Exhibit 4
EXECUTION
COPY
STANDBY PURCHASE AGREEMENT
This STANDBY PURCHASE AGREEMENT (this “Agreement”) dated as of March 10, 2008, by and among
Patrick Industries, Inc., an Indiana corporation (the “Company”), Tontine Capital Partners, L.P.,
a Delaware limited partnership (“TCP”), and
Tontine Capital Overseas Master Fund, L.P., a Cayman Islands limited
partnership (“TCO” and collectively with TCP,
the “Standby Purchasers”);
W I T N E S S
E T H:
WHEREAS, the Standby Purchasers and the Company entered into that
certain Standby Purchase Agreement dated as of September 17, 2007 (the “Original Agreement”), which provided for the purchase by the
Standby Purchasers of shares of the Company’s common stock (the “Common Stock”) in a rights offering proposed under the terms
set forth in the Original Agreement (the “Original Rights Offering”);
and
WHEREAS, the Standby Purchasers and the Company have terminated the
Original Agreement and the Company has terminated the Original Rights Offering,
each effective as of the date hereof; and
WHEREAS, in connection with the termination of the Original Agreement
and the Original Rights Offering and concurrently with the execution of this
Agreement, the Standby Purchasers have entered into a Securities Purchase
Agreement (the “Securities Purchase Agreement”)
pursuant to which the Standby Purchasers have agreed to purchase 1,125,000
shares of Common Stock at a purchase price of $7.00 per share, or an aggregate
purchase price of $7,875,000; and
WHEREAS, the Company proposes, as soon as practicable after the Rights
Offering Registration Statement (as defined herein) becomes effective, to
commence a new rights offering and distribute to holders of the Common Stock of
record as of the close of business on the record date of such rights offering
(the “Record Date”),
non-transferable rights (the “Rights”)
to subscribe for and purchase additional shares of Common Stock (the “New Shares”) at a subscription price (the “Subscription Price”) in accordance with the
term sheet attached hereto as Annex A and incorporated herein by reference
(such term sheet, the “Term Sheet”
and such offering, the “Rights Offering”);
and
WHEREAS, pursuant to the Rights Offering, shareholders of record will
receive one Right, as determined in accordance with the Term Sheet, for each
share of Common Stock held by them as of the Record Date, and each whole Right
will entitle the holder to purchase a fraction of one New Share, at the
Subscription Price (the “Basic Subscription
Privilege”); and
WHEREAS, the Company has requested the Standby Purchasers to agree to
purchase from the Company upon expiration of the Rights Offering, and the
Standby Purchasers are willing to so purchase, New Shares, at the Subscription
Price, to the extent such New Shares are not purchased by shareholders pursuant
to the exercise of Rights;
WHEREAS, the Company and the Standby Purchasers entered into an Amended
and Restated Registration Rights Agreement, dated May 18, 2007 (the “Registration Rights Agreement”) pursuant to which the Company
has agreed under certain circumstances to register the resale of shares of
Common Stock held by the Standby Purchasers and whereby the Securities (as
defined herein) purchased by the Standby Purchasers pursuant to this Agreement
would also be eligible to be registered for resale; and
WHEREAS, the Company shall use the proceeds obtained in connection with the Rights Offering and the
transactions contemplated under the Securities Purchase Agreement to prepay in
full the outstanding principal and pay related accrued interest under the
Senior Subordinated Promissory Notes
dated
as of May 18, 2007, issued by the Company to the Standby Purchasers in
connection with financing the Company’s acquisition of Adorn Holdings, Inc.;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
Section 1. Certain
Other Definitions. The
following terms used herein shall have the meanings set forth below:
“Action” shall mean any action, suit, claim, inquiry, notice
of violation, proceeding (including any partial proceeding such as a
deposition) or investigation against or affecting the Company, any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), public board, stock market, stock
exchange or trading facility.
“Affiliate” shall have the
meaning set forth in Rule 12b-2 under the Exchange Act.
“Agreement” shall have the
meaning set forth in the preamble hereof.
“Basic Subscription Privilege”
shall have the meaning set forth in the recitals hereof.
“Board” shall mean the
board of directors of the Company.
“Business Day” shall mean
any day that is not a Saturday, a Sunday or a day on which banks are required
or permitted to be closed in the State of Indiana.
“Closing” shall mean the
closing of the purchases described in Section 2 hereof, which shall be
held at 10:00 a.m. (Chicago time) on the Closing Date at the offices of
Barack Ferrazzano Kirschbaum and Nagelberg LLP located at 200 West Madison
Street, Suite 3900, Chicago, Illinois 60606, or such other time and place
as may be agreed to by the parties hereto.
“Closing Date” shall mean
the date that is three (3) Business Days after the Rights Offering
Expiration Date, or such other date as may be agreed to by the parties hereto.
“Code” shall have the meaning set forth
in Section 3(q) hereof.
“Commission” shall mean
the United States Securities and Exchange Commission, or any successor agency
thereto.
“Common Stock” shall have
the meaning set forth in the recitals hereof.
“Company” shall have the
meaning set forth in the preamble hereof.
“Company Indemnified Persons”
shall have the meaning set forth in Section 9(b) hereof.
“Company Shareholder Approval” shall have the meaning set forth
in Section 3(h) hereof.
“Environmental Laws” shall have the
meaning set forth in Section 3(o) hereof.
“ERISA” shall have the meaning set forth
in Section 3(y) hereof.
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“Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder.
“Expenses” shall have the
meaning set forth in Section 6(b) hereof.
“Hazardous Materials” shall have the
meaning set forth in Section 3(o) hereof.
“GAAP” shall have the meaning set forth
in Section 3(e) hereof.
“IBCL” shall mean the Indiana Business Corporation Law; as
amended.
“Indemnified Persons”
shall have the meaning set forth in Section 9(b) hereof.
“Intellectual Property” shall have the
meaning set forth in Section 3(l) hereof.
“Investment Company” shall have the
meaning set forth in Section 3(q) hereof.
“Legal Requirement”
means any federal, state, local, municipal, foreign, international,
multinational or other law, rule, regulation, order, judgment, decree,
ordinance, policy or directive, including those entered, issued, made, rendered
or required by any court, administrative or other governmental body, agency or
authority, or any arbitrator.
