration or ordering of the effectiveness of such registration
statement.
"Request" shall mean a request to register at least Fifty-one Percent
(51%) of the shares of Warrant Stock then held collectively by the Holders
pursuant to Section 7 hereof and signed by the Holders of such Warrant Stock and
containing any and all information required by Sections 7 and 10 hereof,
provided, however, that in no case may more than one Request be made under this
Agreement and provided further that no Request shall be permitted with respect
to Warrant Stock that may be sold in compliance with all applicable laws without
registration or pursuant to Rule 144 of the Securities Act or any successor
rule.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Lender" shall mean Fleet Capital Corporation, a Rhode Island
corporation, or its permitted successors and assigns.
"Senior Loan Agreement" means that certain Amended and Restated Loan
Agreement dated as of October 20, 1997, as subsequently amended, by and between
Borrower and Senior Lender, as the same may be amended, supplemented, replaced
or refinanced from time to time in compliance with terms of the Intercreditor
Agreement.
-5-
"Stock" shall mean (i) all classes and categories of the capital stock
of the Company whether then issued or issuable, including without limitation,
any shares of Common Stock and (ii) any shares of Common Stock issued or
issuable with respect to the Common Stock by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Warrant Stock" shall mean Common Stock issued or issuable upon
exercise of the Warrant in accordance with its terms and any capital stock or
other securities into which or for which such Common Stock shall have been
converted or exchanged pursuant to any recapitalization, reorganization or
merger of the Company.
2. WARRANT PURCHASE; ANTIDILUTION.
2.1 Warrant Purchase. Contemporaneously with the execution
of this Agreement, the Company shall issue to the Initial Holder, Warrants, in
the form attached hereto as Exhibit A (the "Warrant"), evidencing the Initial
Holder's right to purchase at the Exercise Price up to Three Hundred Twenty-Five
Thousand (325,000) shares of Common Stock.
2.2 No Voting Rights. Except as set forth herein, this
Agreement shall not entitle any Holder to any voting rights or other rights as a
shareholder of the Company, and no dividend or interest shall be payable or
accrued in respect of the Warrant or this Agreement or the interest represented
hereby or the shares of Warrant Stock which may be purchased hereunder until and
unless, and except to the extent that, a Holder has duly exercised its rights
under any Warrant issued to such Holder or its predecessor in interest and such
Holder has been issued shares of Warrant Stock. The Company shall thereupon
treat such Holder (or its designee) as the record owner of the shares of Warrant
Stock obtained by such exercise for voting and all other purposes.
2.3 Good Faith by Company. The Company will not, by
amendment to its Certificate of Incorporation or through any reorganization,
reclassification, consolidation, merger, sale of assets, dissolution, issue or
sale of securities or other action, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement, but will at all times in good
faith carry out all such terms and take all such action as may be necessary or
appropriate to protect the rights of the Holders hereunder in accordance with
this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF HOLDERS; RESTRICTIONS ON
TRANSFERABILITY.
-6-
3.1 The Initial Holder hereby represents and warrants to the
Company as set forth in this Section 3.1 and each Holder other than the Initial
Holder shall, upon its acquisition of a Warrant, be deemed to represent and
warrant to the Company (severally and not jointly) as set forth in this Section
3.1. In addition, the representations and warranties set forth in this Section
3.1 shall be deemed to be remade by a Holder from time to time to the Company as
of the date a Warrant is exercised by such Holder.
(a) Authorization.
(i) Authorization and Compliance With Law. The execution
and delivery of this Agreement by the Holder, and any exercise or exchange of
such Holder's Warrant pursuant to the terms hereof or thereof, have been duly
authorized by all necessary action, corporate and otherwise, on the part of the
Holder. The entry into this Agreement by the Holder, the acquisition and
ownership of the Warrant issued to such Holder and the exercise or exchange of
such Warrant pursuant to the terms hereof and thereof do not and will not
violate any Law applicable to such Holder.
(ii) Approvals. No authorization, consent, approval,
license or filing with any third party or any Official Body is or will be
necessary for the valid execution, delivery or performance of this Agreement by
the Holder, the acquisition and ownership of the Warrant issued to the Holder or
the exercise or exchange of such Warrant pursuant to the terms hereof or
thereof.
(b) Investment Representations.
(i) No Distributive Intent; Restricted Securities. The
Holder is acquiring the Warrant issued to it and, if applicable, the Warrant
Stock (all of which shall be collectively referred to in this Section 3 as the
"Securities" and singly, by type, as a "Security") for its own account with no
present intention of reselling or otherwise distributing any such Security or
participating in a distribution of such Securities in violation of the
Securities Act, or any applicable state securities laws. The Holder acknowledges
that it has been advised and is aware that (A) the Company is relying upon an
exemption from registration under the Securities Act and applicable state
securities laws predicated upon such Holder's representations and warranties
contained in this Section 3.1 in connection with the issuance of such Securities
pursuant to this Agreement, and (B) such Securities in the hands of the Holder
will be "restricted securities" within the meaning of Rule 144 promulgated by
the Commission pursuant to the Securities Act and, unless and until registered
under the Securities Act, will be subject to limitations on resale (including,
among others, limitations on the amount of securities that can be resold and the
timing and manner of resale) set forth in Rule 144 or in
-7-
administrative interpretations of the Securities Act by the Commission or in
other rules and regulations promulgated thereunder by the Commission, in effect
at the time of the proposed sale or other disposition of the Securities.
(ii) Compliance with Law Upon Transfer. To the extent that
the Holder is entitled to transfer or pledge any of the Securities, the Holder
will not transfer or pledge any of such Securities in violation of the
Securities Act or any other applicable Laws, and in the event the Holder pledges
or transfers any of such Securities it will advise the pledgee or transferee of
the transfer restrictions imposed on such Securities.
(iii) No Commission. No outside parties have participated
with respect to the negotiation of this transaction on behalf of the Holder, and
the Holder shall indemnify and hold the Company harmless with respect to any
claim for any broker's or finder's fees or commissions with respect to the
transactions contemplated hereby by anyone found to have been acting on behalf
of the Holder with the Holder's consent.
(iv) Legends. The Holder consents to the endorsement on
each certificate representing the Securities of the legends described in Section
3.2(b) indicating that the Securities are not registered, except as and when
such Securities may be registered pursuant to the terms hereof.