“Market Adverse Effect”
shall have the meaning set forth in Section 7(a)(iii) hereof.
“Material Adverse Effect”
shall mean a material adverse effect on the financial condition, or on the earnings,
financial position, operations, assets, results of operation, business or
prospects of the Company and its Subsidiaries taken as a whole.
“New Shares” shall have
the meaning set forth in the recitals hereof.
“Original Agreement” shall
have the meaning set forth in the recitals hereof.
“Original Rights Offering”
shall have the meaning set forth in the recitals hereof.
“Permits” shall have the meaning set forth in Section 3(n) hereof.
“Person” shall mean an
individual, corporation, partnership, association, joint stock company, limited
liability company, joint venture, trust, governmental entity, unincorporated
organization or other legal entity.
“Prospectus” shall mean a
prospectus, as defined in Section 2(10) of the Securities Act, that
meets the requirements of Section 10 of the Securities Act and is current
with respect to the securities covered thereby.
“Proxy Statement” shall
mean a definitive proxy statement filed with the Commission relating to the
Rights Offering and the transactions contemplated hereunder, together with all
amendments, supplements and exhibits thereto.
“Registration Rights Agreement”
shall have the meaning set forth in the recitals hereof.
“Record Date” shall have
the meaning set forth in the recitals hereof.
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“Rights” shall have the
meaning set forth in the recitals hereof.
“Rights Agreement” shall
have the meaning set forth in Section 3(x) hereof.
“Rights Offering” shall
have the meaning set forth in the recitals hereof.
“Rights Offering Expiration Date”
shall mean the date on which the subscription period under the Rights Offering
expires.
“Rights Offering Prospectus”
shall mean the final Prospectus included in the Rights Offering Registration
Statement for use in connection with the issuance of the Rights.
“Rights Offering Registration
Statement” shall mean the Company’s Registration Statement on Form S-1
under the Securities Act or such other appropriate form under the Securities
Act, pursuant to which the Rights and underlying shares of Common Stock will be
registered pursuant to the Securities Act.
“SEC Documents” shall have the meaning
set forth in Section 3(e) hereof.
“Securities” shall mean
those of the New Shares and Unsubscribed Shares that are purchased by the
Standby Purchasers pursuant to Section 2 hereof.
“Securities Act” shall
mean the Securities Act of 1933, as amended, and the rules and regulations
promulgated by the Commission thereunder.
“Securities Purchase Agreement”
shall have the meaning set forth in the recitals hereof.
“Standby Indemnified Persons”
shall have the meaning set forth in Section 9(a) hereof.
“Standby Purchasers” shall
have the meaning set forth in the preamble hereof.
“Subscription Agent” shall
have the meaning set forth in Section 6(a)(vii) hereof.
“Subscription Price” shall
have the meaning set forth in the recitals hereof.
“Subsidiaries” shall mean with respect
to the Company, Machinery Inc., Harlan Machinery Inc., Adorn Holdings Inc. and
Adorn, L.L.C.
“Term Sheet” shall have the meaning set forth in the recitals
hereof.
“Unsubscribed Shares” shall have the meaning set forth in Section 2(b) hereof.
Section 2. Standby
Purchase Commitment.
(a) The Standby Purchasers hereby agree to
purchase from the Company, and the Company hereby agrees to sell to the Standby
Purchasers, at the Subscription Price, all of the New Shares that will be
available for purchase by the Standby Purchasers pursuant to their Basic
Subscription Privilege.
(b) Standby Purchasers hereby agree to
purchase from the Company, and the Company hereby agrees to sell to the Standby
Purchasers, at the Subscription Price, any and all New Shares if and to the
extent such New Shares are not purchased by the Company’s shareholders (the “Unsubscribed Shares”) pursuant to the
exercise of Rights. It is understood and
agreed that if, and to the extent that the
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Standby Purchasers
are required to purchase Unsubscribed Shares pursuant to this subsection (b),
the Standby Purchasers reserve the right to determine the allocation of
Unsubscribed Shares to be purchased by each of them, so long as they purchase
100% of the Unsubscribed Shares in the aggregate.
(c) Payment of the Subscription Price for the
Securities shall be made, on the Closing Date, against delivery of certificates
evidencing the Securities, in United States dollars by means of certified or
cashier’s checks, bank drafts, money orders or wire transfers.
Section 3. Representations
and Warranties of the Company. Except as set forth in the Company’s Disclosure
Schedule attached hereto, the Company represents and warrants to the Standby
Purchasers that:
(a) Organization
and Qualification. The
Company has no subsidiaries other than the Subsidiaries. The Company and each of its Subsidiaries is a
corporation or limited liability company, duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
or organized, with corporate power and authority to own, lease, use and operate
its properties and to carry on its business as now operated and conducted. The Company and each of its Subsidiaries is
duly qualified as a foreign corporation or limited liability company to do
business and is in good standing in each jurisdiction in which its ownership or
use of property or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. Neither the Company nor any Subsidiary is in
violation of any provision of its respective certificate or articles of
incorporation, articles of organization, partnership agreement, bylaws or other
organizational or charter documents, as the same may have been amended.
(b) Authorization; Enforcement.
This Agreement has been duly and validly authorized, executed and
delivered by the Company and, subject to approval by the Company’s
shareholders, constitutes a binding obligation of the Company enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) Capitalization. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock, of which
6,008,033 shares are issued and outstanding; and (ii) 1,000,000 shares of
Preferred Stock, of which no shares are issued and outstanding, as of the date
hereof. As of the date of this Agreement, except as set forth on Schedule 3(c) or
disclosed in the Company’s Proxy Statement filed on October 9, 2007, (A) there
are no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
and (B) there are no agreements or arrangements under which the Company or
any of its Subsidiaries is obligated to register the sale of any of its or
their securities under the 1933 Act (except the Registration Rights
Agreement). All of the outstanding
shares of Common Stock have been duly authorized, are validly issued, fully
paid and nonassessable and were offered, sold and issued in compliance with all
applicable federal and state securities laws and without violating any
contractual obligation or any other preemptive or similar rights.
(d) No Conflicts.
The execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
will not (i) conflict with or result in a violation of any provision of
the Articles of Incorporation, as amended, of the Company or the Bylaws, as
amended, of the Company, (ii) violate or conflict with, or result in a
breach of
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any provision of,
or constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
patent, patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any Legal
Requirement (including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its
Subsidiaries is in violation of its Certificate or Articles of Incorporation,
bylaws or other organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with notice or
lapse of time would result in a default) under, and neither the Company nor any
of its Subsidiaries has taken any action or failed to take any action that
would give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or
any of its Subsidiaries is bound or affected, except for possible defaults as
would not, individually or in the aggregate, have a Material Adverse Effect. Except with respect to any filings or notices
related to the issuance of the New Shares and the Securities to be filed with
Nasdaq, if any, and as required under the Securities Act and any applicable
state securities laws, the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its
obligations under this Agreement. All
consents, authorizations, orders, filings and registrations that the Company is
required to effect or obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof.
(e) SEC Documents; Financial Statements.
(i) Since December 31,
2005, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Commission pursuant to
the reporting requirements of the Securities Act and the Exchange Act (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”),
or has timely filed for a valid extension of such time of filing and has filed
any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the Commission, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(ii) As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes, year end adjustments or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-
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end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to December 31, 2006, and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or taken in the aggregate would
not reasonably be expected to have a Material Adverse Effect.
(iii) Except as set
forth on Schedule 3(e), the Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under
the Exchange Act).
(f) Absence of Certain Changes.
Except as set forth on Schedule 3(f), since December 31,
2006, other than circumstances affecting the recreational vehicle and
manufactured housing industries generally, there has not occurred any event or
circumstance that has had, resulted in, or would reasonably be expected to
have, a Material Adverse Effect. Except
with respect to the transactions contemplated hereby and except as set forth on
Schedule 3(f), since December 31, 2006, the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary
course of business consistent with past practice, (B) liabilities not
required to be reflected on the Company’s financial statements pursuant to
GAAP, and (C) liabilities disclosed in filings made with the Commission.
(g) Rights Offering
Registration Statement. At the time
the Rights Offering Registration Statement becomes effective, the Rights
Offering Registration Statement will comply in all material respects with the
requirements of the Securities Act and will not contain 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. The Prospectus, at
the time the Rights Offering Registration Statement becomes effective and at
the Closing Date, will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Rights Offering Registration Statement or the Prospectus made in
reliance upon and in conformity with the information furnished to the Company
in writing by the Standby Purchasers for use in the Rights Offering
Registration Statement or in the Prospectus.
(h) Proxy Statement.
The Proxy Statement will not, on the date it is first mailed to
shareholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading and will not, at the time the shareholders of the
Company vote at a meeting of the shareholders of the Company, to approve (i) the
Rights Offering and (ii) this Agreement and the transactions hereunder
(the “Company Shareholder Approval”)
omit to state any material fact necessary to correct any statement in any
earlier communication from the Company with respect to the solicitation of
proxies for the Company Shareholder Approval which shall have become false or
misleading in any material respect. The Proxy Statement will comply as to form
in all material respects with the applicable requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to information furnished to the Company in writing by the Standby
Purchasers for inclusion or incorporation by reference in any of the foregoing
documents.
(i) Prospectus.
The documents incorporated by reference into the Prospectus, when they
become effective or at the time they are filed with the Commission, as the case
may be, will comply in all material respects with the applicable provisions of
the Exchange Act.
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(j) Valid Issuance.
All of the Securities and New Shares will have been duly authorized for
issuance prior to the Closing (assuming Company Shareholder Approval has been
obtained), and, when issued and distributed as set forth in the Prospectus,
will be validly issued, fully paid and non-assessable; and none of the
Securities or New Shares will have been issued in violation of the preemptive
rights of any security holders of the Company arising as a matter of law or
under or pursuant to the Company’s Articles of Incorporation, as amended, the
Company’s Bylaws, as amended, or any agreement or instrument to which the
Company is a party or by which it is bound.
(k) Absence
of Litigation. There is no
Action pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries that (i) adversely
affects or challenges the legality, validity or enforceability of this
Agreement, or (ii) would, if there were an unfavorable decision, have or
reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and
to the knowledge of the Company, there is not pending any investigation by the
Commission involving the Company or any current or former director or officer
of the Company (in his or her capacity as such). The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company under the Exchange Act or the Securities Act.
(l) Intellectual
Property. The Company
and each of its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions, know-how,
trade secrets, copyrights, trademarks, trademark applications, service marks,
service names, trade names and copyrights (“Intellectual
Property”) necessary to enable it to conduct its business as now
operated (and, to the Company’s knowledge, as presently contemplated to be
operated in the future); except as set forth on Schedule 3(l), there is
no claim or Action by any person pertaining to, or proceeding pending, or to
the Company’s knowledge threatened, which challenges the right of the Company
or of a Subsidiary with respect to any Intellectual Property necessary to
enable it to conduct its business as now operated and to the Company’s
knowledge, the Company’s or its Subsidiaries’ current products and processes do
not infringe on any Intellectual Property or other rights held by any person, except
where any such infringement would not reasonably be expected to have a Material
Adverse Effect.
(m) Tax
Status. The Company
and each of its Subsidiaries has made or filed all federal, state and foreign
income and all other material tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax.
(n) Permits;
Compliance.
(i) The Company and
each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its properties
and to carry on its business as it is now being conducted (collectively, “Permits”), and there is no Action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of
any of the Permits. Neither the
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Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Permits, except for
any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(ii) Except as set
forth on Schedule 3(n), since December 31, 2006, no event has
occurred or, to the knowledge of the Company, circumstance exists that (with or
without notice or lapse of time): (a) would reasonably be expected to
constitute or result in a violation by the Company or any of its Subsidiaries,
or a failure on the part of the Company or its Subsidiaries to comply with, any
Legal Requirement; or (b) would reasonably be expected to give rise to any
obligation on the part of the Company or any of its Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature
in connection with a failure to comply with any Legal Requirement, except in
either case that would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule
3(n), neither the Company nor any of its Subsidiaries has received any
notice or other communication from any regulatory authority or any other
person, nor does the Company have any knowledge regarding: (x) any actual,
alleged, possible or potential violation of, or failure to comply with, any
Legal Requirement, or (y) any actual, alleged, possible or potential
obligation on the part of the Company or any of its Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature
in connection with a failure to comply with any Legal Requirement, except in
either case that would not reasonably be expected to have a Material Adverse
Effect.