(c) Execution and Binding Effect. This Agreement has been duly
and validly executed and delivered by such Holder and constitutes legal, valid
and binding obligations of such Holder, enforceable against such Holder in
accordance with its terms.
3.2 Restrictions on Transferability.
(a) Restricted Securities. The Warrants and the Warrant Stock
that are subject to the restrictions set forth in this Section 3.2
(collectively, the "Restricted Securities"), shall not be transferable to anyone
other than the Company before satisfaction of the conditions specified in this
Section 3.2, which conditions are intended to insure compliance with the
provisions of applicable securities laws in respect of the transfer of the
Restricted Securities. The Warrants and the Warrant Stock shall cease to be
"Restricted Securities" when and only when either they are distributed pursuant
to an effective registration statement with respect thereto or, counsel to the
Holder shall provide an opinion, which opinion shall be satisfactory in form and
substance to the Company, stating that the securities may be distributed freely
by the holders thereof
-8-
(including all subsequent holders) without registration under the Securities Act
and applicable state securities laws.
(b) Restrictive Legends. Unless and until otherwise permitted
by this Section 3.2 or unless distributed pursuant to an effective registration
statement,
(i) each certificate evidencing the Warrants, and each
certificate evidencing a Warrant upon the transfer thereof, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"Neither this Warrant, nor the shares of capital stock for
which it is exercisable, have been registered under the
Securities Act of 1933 or any applicable state securities
laws, and no transfer or assignment of this Warrant or the
shares issuable upon its exercise may be made in the absence
of an effective registration statement under such laws or the
availability of exemptions from the registration provisions
thereof in respect of such transfer or assignment in the
opinion of counsel satisfactory to the Company. Moreover, this
Warrant and the shares of capital stock for which it is
exercisable are subject to restrictions on transferability and
similar restrictions as set forth in a Warrant Agreement dated
as of April 5, 2001 relating to the issuance of this Warrant
(a copy of which Agreement is on file with the Company's
Secretary and will be made available upon request of a Warrant
holder or proposed transferee)."
(ii) each certificate for Warrant Stock initially issued
upon the exercise of a Warrant, and each certificate for Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or the securities
laws of any state and are subject to the conditions specified
in a certain Warrant Agreement dated as of April 5, 2001,
between the Company and The HillStreet Fund, L.P. A transfer
of the shares represented by this certificate shall not be
valid or effective until such conditions have been fulfilled,
including receipt by the Company of an opinion of counsel in
form and substance satisfactory to it that any such transfer
will not violate
-9-
federal or state securities laws. A copy of the Warrant
Agreement is on file with the Secretary of the Company and
will be made available upon request. The holder of this
certificate, by acceptance of this certificate, agrees to be
bound by the provisions of said Warrant Agreement and to
indemnify and hold the Company harmless against loss or
liability arising from the disposition of the shares
represented by this certificate in violation of such
provisions."
3.3 Removal of Legends. When the restrictions on
transferability contained in Section 3.2 shall terminate or otherwise be
satisfied, the Company shall, or shall instruct its transfer agent or warrant
agent, as appropriate, to issue new certificates evidencing such securities in
the name of such Holder not bearing the legends required by Section 3.2(b).
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
4.1 Representations and Warranties. The Company hereby
acknowledges and affirms each of the representations and warranties made by it
in the Loan Agreement as set forth in Article 4 thereof, which representations
and warranties are specifically incorporated herein by reference.
4.2 Covenants.
(a) Loan Agreement. The Company shall comply with the
affirmative, financial and negative covenants set forth in the Loan
Agreement in Articles 5, 6, and 7 thereof, which covenants are
specifically incorporated herein by reference.
(b) Registration Rights. The Company shall not grant any
demand rights to any third person with respect to the registration of
securities held by any such person unless such demand rights are
expressly subordinate to and may not be exercised prior to or in
conjunction with the exercise of the demand registration rights of the
Holders hereunder.
(c) Registration Procedures. If and when the Company is
required to effect the registration of any Warrant Stock under the
Securities Act as provided in Section 7 or 8, the Company shall: (i)
prepare and file with the Commission a Registration Statement and such
amendments and supplements thereto and any prospectus used in
connection therewith as may be necessary to keep such Registration
-10-
Statement effective for such period as shall be necessary to complete
the marketing of the Warrant Stock included therein, but in no event
longer than one hundred twenty (120) days after the effective date of
such Registration Statement; (ii) furnish to the Applicable Holders
such number of copies of a prospectus, including, without limitation, a
preliminary prospectus, conforming with the requirements of the
Securities Act, and such other documents as the Applicable Holders may
reasonably request in order to facilitate the public sale or other
disposition of such Warrant Stock; (iii) use its best efforts to
register or qualify, not later than the effective date of any
Registration Statement filed pursuant to this Agreement, the Warrant
Stock covered by such Registration Statement under the securities or
Blue Sky laws of such jurisdictions within the United States as any
Applicable Holder may reasonably request and do any and all other acts
or things which may be necessary or advisable to enable such Applicable
Holder to consummate the public sale or other disposition in such
jurisdiction of such Warrant Stock provided, however, that the Company
shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified; (iv) promptly notify the
Applicable Holders, at any time when a prospectus relating to the
Warrant Stock being distributed is required to be delivered under the
Securities Act, of 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 material fact or omits 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
then existing and, at the request of the Applicable Holder, evidenced
by a Certificate of Applicable Holders, promptly prepare, file with the
Commission and furnish to the Applicable Holders 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
Warrant Stock, 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
light of the circumstances then existing; (v) use its best efforts to
furnish, at the request of any Applicable Holder or any underwriter of
any distribution of the Warrant Stock, an opinion of legal counsel to
the Company, covering such matters as are typically covered by opinions
of issuer's counsel in underwritten offerings under the Securities Act
and are similar in form and substance to that furnished in connection
with the Company's most recent underwritten public offering of Common
Stock, as any Applicable Holders or the underwriter of any distribution
of the Warrant Stock request; (vi) use its best efforts to cause all of
the shares of Warrant Stock in the Request to be listed on any
recognized securities exchange, including, without limitation, the
NASDAQ Stock Market, on which the Common Stock is then listed and to
maintain the currency and effectiveness of any such listings; and (vii)
enter into an agreement with the underwriters for such offering in
which the Company shall provide indemnities similar to those described
in Section 11.1 hereof to the underwriters and in which the Company
shall make representations and warranties
-11-
customarily made by issuers of equity securities to underwriters,
similar in form and substance to those made to the underwriters of the
most recent underwritten public offering of Company Stock.