(iii) The Company is
in compliance in all material respects with the provisions of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
thereunder that are applicable to it and has taken reasonable steps such that
the Company expects to be in a position to comply with the requirements of Section 404
of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder at such time as Section 404 becomes applicable to
the Company.
(iv) The Company is,
and has reason to believe that for the foreseeable future it will continue to
be, in compliance with all applicable rules of the Nasdaq Stock
Market. The Company has not received
notice from Nasdaq that the Company is not in compliance with the rules or
requirements thereof. The issuance and
sale of the Securities under this Agreement does not contravene the rules and
regulations of the Nasdaq Stock Market.
(o) Environmental
Matters. “Environmental Laws” shall mean, collectively, all Legal
Requirements, including any federal, state, local or foreign statute, laws,
rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment issued against the Company or
its Subsidiaries, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened release
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials. Except for such
matters as could not, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect: (i) the Company and its Subsidiaries
have complied and are in compliance with all applicable Environmental Laws; (ii) without
limiting the generality of the foregoing, the Company and its Subsidiaries have
obtained, have complied, and are in compliance with all Permits that are
required pursuant to Environmental Laws for the occupation of their respective
facilities and the operation of their respective businesses; (iii) none of
the Company or its Subsidiaries has received any written notice, report or
other information regarding any actual or alleged violation of Environmental
Laws, or any liabilities or potential liabilities (including fines, penalties,
costs and expenses), including any investigatory, remedial or corrective
obligations, relating to any of them or their respective facilities arising
under Environmental
9
Laws, nor, to the knowledge of the Company is there any factual basis
therefore; (iv) there are no underground storage tanks, polychlorinated
biphenyls, urea formaldehyde or other hazardous substances (other than small
quantities of hazardous substances for use in the ordinary course of the
operation of the Company’s and its Subsidiaries’ respective businesses, which
are stored and maintained in accordance and in compliance with all applicable
Environmental Laws), in, on, over, under or at any real property owned or
operated by the Company and/or its Subsidiaries; (v) there are no
conditions existing at any real property or with respect to the Company or any
of its Subsidiaries that require remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws and (vi) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
contractually, by operation of law, or otherwise amended or succeeded to any
liabilities arising under any Environmental Laws of any predecessors or any
other Person.
(p) Title
to Property. Except for
any lien for current taxes not yet delinquent or which are being contested in
good faith and by appropriate proceedings and except as set forth on Schedule
3(p), the Company and its Subsidiaries have good and marketable title to
all real property and all personal property owned by them which is material to
the business of the Company and its Subsidiaries. Any leases of real property and facilities of
the Company and its Subsidiaries are valid and effective in accordance with
their respective terms, except as would not have a Material Adverse Effect.
(q) No
Investment Company or Real Property Holding Company. The Company is not, and upon the issuance and
following the transactions contemplated by this Agreement will not be, an
“investment company” as defined under the Investment Company Act of 1940 (“Investment Company”).
The Company is not controlled by an Investment Company. The Company is not a United States real
property holding company, as defined under the Internal Revenue Code of 1986,
as amended (the “Code”).
(r) No
Brokers. The Company
has taken no action which would give rise to any claim by any person for
brokerage commissions, transaction fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
(s) Registration
Rights. Except
pursuant to the Registration Rights Agreement and this Agreement, neither the
Company nor any Subsidiary is currently subject to any agreement providing any
person or entity any rights (including piggyback registration rights) to have
any securities of the Company or any Subsidiary registered with the Commission
or registered or qualified with any other governmental authority.
(t) Exchange
Act Registration. The Common
Stock is registered pursuant to the Exchange Act, and the Company has taken no
action designed to, or which, to the knowledge of the Company, is likely to
have the effect of, terminating the registration of the Common Stock.
(u) Labor
Relations. No labor or
employment dispute exists or, to the knowledge of the Company, is imminent or
threatened, with respect to any of the employees of the Company that has, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(v) Transactions
with Affiliates and Employees. Except as set forth in the SEC Documents,
none of the officers or directors of the Company, and to the knowledge of the
Company, none of the employees of the Company, is presently a party to any
transaction or agreement with the Company (other than for services as
employees, officers and directors) exceeding $100,000, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner.
10
(w) Insurance. The Company and its Subsidiaries have
insurance policies in full force and effect of a type, covering such risks and
in such amounts, and having such deductibles and exclusions as are customary
for conducting businesses and owning assets similar in nature and scope to
those of the Company and its Subsidiaries.
The amounts of all such insurance policies and the risks covered thereby
are in accordance in all material respects with all material contracts and
agreements to which the Company and/or its Subsidiaries is a party and with all
applicable Legal Requirements. With respect
to each such insurance policy: (i) the
policy is valid, outstanding and enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect that
limit creditors’ rights generally, equitable limitations on the availability of
specific remedies and principles of equity (regardless of whether such
enforcement is considered in a proceeding in law or in equity); (ii) neither
the Company nor any of its Subsidiaries is in breach or default with respect to
its obligations thereunder in any material respect; and (iii) no party to
the policy has repudiated, or given notice of an intent to repudiate, any
provision thereof.
(x) Approved Acquisitions of
Securities; No Anti-Takeover Provisions. Prior to
Closing, the Company will have taken all necessary action, if any, required
under the laws of the State of Indiana or otherwise to allow the Standby
Purchasers to acquire the Securities pursuant to this Agreement, including the
adoption of irrevocable resolutions approving and exempting from the
restrictions in Section 18 and Section 19 of Chapter 43 of the IBCL
the transactions contemplated by this Agreement. Without limitation of the foregoing, the Company
will have not amended its Bylaws to opt in to the provisions of the IBCL
pertaining to the acquisition of a controlling interest (IBCL 23-1-42-1 through
23-1-42-11) with respect to the acquisition by the Standby Purchasers of the
Securities. Except for the Rights
Agreement, the Company has no control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s Articles of Incorporation
or Bylaws, each as amended (or similar charter documents), that is or could
become applicable to the Standby Purchasers as a result of the Standby
Purchasers and the Company fulfilling their obligations or exercising their
rights under this Agreement, including without limitation the Company’s
issuance of the Securities and the Standby Purchasers’ ownership of the
Securities. Prior to Closing, the
Company will have amended the Rights Agreement, dated March 21, 2006, as
amended, by and between the Company and National City Bank, as Rights Agent
(the “Rights Agreement”), to accommodate the
issuance and sale of the Securities to the Standby Purchasers, in a form
reasonably acceptable to the Standby Purchasers.
(y) ERISA.
Based upon the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and the regulations and
published interpretations thereunder: (i) neither the Company nor any of
its Subsidiaries has engaged in any Prohibited Transactions (as defined in Section 406
of ERISA and Section 4975 of the Code); (ii) the Company and each of
its Subsidiaries has met all applicable minimum funding requirements under Section 302
of ERISA in respect to its plans; (iii) neither the Company nor any of its
Subsidiaries has any knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plan(s); neither the Company nor any of
its Subsidiaries has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than its or such
Subsidiary’s employees; and (v) neither the Company nor any of its
Subsidiaries has withdrawn, completely or partially, from any multi-employer
pension plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.
(z) Disclosure. The Company understands and confirms that the
Standby Purchasers will rely on the representations and covenants contained
herein in effecting the transactions contemplated by this Agreement. All representations and warranties provided
to the Standby Purchasers including the disclosures in the Company’s disclosure
schedules attached hereto furnished by or on behalf of the Company, taken as a
whole are true and correct and do not contain any untrue statement of material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of
11
the circumstances under which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or its Subsidiaries or its or
their businesses, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
Section 4. Representations and
Warranties of Standby Purchasers. Each Standby
Purchaser, severally and not jointly, represents and warrants to the Company,
as to itself only, as follows:
(a) Organization. Such Standby Purchaser is a
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization.
(b) Authorization.
This Agreement has been duly and validly authorized, executed and
delivered by such Standby Purchaser and constitutes a binding obligation of
such Standby Purchaser enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(c) Accredited Investor.
Such Standby Purchaser is an “accredited investor” within the meaning of
Rule 501(a) under the Securities Act and is acquiring the Securities
for investment for its own account, with no present intention of dividing its
participation with others (other than in accordance with Section 12
hereof) or reselling or otherwise distributing the same in violation of the
Securities Act or any applicable state securities laws.
(d) Resale of Securities.
Such Standby Purchaser understands that: (i) other than pursuant to
the Registration Rights Agreement, the resale of the Securities has not been
and is not being registered under the Securities Act or any applicable state
securities laws, and the Securities may not be sold or otherwise transferred
unless (a) the Securities are sold or transferred pursuant to an effective
registration statement under the Securities Act, (b) at the Company’s
request, such Standby Purchaser shall have delivered to the Company an opinion
of counsel (which opinion shall be in form, substance and scope reasonably
satisfactory to the Company’s counsel) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, or (c) the Securities are sold pursuant to Rule 144
promulgated under the Securities Act; (ii) any sale of such Securities
made in reliance on Rule 144 under the Securities Act may be made only in
accordance with the terms of such Rule; and (iii) except as set forth in
the Registration Rights Agreement, neither the Company nor any other Person is
under any obligation to register such Securities under the Securities Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Such Standby Purchaser acknowledges that an appropriate
restrictive legend will be placed on the certificate or certificates
representing the Securities that may be issued pursuant to this Agreement in a
form substantially similar to the legend set forth below (and a stop-transfer
order may be placed against transfers of the certificates evidencing such
Securities). The legend shall be removed
upon the effectiveness of a registration statement filed pursuant to the
Registration Rights Agreement.
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”). THE
SHARES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO
BE ESTABLISHED TO THE SATISFACTION OF THE CORPORATION.”
12
Section 5. Deliveries
at Closing.
(a) At the Closing, the Company shall deliver
to each Standby Purchaser the following:
(i) A certificate
or certificates representing the number of shares of Common Stock issued to
such Standby Purchaser pursuant to Section 2 hereof; and
(ii) A certificate
of an officer of the Company on its behalf to the effect that the
representations and warranties of the Company contained in this Agreement are
true and correct in all material respects on and as of the Closing Date, with
the same effect as if made on the Closing Date.
(b) At the Closing,
each Standby Purchaser shall deliver to the Company the following:
(i) Payment of the
Subscription Price of the Securities purchased by such Standby Purchaser, as
set forth in Section 2(c) hereof; and
(ii) A certificate
of such Standby Purchaser to the effect that the representations and warranties
of such Standby Purchaser contained in this Agreement are true and correct in
all material respects on and as of the Closing Date with the same effect as if
made on the Closing Date.
Section 6. Covenants.
(a) Covenants. The Company
agrees as follows between the date hereof and the Closing Date:
(i) To use its reasonable best efforts to
have the Board recommend to the shareholders of the Company to approve this
Agreement and the transactions contemplated hereunder;
(ii) To as soon as reasonably practicable (A) seek
the Company Shareholder Approval and (B) file with the Commission the
Rights Offering Registration Statement and the Proxy Statement;
(iii) To use reasonable best efforts to cause
the Rights Offering Registration Statement, and any amendments thereto to
become effective as promptly as possible, and to cause the Proxy Statement to
be cleared by the Commission as promptly as practicable;
(iv) To use reasonable best efforts to
effectuate the Rights Offering;
(v) As soon as reasonably practicable after
the Company is advised or obtains knowledge thereof, to advise the Standby
Purchasers with a confirmation in writing, of (A) the time when the Rights
Offering Registration Statement, or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed, (B) the issuance by the Commission of any stop order, or of the
initiation or threatening of any proceeding, suspending the effectiveness of
the Rights Offering Registration Statement, or any amendment thereto or any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus or any amendment or supplement thereto, (C) the issuance by any
state securities commission of any notice of any proceedings for the suspension
of the qualification of the New Shares for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose, (D) the
receipt of any comments from the Commission, and (E) any request by the
Commission for any amendment to the Rights Offering Registration Statement, or
any amendment or supplement to the Prospectus or for additional information.