5. TAG-ALONG RIGHTS.
5.1 Tag Along Rights. If any Principal Stockholder of the
Company desires to sell or transfer, in a single transaction or in a series of
related transactions, fifteen percent (15%) or more of the Company's Outstanding
Common Stock (excluding, to the extent permitted by applicable law, transfers of
Company Stock by any Principal Stockholder to a member of the family of such
Principal Shareholder, or a trust for the benefit of such Principal Shareholder,
or any of such Principal Shareholder's spouse, children or grandchildren;
provided, however, a Principal Shareholder's obligations with respect to this
Section 5 shall be assumed undiminished by any such transferee), then such
Stockholder agrees to give notice of such intent to the Holders at least fifteen
(15) days prior to the proposed date of such sale or transfer. Such notice shall
specify the number and class of Common Stock and the terms, including price,
upon which such Common Stock are to be sold or otherwise transferred and the
proposed date of such sale or transfer.
One or more of the Holders may elect to participate in such
sale by giving notice to the Company and such Stockholders at least five (5)
days prior to the date of the proposed sale or transfer. Such notice shall
specify the number of shares of Common Stock which such Holder wishes to sell or
transfer. If one or more of the Holders elects to participate in such sale, and
gives timely notice of such election in accordance with the provisions of this
Section 5.1, then such sale shall not be effected unless the proposed purchaser
of such shares of Common Stock offers to purchase from each of the Holders
electing to participate in the sale, at the same time and on the same terms
(including price) as shares of Common Stock that are being purchased from such
Stockholders, that proportional number of shares of Common Stock which bears the
same proportion to the total number of shares of Common Stock issued and
issuable upon the exercise of such Warrant by the Holder as the number of shares
of Common Stock being sold by such Stockholders bears to the total number of
shares of Common Stock owned by such Stockholder.
6. PUT AND CALL OF WARRANTS AND STOCK.
6.1 Put Rights. On or at any time after the Put Exercise Date
and prior to the Expiration Date, and upon written notice thereof by any of the
Holders ("Put Exercise Notice") each Holder shall have the right to "put" to the
Company all or any part of its Warrant or the Warrant Stock obtained or
obtainable by the Holder through the exercise of its Warrants
-12-
(the "Put") subject to applicable law and any restriction set forth in the Loan
Agreement. The Company shall, within ten (10) days following the receipt of a
written notice that the Holder intends to exercise the Put hereunder, purchase
the Warrants (or portion thereof) or the Warrant Stock being sold by the Holder
for the Put Price calculated in accordance with Section 6.2 out of funds legally
available therefore, if any.
6.2 Put Price. Upon exercise of the put rights set forth in
Section 6.1, the purchase price ("Put Price") (a) for each share of Warrant
Stock being put shall equal the Entity Value of the Company as defined herein
divided by the total number of shares of Outstanding Common Stock, and (b) for
each Warrant being put shall equal (x) the price per share determined pursuant
to clause (a) above multiplied by the number of shares of Warrant Stock which
such Warrant entitles the Holder thereof to purchase, minus (y) the Exercise
Price per share of Warrant Stock multiplied by the number of shares of Warrant
Stock which such Warrant entitles the Holder thereof to purchase.
6.3 Default. If the Company shall, for any reason other than
restrictions under applicable law or under the Loan Agreement, fail to pay in
full the Put Price (or portion thereof) or the Warrant Stock being sold by the
Holder pursuant to Sections 6.1 and 6.2 when such amount is due and payable in
accordance with Section 6.1 (the "Due Date"), the Company shall pay to such
Holder, on demand, in immediately available funds, an amount equal to the sum of
(i) the unpaid amount of the Put Price due to such Holder on the Due Date (the
"Unpaid Portion") plus (ii) interest on such Unpaid Portion from the Due Date,
computed on a daily basis and on the basis of a 360-day year, through the date
upon which payment is received by Holder after demand is made pursuant to this
Section 6.3 (the "Payment Date"), at a rate per annum equal to Eighteen Percent
(18%) per annum.
Until such time as the Put Price for each unrepurchased
share of Warrant Stock has been paid in full
in cash, the Holder of such unrepurchased Warrant Stock shall be entitled to
retain legal and beneficial ownership of such unrepurchased Stock and to
exercise all rights with respect to such unrepurchased Warrant Stock under this
Agreement.
6.4 Call Rights. On and after April 5, 2007, the Company shall
have the option to require the Holder to sell to the Company all or any part of
the Warrant or the Warrant Stock obtained or obtainable by the Holder through
the exercise of the Warrants. The Company shall, within ten (10) days following
the delivery to the Holder of a written notice that the Company intends to
exercise its purchase option hereunder, purchase the Warrants (or portion
thereof) or the Warrant Stock being sold by the Holder for a purchase price
equal to the Put Price calculated in accordance with Section 6.2 out of funds
legally available therefore, if any.