The Company will use its reasonable best efforts to prevent the issuance of any
such order or the
13
imposition of any such suspension and, if any such order is issued or
suspension is imposed, to obtain the withdrawal thereof as promptly as
possible;
(vi) To operate the Company’s business in the
ordinary course of business consistent with past practice;
(vii) To notify, or to cause the subscription
agent for the Rights Offering (the “Subscription
Agent”) to notify the Standby Purchasers, on each Friday during the
exercise period of the Rights, or more frequently if reasonably requested by
the Standby Purchasers, of the aggregate number of Rights known by the Company
or the Subscription Agent to have been exercised pursuant to the Rights
Offering as of the close of business on the preceding Business Day or the most
recent practicable time before such request, as the case may be;
(viii) Not to issue any shares of capital stock
of the Company, or options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, securities convertible into or exchangeable
for capital stock of the Company, or other agreements or rights to purchase or
otherwise acquire capital stock of the Company, except for (A) shares
of Common Stock issuable upon exercise of stock options existing on the date
hereof, and (B) an additional 30,108 shares of Common Stock in connection
with a stock bonus program established by the Company for the benefit for
certain Company employees in connection with integration activities relating to
the Company’s acquisition of Adorn
Holdings, Inc.
(ix) Not to authorize any stock split, stock
dividend, stock combination or similar transaction affecting the number of issued
and outstanding shares of Common Stock;
(x) Not to declare or pay any dividends or
repurchase any shares of Common Stock; and
(xi) Not to incur any indebtedness or
guarantees thereof, other than borrowings in the ordinary course of business
and consistent with past practice.
(b) Expense
Reimbursement. The Company agrees to promptly reimburse the
Standby Purchasers for all of their reasonable out-of-pocket costs and expenses
and reasonable attorneys’ fees (collectively, “Expenses”) incurred by the Standby Purchasers in connection
with this Agreement, the drafting and negotiation of documentation in
connection with the transactions contemplated hereunder and all other
activities relating to the transactions contemplated hereunder upon the
Company’s receipt of all reasonably requested documentation to support the
incurrence by the Standby Purchasers of such Expenses.
(c) Public
Statements. Neither the Company nor the Standby Purchasers
shall issue any public announcement, statement or other disclosure with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party hereto, which consent shall not be unreasonably
withheld or delayed, except (i) if such public announcement, statement or
other disclosure is required by applicable law or applicable stock market
regulations, in which case the disclosing party shall consult in advance with
respect to such disclosure with the other parties to the extent reasonably
practicable, or (ii) the filing of an amendment or amendments to
Schedule 13D of the Standby Purchasers, to which a copy of this Agreement
may be attached as an exhibit thereto.
(d) Rights Agreement. As soon as practicable after the date
hereof, the Company shall amend the Rights Agreement to permit the acquisition
by the Standby Purchasers and their respective Affiliates of the shares of
Common Stock contemplated by Section 2 of this Agreement.
14
(e) Access to Information.
Between the date hereof and the Closing Date, the Company will afford,
to the officers, accountants, attorneys and authorized representatives of the
Standby Purchasers, reasonable access during normal business hours to the
corporate and other offices, personnel, advisors, consultants, properties,
contracts, commitments, books and records of the Company and its Subsidiaries,
whether such documents are located on the premises of the Company or
elsewhere. The Company shall furnish the
Standby Purchasers with all such statements (financial and otherwise), records
and documents or copies thereof, and other information concerning the business
and affairs of the Company and its Subsidiaries as the Standby Purchasers shall
from time to time reasonably request.
The Company further agrees to cause its accountants, attorneys and other
representatives to fully cooperate with Standby Purchasers and their
representatives in connection with the right of access granted herein.
Section 7. Conditions to Closing.
(a) The obligations
of each Standby Purchaser to consummate the transactions contemplated hereunder
are subject to the fulfillment, prior to or on the Closing Date, of the
following conditions:
(i) The representations and warranties of the
Company in Section 3 shall be true and correct in all material respects as
of the date hereof and at and as of the Closing Date as if made on such date
(except for representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such specified date);
(ii) Subsequent to the execution and delivery
of this Agreement and prior to the Closing Date, there shall not have been any
Material Adverse Effect and no event shall have occurred or circumstance shall
exist which would reasonably likely result in a Material Adverse Effect;
(iii) As of the Closing Date, none of the
following events shall have occurred and be continuing: (A) trading in the
Common Stock shall have been suspended by the Commission or the Nasdaq Stock
Market or trading in securities generally on the Nasdaq Stock Market, the New
York Stock Exchange or the American Stock Exchange shall have been suspended or
limited or minimum prices shall have been established on either such exchange
or the Nasdaq Stock Market, (B) a banking moratorium shall have been
declared either by U.S. federal or New York State authorities, or (C) there
shall have occurred any material new outbreak or material escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis which has a material adverse effect on the U.S.
financial markets (collectively, a “Market
Adverse Effect”);
(iv) As of the
Closing Date, the Company shall not have amended its Bylaws to opt back in to
the provisions of the IBCL pertaining to the acquisition of a controlling
interest (IBCL 23-1-42-1 through 23-1-42-11); provided, however, that the
Company may so amend its Bylaws to opt into the provisions of Chapter 42 of the
IBCL once the purchase and issuance of the Securities hereunder is complete;
(v) The Board shall
have adopted
irrevocable resolutions approving and exempting from the restrictions in Section 18
and Section 19 of Chapter 43 of the IBCL the transactions contemplated by
this Agreement.
(vi) As of the
Closing Date, the amendment to the Rights Agreement referenced in Section 6(d) shall
continue to be in full force and effect to accommodate the issuance and sale of
the Securities to the Standby Purchasers and to allow the Standby Purchasers to
purchase all of the Securities issued pursuant to this Agreement; and
15
(b) The obligations
of the Company to consummate the transactions contemplated hereunder are
subject to the representations
and warranties of the Standby Purchasers in Section 4 being true and correct in
all material respects as of the date hereof and at and as of the Closing Date
as if made as of such date (except for representations and warranties made as
of a specified date, which shall be true and correct in all material respects
as of such specified date).