-13-
6.5 Calculations of Put Price. If any Holder who has exercised
its put shall disagree with any amount proposed by the Company as the Put Price,
such Holder shall give the Company written notice of its objection within ten
(10) days of receipt of such Put Price or of notice from the Company of its
proposed Put Price. Within five (5) days of the Company's receipt of the Put
Exercise Notice, the Board of Directors of the Company shall give the Holders
written notice of its determination of the Entity Value. If the holders of 51%
of the Warrants shall not be reasonably satisfied with the determination of the
Board of Directors of the Company, the Fair Market Value shall be determined in
accordance with the following procedures (such determination, the "Appraised
Value"): first, by an investment banking firm selected by holders of 51% of the
Warrants which are subject to such Put, which determination shall be made within
thirty (30) days after the delivery of the notice of the Holders' objection to
the Company's determination of the Put Price; second, if such determination by
the investment banking firm selected by the Holders shall not be satisfactory to
the Company, as evidenced by a written objection by the Company delivered to the
holders of the Warrants subject to such Put within fourteen (14) days of receipt
by the Company of such determination, the Company shall be entitled to select an
investment banking firm which shall make its own determination within thirty
(30) days of such Company notice, and if such determination shall differ by less
than 10% from the determination of the investment banking firm selected by the
Company, the Fair Market Value shall be the average of such determinations; and,
third, if such determinations shall differ by 10% or more, such investment
banking firms shall appoint a third investment banking firm which shall make its
own determination within fourteen (14) days of its appointment, which
determination shall be binding upon the Company and the holders of the Warrants
subject to the Put Exercise Notice. Any and all determinations required to be
made by an investment banking firm pursuant to this definition shall be
performed by an investment banking firm experienced in the conduct of corporate
valuations and shall be based upon the fair market value of 100% of the Company
on a consolidated basis if sold as a going concern, without giving effect to any
discount for lack of liquidity of the shares of Common Stock or to any
restrictions upon the conversion or convertibility of any shares of nonvoting
common stock into voting common stock, or to any or to the fact that the shares
of Common Stock issuable upon exercise of the Warrants being put to the Company
represent a minority equity interest in the Company, or to any discount relating
to, or reclassification because of, any right or option of any stockholder or
warrant holder of the Company to sell its shares of stock or warrants to the
Company, including pursuant to this Warrant Agreement. In addition, in making
such determination, the investment banking firm shall assume the conversion,
exercise or exchange of all Exercisable Convertible Securities and shall take
into account the going-concern valuations associated with companies engaged in
businesses similar to the Company and such other matters as are relevant to the
valuation of the Company. Further, in making such determination, the investment
banking firm's valuation methodology shall be independent of any alternative
valuation methodology set forth in this Warrant Agreement. Notwithstanding
anything herein to the contrary, in determining the Entity Value under this
definition, (i) any adverse changes in GAAP from the date of original
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issuance of this Warrant Agreement shall be disregarded such that any
computations shall be made as if the GAAP change had not been implemented, and
(ii) any dividends paid or redemptions or repurchases of any of the securities
of the Company by the Company within one (1) year prior to the exercise of the
Put or in connection with any then contemplated Capital Transaction or Public
Offering shall be disregarded and any amounts distributed shall be treated as if
such amounts had been retained by the Company. All costs and expenses incurred
by the Warrant Holder or the Company in connection with the determination of Put
Price (whether or not timely made) and the exercise of the Put hereunder shall
be borne by the Company.
7. DEMAND REGISTRATION RIGHTS.
7.1 The Company has completed a public offering (an "Initial
Public Offering") of its Common Stock under the Securities Act, pursuant to
which its Common Stock is traded on the NASDAQ system. Upon receiving a Request
from the Holders, the Company will prepare and file, promptly after such Request
and in no case more than sixty (60) days after receipt of such Request, and
thereafter will use its best efforts to cause to become effective a registration
statement ("Registration Statement") with respect to the Warrant Stock on such
form selected by the Company and complying with the Act. If, for any reason
other than the Applicable Holders' failure to perform their obligations under
Section 7.4(a) hereof, the Registration Statement does not become effective, the
Request shall be withdrawn and shall not count as a "Request" made pursuant to
this Section.
7.2 If the Request so states, the offering or distribution of
Warrant Stock under this Section shall be, to the best of the Company's efforts,
pursuant to a firm commitment underwriting. The managing underwriter shall be a
nationally recognized investment banking firm selected by the Company but the
selection shall be subject to the Applicable Holders' approval, which approval
shall not be unreasonably withheld. The Applicable Holders shall be entitled to
negotiate the underwriting discounts and commission and other fees of such
underwriter.
7.3 Any Request shall specify the number of shares of Warrant
Stock as to which such Request relates, express the Applicable Holders' present
intention to offer such Warrant Stock for distribution and contain an
undertaking to provide all such information and materials and take all such
actions and execute all such documents as may be required in order to permit the
Company to comply with all applicable requirements of the Commission, to obtain
acceleration of the effective date of the Registration Statement and to enter
into satisfactory underwriting arrangements, if the distribution of Warrant
Stock is to be underwritten. Any Request shall designate an Authorized Holder
and such Authorized Holder's address for the purpose of delivering notices under
the Agreement to the Applicable Holders. The Request shall also contain any
other information required to be set forth under Section 7.
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7.4 No securities to be sold by the Company or any
securityholder of the Company shall be included in any Registration Statement
filed pursuant to this Section, unless (a) the Company shall have received a
Certificate of Applicable Holders consenting to the inclusion of such other
securities, which consent shall not be unreasonably withheld; (b) in the case of
a firm underwriting, the managing or principal underwriter shall have consented
to the inclusion of such other securities and (c) all the Warrant Stock
requested to be included in the Request shall be so included.
7.5 The Company shall be entitled to postpone the filing of
any Registration Statement otherwise required to be prepared and filed by it
pursuant to this Section if, at the time it receives a Request, counsel for the
Company is reasonably of the opinion (which opinion shall be expressed in
writing) that (a) such registration will require preparation of audited
financial information for the Company as of a date or for a period which
preparation will not otherwise be required or (b) any material pending
transaction of the Company or any of its subsidiaries renders the effecting of
such registration inappropriate at the time; provided, that in the case of an
event referred to in clause (b) above, the duration of such delay shall not
exceed 90 days from the date the Company became aware of such material business
information; provided, further, that the Company shall promptly make such filing
as soon as the conditions which permit it to delay such filing no longer exist;
and provided, further that in the event of any such deferral, the Applicable
Holders shall have the right to withdraw the Request by way of a Certificate of
Applicable Holders and such withdrawn Request shall not be considered as a
Request.
8. PIGGYBACK REGISTRATIONS.
8.1 If at any time prior to the Expiration Date, the Company
shall propose to file a Registration Statement for the purpose of a primary or
secondary offering for itself or any securityholder of the Company (the
"Initiating Securityholder") under the Act, other than for issuance to
employees, the Company shall as promptly as practicable, but in no event later
than thirty (30) days prior to the proposed filing date, give notice of such
intention to each Holder and upon the written Request of any such Holder within
fifteen (15) days after receipt of any such notice (which Request shall specify
the Warrants or Warrant Stock intended to be sold or disposed of by such
Holder), the Company will include in such Registration Statement all such
Warrants or Warrant Stock specified in such Request to be so registered.
9. OTHER REGISTRATIONS.
If the Warrants or any Warrant Stock issued or issuable
pursuant hereto require registration or qualification with or approval of any
United States or governmental official or
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authority in addition to registration under the Securities Act before the
Warrants or such Warrant Stock may be sold, the Company will take all requisite
action in connection with such registration and will use its best efforts to
cause any such shares and/or such Warrants to be duly registered or approved as
may be required; provided, however, that it shall not be required to give a
general consent to service of process or to qualify as a foreign corporation or
subject itself to taxation as doing business in any such state.