(c) The obligations
of each of the Company and the Standby Purchasers to consummate the
transactions contemplated hereunder in connection with the Rights Offering are
subject to the fulfillment, prior to or on the Closing Date, of the following
conditions:
(i) No judgment, injunction, decree or other
legal restraint shall prohibit, or have the effect of rendering unachievable,
the consummation of the Rights Offering or the transactions contemplated by
this Agreement;
(ii) The Standby
Purchasers and the Company shall have entered into the Securities Purchase
Agreement and the Standby Purchasers and the Company shall have consummated the
purchase and sale of Common Stock provided for thereunder.
(iii) The Rights Offering Registration
Statement shall have been filed with the Commission and declared effective; no
stop order suspending the effectiveness of the Rights Offering Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and any
request of the Commission for inclusion of additional information in the
Registration Statement or otherwise shall have been complied with;
(iv) The Rights Offering and the transactions
contemplated hereunder shall have been approved by the affirmative vote of a
majority of the shares of the Company’s securities present in person or by
proxy at the meeting of shareholders and entitled to vote on the matter; and
(v) The New Shares and the Securities shall
have been authorized for listing on the Nasdaq Stock Market.
Section 8. Termination.
(a) This Agreement
may be terminated at any time prior to the Closing Date, by either Standby
Purchaser by written notice to the other parties hereto if there is a Material
Adverse Effect or a Market Adverse Effect, in either case that is not cured
within fifteen (15) days after the occurrence thereof.
(b) This Agreement
may be terminated at any time prior to the Closing Date, by the Company on one hand
or by either of the Standby Purchasers on the other hand by written notice to
the other parties hereto:
(i) if there is a material breach of this
Agreement by the other party that is not cured within fifteen (15) days
after receipt of written notice by such breaching party; or
(ii) if the Closing has not occurred on or
prior to July 31, 2008 for any reason whatsoever, other than a material
breach hereunder by such terminating party or failure of the closing condition
specified in Section 7(a)(iii).
16
Section 9. Indemnification and
Contribution.
(a) The Company
shall indemnify and hold harmless the Standby Purchasers and each other Person
who participated in the offering of any Securities hereunder and each other
Person, if any, who controls either Standby Purchaser or such participating
Person within the meaning of the Securities Act (all such Persons being
hereinafter referred to, collectively, as the “Standby Indemnified Persons”), against any losses, claims,
damages or liabilities, joint or several, to which any of the Standby
Indemnified Persons may become subject as a result of (i) any breach by
the Company of any of its representations or warranties contained herein or in
any certificate delivered hereunder or (ii) this Agreement or the
performance of the transactions contemplated hereby, including under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (A) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (B) any alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each such Standby Indemnified
Person for any reasonable legal or any other expenses reasonably incurred by
such Standby Indemnified Person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to any Standby
Indemnified Person to the extent that any such loss, claim, damage or liability
arises out of or is based upon any actual or alleged untrue statement or actual
or alleged omission made in such registration statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Standby
Indemnified Person specifically for use therein. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Standby Indemnified Person, and shall survive the transfer of such
Securities or New Shares by such Standby Indemnified Person.
(b) Each Standby
Purchaser, severally, and not jointly, agrees to indemnify and hold harmless
the Company, its directors and officers and each other Person, if any, who
controls the Company within the meaning of the Securities Act (all such Persons
being hereinafter referred to, collectively, as the “Company Indemnified Persons” and together with the Standby
Indemnified Persons, the “Indemnified Persons”)
against any losses, claims, damages or liabilities to which any of the Company
Indemnified Persons may become subject (i) as a result of any breach by
such Standby Purchaser of any of its representations or warranties contained
herein or in any certificate delivered hereunder or (ii) under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon information provided in writing to the Company by such Standby
Purchaser specifically for use in any registration statement under which
Securities are registered under the Securities Act at the request of such
Standby Purchaser, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto.
(c) Any Person
entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification (provided that the failure to give such notice shall not
limit the rights of such Person, except to the extent the indemnifying party is
actually prejudiced thereby) and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that
any person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (A) the
indemnifying party has agreed to pay such fees or expenses or (B) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person. If such defense is not
assumed by the indemnifying party as permitted hereunder, the indemnifying
party
17
will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld or delayed). If such defense is assumed by the
indemnifying party pursuant to the provisions hereof, such indemnifying party
shall not settle or otherwise compromise the applicable claim unless (i) such
settlement or compromise contains a full and unconditional release of the
indemnified party or (ii) the indemnified party otherwise consents in
writing, which consent shall not be unreasonably withheld or delayed. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party, a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.
(d)
(i) If the indemnification
provided for in this Section 9 is unavailable to an Indemnified Person
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and Indemnified Person in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of such
indemnifying party and Indemnified Persons shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
the indemnifying party or the Indemnified Persons, and their relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
(ii) The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 9(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
Section 10. Survival. The
representations and warranties of the Company and the Standby Purchasers
contained in this Agreement or in any certificate delivered hereunder shall
survive the Closing hereunder.
Notwithstanding anything to the contrary contained in this Agreement,
the provisions of Sections 9 through 15 shall survive the termination of this
Agreement.
Section 11. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be delivered personally or by
courier (including a recognized, receipted overnight delivery service) or by
facsimile (with a copy delivered by receipted overnight delivery service) and
shall be effective upon receipt, if delivered personally or by courier
(including a recognized, receipted overnight delivery service) or by facsimile,
in each case addressed to a party. The
addresses for such communications shall be:
18
If to the Company:
Patrick Industries, Inc.
107 West Franklin Street
Elkhart, Indiana 46516
Attention: Andy Nemeth
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Telephone:
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(574) 294-7511
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Facsimile:
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(574)
522-5213
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With copy to:
McDermott Will &
Emery LLP
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr., Esq.
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Telephone:
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(312) 984-7582
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Facsimile:
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(312) 984-7700
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If to the Standby
Purchasers:
Tontine Capital Partners,
L.P.