10. COSTS AND EXPENSES OF REGISTRATION.
The Company shall bear the entire cost and expense of any
registration made pursuant to Section 7 or 8 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, the
fees and expenses of the Company's counsel and its independent accountants and
all other out-of-pocket expenses of the Company incident to the preparation,
printing and filing under the Act of the Registration Statement and all
amendments and supplements thereto, the cost of furnishing copies of each
preliminary prospectus, each final prospectus and each amendment or supplement
thereto to underwriters, brokers and dealers and other purchasers of the
securities so registered, and the costs and expenses incurred in connection with
the qualification of the securities so registered under "blue sky" or other
state securities laws (all such expenses are herein called "Registration
Expenses"). The Company shall not be responsible for any underwriter's or
broker's fees or commissions incurred by Holder respect to any registration
hereunder.
11. INDEMNIFICATION.
11.1 Indemnity to the Holders. The Company will indemnify the
Applicable Holders of the Common Stock against all claims, losses, damages,
liabilities and expenses resulting from any untrue statement or alleged untrue
statement of a material fact contained in a prospectus or in any related
Registration Statement, notification or similar filing under securities laws of
any jurisdiction or from 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 the same may have been based upon
information furnished in writing to the Company by any Holder expressly for use
therein and used in accordance with such writing.
11.2 Indemnity to the Company. The Applicable Holders,
severally and not jointly (i) by requesting any such registration pursuant to
Section 7, or (ii) having their Warrant Stock included in a registration
pursuant to Section 8 hereof, agree to furnish to the Company such information
concerning them as may be requested by the Company and which is necessary in
connection with any registration or qualification of the Warrant Stock and to
indemnify the Company against all claims, losses, damages, liabilities and
expenses resulting
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from the utilization of any such information furnished in writing to the Company
expressly for use therein and used in accordance with such writing.
11.3 Indemnification Procedures. If any action is brought or
any claim is made against any party indemnified pursuant to this Section 11 in
respect of which indemnity may be sought against the indemnitor pursuant to this
Section 11, such party shall promptly notify the indemnitor in writing of the
institution of such action or the making of such claim and the indemnitor shall
assume the defense of such action or claim, including the employment of counsel
and payment of expenses. The failure of an indemnified party to give notice as
provided herein shall not relieve the indemnitor of its obligations under this
Section 11 except to the extent the indemnitor is actually prejudiced by such
failure to give notice. Such party shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such party unless the employment of such counsel shall have
been authorized in writing by the indemnitor by a resolution of the Board of
Directors of the Company or by a Certificate of Applicable Holders, whichever
the case may be, in connection with the defense of such action or claim or such
indemnified party or the parties shall have reasonably concluded that there are
defenses available to it or them which are in conflict with those available to
the indemnitor (in which case the indemnitor shall not have the right to
interpose such conflicting defense but otherwise shall retain control of such
action or claim on behalf of the indemnified party or parties), in any of which
events such fees and expenses of not more than one additional counsel for the
indemnified parties shall be borne by the indemnitor. Except as expressly
provided above, in the event that the indemnitor shall not previously have
assumed the defense of any such action or claim, at such time as the indemnitor
does not assume the defense of such action or claim, the indemnitor shall
thereafter be liable to any person indemnified pursuant to this Agreement for
any reasonable legal or other expenses subsequently incurred by such person in
investigating, preparing or defending against such action or claim. Anything in
this paragraph to the contrary notwithstanding, the indemnitor shall not be
liable for any settlement of any such claim or action effected without its
written consent. An indemnitor will not consent to any entry of judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the indemnitor/plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation.
12. RULE 144.
The Company shall take such action as any holder of Warrant
Stock may reasonably request, all to the extent required from time to time to
enable such Holder to sell shares of its Warrant Stock without registration
under the Act pursuant to and in accordance with (x) Rule 144 under the Act, as
such Rule may be amended from time to time, or (y) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the
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Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
13. AMENDMENTS AND WAIVERS.
This Agreement may be amended, and the Company may take any
action herein prohibited or omit to perform any act herein required to be
performed by it, only if Company shall have obtained the advance written consent
of the Holders holding Warrants exercisable for 51% or more of the Warrant Stock
issuable upon exercise of outstanding Warrants at such time.
14. NOTICES.
Notices and other communications under this Agreement shall be
in writing and shall be sent by registered mail, postage prepaid, addressed:
(a) to any Holder of Warrant Stock or Warrants at the address
shown on the Stock or Warrant transfer books of the Company unless such
Holder has advised the Company in writing of a different address as to
which notices shall be sent under this Agreement; and
(b) if to Company at 0000 Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx
00000 or to such other address as Company shall have furnished to the
Holder at the time outstanding.
15. 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. This Agreement and the
Company Documents embody the entire agreement and understanding between the
Company and the other parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings relating to the subject
matter hereof. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF OHIO. 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.
[Remainder of page intentionally left blank. Signature page follows.]
-19-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
ATTEST: Q.E.P., CO., INC.
By:
----------------------------------- -------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Financial Officer
ATTEST: LENDER:
THE HILLSTREET FUND, L.P.
By: HillStreet Capital, Inc.
Its: Investment Manager
By:
----------------------------------- -------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxx
Title: President
The undersigned Principal Shareholders join in this Warrant Agreement
for purposes of agreeing to the provisions of Section 5.
----------------------------------------
Printed name: Xxxxx Xxxxx
STATE OF CONNECTICUT )
: SS:
COUNTY OF HARTFORD )
The foregoing Warrant Agreement was acknowledged before me this 5th day
of April, 2001 by Xxxx X. Xxxxxxxxx, the Chief Financial Officer of the Company
set forth above, on behalf of such Company.
------------------------------------------------
Notary Public/Commissioner of the Superior Court
Neither this Warrant, nor the shares of capital stock for which it is
exercisable, have been registered under the Securities Act of 1933 or
any applicable state securities laws, and no transfer or assignment of
this Warrant or the shares issuable upon its exercise may be made in
the absence of an effective registration statement under such laws or
the availability of exemptions from the registration provisions thereof
in respect of such transfer or assignment in the opinion of counsel
satisfactory to the Company. Moreover, this Warrant and the shares of
capital stock for which it is exercisable are subject to restrictions
on transferability and similar restrictions as set forth in a Warrant
Agreement dated as of April 5, 2001 relating to the issuance of this
Warrant (a copy of which Agreement is on file with the Company's
Secretary and will be made available upon request of a Warrant holder
or proposed transferee).
Warrant Certificate No. ___ Warrants for 325,000 Shares
Original Issue Date: Xxxxx 0, 0000
XXXXXXX TO PURCHASE COMMON STOCK
OF
Q.E.P. CO., INC.
This certifies that THE HILLSTREET FUND, L.P., a Delaware limited
partnership, or its registered assigns ("Holder"), is entitled, subject to the
terms set forth below, at any time on or after the date hereof and prior to the
Expiration Date to purchase from Q.E.P. CO., INC. (the "Company"), a Delaware
corporation, up to Three Hundred Twenty-Five Thousand (325,000) fully paid and
non-assessable shares of the Company's common stock ("Common Stock") upon
surrender hereof, at the principal office of the Company, with the subscription
form annexed hereto duly executed, and simultaneous payment therefor, at the
purchase price of Three and 63/100 Dollars ($3.63) per share of Common Stock
(the "Purchase Price"). For purposes of this Warrant, "Outstanding Common Stock"
shall be deemed to be that number of shares of Common Stock then outstanding
plus all shares of Common Stock that the Company is obligated to issue at the
time or in the future by any outstanding warrant, option, convertible security
or other agreement of any nature.
1. The Warrants. This Warrant is issued to Holder in connection with a
certain Subordinated Loan and Security Agreement dated as of April 5, 2001,
between the Company and The HillStreet Fund, L.P. (the "Loan Agreement"). The
term "Warrants" as used herein shall
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include all Warrants issued in connection with the Loan Agreement and also any
warrants delivered in substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Full Exercise. Subject to compliance with the provisions
hereof, this Warrant may be exercised by the Holder, in whole or in part, during
the period of exercise specified above, at any time or from time to time, on any
business day, by surrendering the Warrant at the principal office of the
Company, 0000 Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000 with the form of Election
to Exercise in substantially the form of Exhibit A fully executed, together with
payment in cash or immediately available funds of the sum obtained by
multiplying: (a) the number of shares of Common Stock for which the Warrant is
being exercised; by (b) the Exercise Price, provided, however, that all or part
of such payment may be made by the surrender by such Holder to the Company, at
the aforesaid office or agency, of any instrument evidencing indebtedness of the
Company, or any other corporation of which the Company owns at least fifty
percent (50%) of the voting stock. All indebtedness so surrendered shall be
credited against such Exercise Price in an amount equal to the outstanding
principal amount thereof plus accrued but unpaid interest to the date of
surrender.
2.2 Partial Exercise. This Warrant may be exercised for less
than the full number of shares of Common Stock or any fraction thereof called
for hereby, during the period of exercise specified above, at any time or from
time to time, in the manner set forth in Section 2.1. Upon any partial exercise,
the number of shares receivable upon the exercise of this Warrant as a whole,
and the sum payable upon the exercise of this Warrant as a whole, shall be
proportionately reduced. Upon such partial exercise, this Warrant shall be
surrendered and a new Warrant of the same tenor and for the purchase of the
number of such shares not purchased upon such exercise shall be issued by the
Company to the registered Holder hereof within five (5) days after such
exercise. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the Holder of such
shares of record as of the close of business on such date. As soon as
practicable on or after such date, but in any event within five (5) days after
payment of the Exercise Price pursuant to this Section 2, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of shares of Common Stock issuable
upon such exercise.
2.3 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if the Market Price (as defined below) for one share of Common
Stock is greater than the Exercise Price (on the date of exercise of all or a
part of this Warrant), in lieu of exercising this Warrant for cash, the Holder
may elect to receive Warrant Stock equal to the value (as determined below) of
this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company, together with the form of
Election to Exercise
-3-
attached hereto fully executed, in which event the Company shall issue to the
Holder that number of Shares of Warrant Stock computed using the following
formula:
X = Y x (A-B) / A
Where Y = the aggregate number of Shares of Warrant Stock
purchasable under this Warrant or, if only a portion
of this Warrant is being exercised, the number of
Shares of Warrant Stock for which this Warrant is
being exercised (at the date of such calculation)
A = Market Price of one Share of Common Stock
(at the date of such calculation)
B = Exercise Price.
For the purposes of this Section 2.3, "Market Price" shall mean, if the
Warrant Stock is traded on a national securities exchange, the NASDAQ National
Market System or the over-the-counter market, the last reported price on the
date of valuation at which the Warrant Stock has traded on the NASDAQ National
Market System or the average of the bid and asked prices on the over-the-counter
market on the date of valuation or, if no sale took place on such date, the last
date on which a sale took place. If the Warrant Stock is not so traded, "Market
Price" shall be the value of one share of Warrant Stock as determined by
agreement of the parties hereto, or if the parties hereto cannot reach
agreement, then such value shall be determined by appraisal by an independent
investment banking firm selected by the Company and acceptable to the Holder;
provided, however, that if the Holder and the Company cannot agree on such
investment banking firm, such appraised value shall be determined by averaging
the appraised values calculated by (i) an independent investment banking firm
selected by the Company; (ii) an independent investment banking firm selected by
the Holder; and (iii) an independent investment banking firm selected by the
investment banking firms selected by the Company and the Holder. Each such
appraisal shall be at the Company's expense.
3. Payment of Taxes. All shares of Common Stock issued upon the
exercise of a Warrant shall be validly issued, fully paid and non-assessable and
free of any security interest or other adverse claims or encumbrances and free
of claims of pre-emptive rights. The Company shall pay all issuance taxes and
similar governmental charges that may be imposed in respect of the issue or
delivery thereof, but in no event shall the Company pay a tax on or measured by
the net income or gain attributed to such exercise. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer of a Warrant or any transfer involved in the issue of any certificate
for shares of Common Stock in any name other than that of the registered Holder
of the Warrant surrendered in connection with the purchase of such shares, and
in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
-4-
4. Unregistered Securities. The Holder acknowledges that, in taking
unregistered Warrants, it must continue to bear the economic risk of its
investment for an indefinite period of time because of the fact that such
Warrants have not been registered under the Securities Act of 1933 and further
realizes that such Warrants cannot be sold unless they are subsequently
registered under the Securities Act or 1933 or an exception or exemption from
such registration is available. The Holder also acknowledges that appropriate
legends reflecting the status of the Warrants under the Securities Act of 1933
may be placed on the face of the Warrant certificates at the time of their
transfer and delivery to the Holder hereof. The transfer of this Warrant and the
shares issuable upon exercise of this Warrant is subject to the terms of this
Warrant and the terms and provisions of the Warrant Agreement.