55
Railroad Avenue, 1st Floor
Greenwich, Connecticut 06830
Attention: Mr. Joseph
V. Lash
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Telephone:
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(203) 769-2000
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Facsimile:
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(203) 769-2010
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Tontine Capital Overseas
Master Fund, L.P.
55
Railroad Avenue, 1st Floor
Greenwich, Connecticut 06830
Attention: Mr. Joseph
V. Lash
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Telephone:
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(203) 769-2000
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Facsimile:
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(203) 769-2010
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With copy to:
Barack Ferrazzano Kirschbaum &
Nagelberg LLP
200
W. Madison Street, Suite 3900
Chicago, Illinois 60606
Attention: Sarah M. Bernstein, Esq.
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Telephone:
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(312) 984-3100
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Facsimile:
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(312) 984-3150
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Each
party shall provide notice to the other parties of any change in address.
Section 12. Assignment.
This Agreement will be binding upon, and will inure to the benefit of
and be enforceable by, the parties hereto and their respective successors and
assigns, including any person to whom Securities are transferred in accordance
herewith. This Agreement, or the Standby Purchasers’ obligations and rights
hereunder, may be assigned, delegated or transferred, in whole or in part, by
either Standby Purchaser to any Affiliate of such Standby Purchaser over which
such Standby Purchaser or any of its Affiliates exercises investment authority,
including, without limitation, with respect to voting and dispositive rights,
provided that any such assignee assumes the obligations of such Standby
Purchaser
19
hereunder and
agrees to be bound by the terms of this Agreement in the same manner as such
Standby Purchaser. Either Standby Purchaser or any of such Standby Purchaser’s
Affiliates may assign, delegate or transfer, in whole or in part, its Basic
Subscription Privilege to any other Affiliate or to the Standby
Purchasers. Notwithstanding the
foregoing or any other provisions herein, no such assignment will relieve such
Standby Purchaser of its obligations hereunder if such assignee fails to
perform such obligations.
Section 13. Entire
Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto in respect of the subject matter
contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter of this
Agreement.
Section 14. Governing
Law. This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Indiana, without giving effect to the
conflict of laws provisions thereof.
Section 15. Severability. If any
provision of this Agreement or the application thereof to any person or
circumstances is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof, or the application of
such provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties.
Section 16. Extension
or Modification of Rights Offering. Without the prior written
consent of the Standby Purchasers, the Company may (i) waive
irregularities in the manner of exercise of the Rights, and (ii) waive
conditions relating to the method (but not the timing) of the exercise of the
Rights to the extent that such waiver does not materially adversely affect the
interests of the Standby Purchasers.
Section 17. Miscellaneous.
(a) The Company
shall not after the date of this Agreement enter into any agreement with
respect to its securities which is inconsistent with or violates the rights
granted to holders of Securities in this Agreement.
(b) The headings in
this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning of this Agreement.
(c) This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all of which, when taken together, shall constitute one and
the same instrument. This Agreement,
once executed by a party, may be delivered to the other party hereto by
electronic transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.
[Remainder of this page intentionally
left blank.]
20
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
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PATRICK
INDUSTRIES, INC.
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By:
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/s/ Paul E. Hassler
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Paul E. Hassler, President
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TONTINE
CAPITAL PARTNERS, L.P.
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By:
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TONTINE CAPITAL
MANAGEMENT, L.L.C., its general partner
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By:
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/s/ Jeffrey L. Gendell
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Jeffrey L. Gendell, its
managing member
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TONTINE CAPITAL OVERSEAS MASTER FUND, L.P.
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By:
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TONTINE
CAPITAL OVERSEAS GP, L.L.C., its general partner
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By:
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/s/
Jeffrey L. Gendell
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Jeffrey
L. Gendell, its managing member
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S-1
ANNEX A
PATRICK INDUSTRIES, INC.
Term Sheet
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Issuer:
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Patrick
Industries, Inc. (the “Company”)
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Offering
Size:
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Common equity rights
offering of approximately $7,875,000 million
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Authorization:
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Prior approval of the
Company’s Board of Directors and subject to shareholder approval
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Rights
Offering:
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The Company will
distribute to holders of its common stock (the “Eligible Participants”), at
no charge, one subscription right for each share of the Company’s common
stock that Eligible Participants own as of the Record Date
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Basic
Subscription Privilege:
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Each subscription right
will entitle Eligible Participants to purchase 0.157717 of a share of common
stock, upon payment of the Subscription Price in cash
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Subscription
Commitment:
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Tontine Capital Partners,
L.P. (“TCP”) and Tontine Capital Overseas Master Fund, L.P. (“TCO,” and
collectively with TCP, “Tontine”) and/or their affiliates will act as standby
purchasers in the rights offering for all of the unsubscribed shares
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Launch
Date:
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To be determined
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Record
Date:
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The Record Date is to be
the Launch Date at 5:00 p.m. Chicago time
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Expiration
Date:
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The rights would expire no
later than 30 days after the Launch Date. Rights not exercised by the
Expiration Date will be null and void
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Subscription
Price:
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The Subscription Price
shall be $7.00 per share and will be paid in cash. All payments must be
cleared on or before the Expiration Date
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Transferability
of Rights:
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The subscription rights
may not be sold, transferred or assigned
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Use of
Proceeds:
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To prepay the 9.5% Senior
Subordinated Promissory Notes in the original aggregate principal amount of
$13,975,000 issued to Tontine and to pay related accrued interest.
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Subscription
Agent:
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National City Bank
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Registration
Rights:
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Pursuant to the Amended
and Restated Registration Rights Agreement
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A-1
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Other
Conditions:
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Subject to the following
conditions: (i) satisfactory negotiation and execution of definitive
documentation; (ii) amendment of the Company’s Shareholder Rights Plan
to accommodate Tontine’s potential pro forma ownership after giving effect to
the rights offering and the purchase of any unsubscribed shares; and
(iii) irrevocable resolutions adopted by the Company’s board approving
and exempting from the restrictions in Section 18 and Section 19 of
Chapter 43 of the IBCL the transactions contemplated hereby
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Expenses:
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All of the expenses
incurred by Tontine are to be reimbursed by the Company
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A-2