5. Exchanges. This Warrant is exchangeable, upon the surrender hereof
by the Holder at the principal office of the Company together with the form of
transfer authorization attached hereto as Exhibit B duly executed, for new
Warrants for the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares as the Holder
shall designate at the time of such exchange.
6. Adjustments.
6.1 General Adjustment Principles. If any shares of stock or
other securities (or any stock or other securities convertible into or
exchangeable for any such stock or securities) shall be issued or sold by the
Company, or any other event shall occur that shall have the effect of diluting
such rights, then and in each such case the number of shares or other securities
issuable upon exercise of this Warrant and the Exercise Price shall forthwith be
adjusted, so as to protect the Holder of the Warrants against the effect of such
dilution, in the manner described in this Section or by means of a similar
computation mutually acceptable to the parties hereto.
In case of any reclassification, subdivision or combination of Common
Stock or any distribution or dividends on the Common Stock payable in Common
Stock, the number of shares of Warrant Stock which may be purchased by exercise
of this Warrant shall be proportionately adjusted.
In case of the sale or issuance of additional Common Stock, adjustments
shall be computed as described in this Section, other than adjustments that
would result from issuances of Common Stock pursuant to (i) the Q.E.P. Co., Inc.
Omnibus Stock Plan of 1996 as in effect on the date hereof, generally available
to all of the employees of the Company, (ii) the warrants issued by the Company
in connection with the acquisition of Xxxxxxx Consolidated Industries, Inc., in
October 1997, (iii) the warrants issued in connection with the initial public
offering of the Company's Common Stock in 1996, and (iv) the options granted to
Xxxxx Xxxxx for the purchase of up to 54,000 shares of Common Stock at a strike
price of not less than Four and 00/100 Dollars ($4.00) per share, as to which no
adjustments shall be made. If at any time the Company shall issue or sell any
Additional Shares of Common Stock (except as to shares issued pursuant to the
exercise of this Warrant or pursuant to the exceptions set forth in the
foregoing sentence)
-5-
for a consideration per share less than the greater of (x) the Market Price per
share of Common Stock at the time of issuance of the Additional Shares or (y)
the Warrant Exercise Price, then the number of shares of Common Stock thereafter
constituting the Warrant shall be adjusted to that number determined by
multiplying the number of shares of Common Stock constituting the Warrant
immediately prior to such adjustment by a fraction, (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of the Additional Shares of Common Stock, plus the number of shares
of Common Stock represented by the Warrant immediately prior to the issuance of
the Additional Shares of Common Stock, plus the number of such Additional Shares
of Common Stock so issued as contemplated by this Section and (ii) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of the Additional Shares of Common Stock, plus
the number of shares of Common Stock represented by the Warrant immediately
prior to the issuance of the Additional Shares of Common Stock, plus the number
of shares of Common Stock that the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued as contemplated by this
Section would purchase at the greater of such Market Price at the time of
issuance of the Additional Shares or the Warrant Exercise Price. For the
purposes of this Section, (i) the date as of which the Market Price for the
issuance of the Additional Shares and the Warrant Exercise Price shall be
computed shall be the earlier of (a) the date on which the Company shall enter
into a firm contract at a fixed price for the issuance of such Additional Shares
of Common Stock or (b) the date of actual issuance of such Additional Shares of
Common Stock, and (ii) the consideration for Additional Shares of Common Stock
issued and sold by the Company pursuant to an underwritten public offering shall
be deemed to be the price at which the shares are offered to the public.
6.2 Reorganization, Consolidation, Merger. In the event of any
reorganization of the Company (or any other corporation, the stock or other
securities of which are at the time receivable on the exercise of this Warrant),
or the Company (or any such other corporation) shall consolidate with or merge
into another corporation or convey all or substantially all of its assets to
another corporation, then and in each such case the Holder of this Warrant, upon
the exercise hereof as provided in Section 2, at any time after the consummation
of such reorganization, consolidation, merger or conveyance, shall be entitled
to receive, in lieu of the stock or other securities and property receivable
upon the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 6. In
each such case the terms of this Warrant shall be applicable to the shares of
stock or other securities or property receivable upon the exercise of this
Warrant after such consummation; provided, however, that if such reorganization,
consolidation or merger is with any entity affiliated with the Company or any of
its officers or directors, and would result in the elimination of all or
substantially all of the rights to voting interests of the Holder in the
surviving corporation, such Holder upon exercise hereof after such
reorganization, consolidation, or merger shall be entitled to receive, at the
Holder's option, in lieu of the stock or other securities or property to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior
-6-
thereto, cash or voting securities in the proportions that the Holder may elect
in the surviving corporation in an amount equivalent to the fair market value of
the voting interest in the Company that such Holder would have received had the
Warrant been exercised prior to such consummation.
6.3 Other Adjustments. In case at any time conditions arise by
reason of action taken by the Company which, in the opinion of its Board of
Directors (recognizing the fiduciary duty, hereby assumed and acknowledged, of
the Board of Directors to the Holders of the Warrants) or in the opinion of the
Holders of Warrants representing a majority of the shares of Warrant Stock
issuable upon exercise of such Warrants, are not adequately covered by the other
provisions of this Section 6 and which might materially and adversely affect the
exercise rights of the Holders of the Warrants, then the Board of Directors of
the Company shall appoint a firm of independent certified public accountants of
recognized national standing (other than the accountants then auditing the books
of the Company) to determine the adjustment, if any, on a basis consistent with
the standards established in the other provisions of this Section 6, necessary
with respect to the purchase price or adjusted purchase price, as so to
preserve, without dilution, the exercise rights of the Holders of the Warrants.
Upon receipt of such opinion, the Board of Directors of the Company shall
forthwith make the adjustments described in such report.
6.4 No Dilution or Impairment. The Company will not, by
amendment or restatement of its certificate of incorporation or by-laws or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of the Warrants, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the Holders of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company: (a)
shall take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares upon
the exercise of all Warrants at the time outstanding; and (b) shall take no
action to amend or restate its certificate of incorporation or by-laws which
would change to the detriment of the Holders of Warrant Stock (whether or not
any Warrant Stock be at the time outstanding) the dividend or voting rights of
the Company's Warrant Stock.
6.5 Accountants' Certificate as to Adjustments. In each case
of an issuance by the Company of shares or warrants, options, convertible
securities or other agreement of any nature and at any other time requested by
the Holder, but no more than semi-annually, the Company at its expense shall
cause a firm of independent certified public accountants of recognized standing
selected by the Company (who may be the accountants then auditing the books of
the Company except in the circumstances set forth in Section 6.3 above) to
compute such adjustment in accordance with the terms of the Warrants and prepare
a certificate setting forth the adjustment, if any, necessary as a result of
such issuance and showing in detail the facts upon which such adjustment is
based, including a statement of: (a) the consideration received or to be
received by the Company for any additional shares of Warrant Stock issued or
sold or
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deemed to have been sold; and (b) the number of shares of Warrant Stock
outstanding or deemed to be outstanding. The Company will forthwith mail a copy
of each certificate to each Holder of a Warrant at the time outstanding.
6.6 Notices of Record Date. If and when the Company shall
establish a record date for the Holders of its Stock (or such other securities
at the time receivable upon the exercise of the Warrants) for the purpose:
(a) of determining the Holders entitled to receive any
dividend or other distribution, or any right to subscribe for or
purchase any shares of stock of any class or any securities, or to
receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
or merger of the Company with or into another corporation, except for
mergers into the Company of subsidiaries whose assets are less than ten
percent (10%) of the total assets of the Company and its consolidated
subsidiaries, or any conveyance of all or substantially all of the
assets of the Company to another corporation; or
(c) of any voluntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be mailed, to
each Holder of a Warrant at the time outstanding a notice specifying, as the
case may be, the record date established with respect to such dividend,
distribution, voting or other right, and stating the amount and character of
such dividend, distribution, voting or other right, or the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any,
to be fixed as of which the Holders of record of Stock (or such other securities
at the time receivable upon the exercise of the Warrants) shall be entitled to
vote upon or exchange their shares of Stock (or such other securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least thirty (30) days prior to the
dates therein specified. The rights to notice provided in this Section 6.6 are
in addition to the rights provided elsewhere herein or in the Warrant Agreement.
7. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it in the exercise of reasonable discretion, of the ownership of
and the loss, theft, destruction or mutilation of any Warrant and, in the case
of loss, theft or destruction, of indemnity satisfactory to it in the exercise
of reasonable discretion, and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof a new
Warrant of like tenor.
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8. Reservation of Common Stock. The Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants and the issuance of all shares
of Warrant Stock.
9. Transfers. This Warrant and all rights hereunder are transferable on
the books of the Company by any Holder hereof in person or by duly authorized
attorney upon surrender of this Warrant at the principal office of the Company,
together with the form of transfer authorization attached hereto as Exhibit B
duly executed, provided that all conditions set forth below have been met.
Absent any such transfer, the Company may deem and treat the Holder of this
Warrant at any time as the absolute owner hereof for all purposes and shall not
be affected by any notice to the contrary.
9.1 Notice of Proposed Transfers. The Holder of this Warrant,
by acceptance hereof, agrees prior to any transfer of Warrants or Warrant Stock
issued or issuable upon exercise hereof to give written notice to the Company
expressing such Holder's intention to effect such transfer and describing
briefly the manner of the proposed transfer of such Warrants or Warrant Stock
and designating the counsel for the Holder giving such notice.
9.2 Opinion of Counsel. If in the opinion of counsel to the
Company, the proposed transfer of the Warrants or Warrant Stock issued or
issuable upon the exercise hereof may be effected without registration under the
Securities Act of 1933, as amended, as then in force (or any similar Federal
statute then in force) or applicable state securities laws, the Company, as
promptly as practicable, shall notify the Holder of such Warrants or Warrant
Stock of such opinion, whereupon such Holder shall be entitled, but only in
accordance with the terms of the notice delivered by such Holder to the Company,
to transfer such Warrants or Warrant Stock.
10. Definitions. Unless otherwise defined herein, the terms capitalized
herein shall have the meanings set forth in the Warrant Agreement.
11. Warrant Agreement. The terms of the Warrant Agreement are
incorporated by reference in this Warrant as fully as if the same were set forth
herein, shall be considered an integral part of this Warrant and shall entitle
the parties hereto to all rights and benefits accruing thereunder.
12. Information. The Company shall furnish each Holder of Warrants with
copies of all reports, proxy statements, and similar materials that it furnishes
to Holders of its Stock. In addition, it shall furnish to each such Holder of
Warrants copies of all reports filed by it with the Securities and Exchange
Commission.
13. Notices. All notices and other communications under this Warrant
shall be in writing and shall be mailed by first-class registered or certified
mail, postage prepaid, addressed
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(a) if to the Holder, at the registered address furnished to the Company in
writing by the Holder of this Warrant, or (b) if to the Company, to the
attention of its Chief Executive Officer at its principal office located at 0000
Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000, or such other location of its
principal office as shall be furnished to the Holder in writing by the Company.
14. Change, Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement by the change, waiver,
discharge or termination is sought.
15. Headings. The headings in this Warrant are for purposes of
convenience of reference only and shall not be deemed to constitute a part
hereof.
16. Law Governing. This Warrant is delivered in the State of Delaware
and shall be construed and enforced in accordance with and governed by the
internal substantive laws of such State.
April __, 2001
Q.E.P., CO., INC.
By:
-------------------------------------
Name:
Title:
EXHIBIT A
[Subscription Form to Be Executed Upon Exercise of Warrant]
The undersigned registered Holder or assignee of such registered Holder
of a certain Warrant issued by Q.E.P., Co., Inc. dated April 5, 2001, hereby (1)
subscribes for _______________ shares which the undersigned is entitled to
purchase under the terms of said Warrant, (2) makes payment of the Exercise
Price called for by said Warrant, and (3) directs that the shares issuable upon
exercise of said Warrant be issued as follows:
----------------------------------------
(Name)
----------------------------------------
(Address)
Signature:
------------------------------
Dated:_________________________ , ____
EXHIBIT B
[ASSIGNMENT]
(To be executed by the registered Holder
to enact a transfer of the within Warrant)
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns, and transfers unto ______________________________ of
______________________________, the right to purchase shares evidenced by a
certain Warrant issued by Q.E.P., Co., Inc. dated April 5, 2001, and does hereby
irrevocably constitute and appoint ______________________________ to transfer
such right on the books of said Company, with full power of substitution.
Dated:_________________________ , ____
----------------------------------------
Signature
WITNESS:
