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Exhibit 10.56
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MORTON INDUSTRIAL GROUP, INC.
INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH 26, 2004
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TABLE OF CONTENTS
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PAGE
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SECTION 1
GENERAL....................................................................................1
1.1
Definitions....................................................................................1
SECTION 2
REGISTRATION...............................................................................4
2.1 Demand
Registration............................................................................4
2.2 Piggyback
Registrations........................................................................6
2.3
Registration
Procedures........................................................................6
2.4
Registration
Expenses..........................................................................7
2.5
Representations and
Warranties.................................................................7
2.6
Indemnification................................................................................8
2.7 No
Piggyback on
Registrations.................................................................10
2.8
Compliance....................................................................................10
2.9
Discontinued
Disposition......................................................................11
2.10
Registered Public Offering Involving an
Underwriting..........................................11
SECTION 3
SPECIAL
RIGHTS............................................................................12
3.1 Co-Sale
Rights (Tag
Along)....................................................................12
3.2 Drag-Along
Rights.............................................................................13
3.3 Preemptive
Rights.............................................................................14
SECTION 4
COVENANTS.................................................................................15
SECTION 5
MISCELLANEOUS.............................................................................18
5.1 Governing
Law.................................................................................18
5.2
Survival......................................................................................18
5.3 Successors
and
Assigns........................................................................19
5.4 Entire
Agreement..............................................................................19
5.5
Severability..................................................................................19
5.6 Amendment
and
Waiver..........................................................................19
5.7 Delays or
Omissions...........................................................................19
5.8
Notices.......................................................................................20
5.9 Titles and
Subtitles..........................................................................20
5.10
Counterparts..................................................................................20
5.11
Remedies......................................................................................20
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MORTON INDUSTRIAL GROUP, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as
of
the 26th day of March, 2004, by and among
MORTON INDUSTRIAL GROUP, INC., a
Georgia corporation (the "COMPANY"),
William D. Morton (referred to herein as
the "STOCKHOLDER"), and the investors
listed on EXHIBIT A hereto (referred to
herein, collectively, as the "INVESTORS"
and each, individually, as an
"INVESTOR").
RECITALS
WHEREAS, pursuant to that certain Note and Warrant Purchase
Agreement
of even date herewith (as the same may be
amended, modified, supplemented or
restated from time to time, the "NOTE
AGREEMENT"), by and among the Company,
certain Subsidiaries of the Company party
thereto, BMO Nesbitt Burns Capital
(U.S.), Inc., as agent, and the Investors,
the Investors purchased certain
secured subordinated promissory notes of
the Company and certain warrants to
purchase shares of the Company's Class A
Stock; and
WHEREAS, the execution of this Agreement by the Company, the
Stockholder and the Investors is a
condition to the consummation by the
Investors of the transactions contemplated
by the Note Agreement.
NOW, THEREFORE, in consideration of the premises and for other good
and
valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties agree hereto as
follows:
SECTION 1
GENERAL
1.1 DEFINITIONS. Except as otherwise provided herein or in this
Section
1.1, capitalized terms used and not defined
herein shall have the meanings
assigned thereto in the Note Agreement. As
used in this Agreement the following
terms shall have the following respective
meanings:
"CLASS A STOCK" means the Class A Common Stock of the Company,
par
value $.01 per share.
"CLASS B STOCK" means the Class B Common Stock of the Company,
par
value $.01 per share.
"COMMON STOCK" means, at any given time, the issued and
outstanding
common stock of the Company, determined on
a fully-diluted basis, including,
without limitation, the Class A Stock and
the Class B Stock, and any securities
issued or issuable with respect thereto,
including, without limitation, pursuant
to a stock dividend, stock split,
reclassification or like action, or pursuant
to an exchange (including a merger).
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"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the
number
of shares of Common Stock actually
outstanding at such time, plus the number of
shares of Common Stock issuable at such
time upon exercise or conversion of all
outstanding Options and Convertible
Securities regardless of whether the Options
or Convertible Securities are actually
exercisable at such time.
"CONVERTIBLE SECURITIES" means any stock or other securities
directly
or indirectly convertible into or
exchangeable for any shares of Common Stock.
"EFFECTIVENESS DATE" means the 90th day following a Demand
Notice.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section
2.1(c).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means, with respect to a Registration Statement
required
to be filed hereunder, a date no later than
forty-five (45) days following a
Demand Notice.
"FORM S-3" means such form under the Securities Act as in effect on
the
date hereof, or any successor or similar
registration form under the Securities
Act subsequently adopted by the SEC, which
permits inclusion or incorporation of
substantial information by reference to
other documents filed by the Company
with the SEC.
"HOLDER" and "HOLDERS" means each of the Investors and any of
their
respective transferees or assignees who
receive or acquire Registrable
Securities.
"INVESTOR" and "INVESTORS" are defined in the preamble above and
shall
include each of their respective successors
and assigns.
"MAJORITY CONTROL" means the acquisition of, or control over,
the
Company's Common Stock, Convertible
Securities or Options, representing more
than fifty percent (50%) of the combined
voting power of all securities of the
Company entitled to vote in the election of
directors.
"NOTE AGREEMENT" is defined in the recitals above.
"NOTES" means those certain Senior Secured Subordinated
Promissory
Notes in the aggregate original principal
amount of $10,000,000 issued by the
Company to the Investors on March 26,
2004.
"OPTION PLANS" shall have the meaning assigned to such term in the
Note
Agreement.
"OPTIONS" means any rights or options to subscribe for or
purchase
capital stock of the Company or Convertible
Securities, including, without
limitation, under the Option Plans.
"PERMITTED
SALE" shall mean the sale, transfer or other disposition by
the Stockholder of up to ten percent (10%)
of the Common Stock of the Company
held by the Stockholder on March 26,
2004.
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"PERMITTED TRANSFERS" shall have the meaning assigned to such term
in
the Note Agreement.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding
(including, without limitation, an
investigation or partial proceeding, such as
a deposition), whether commenced or
threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a
prospectus that includes any
information previously omitted from a
prospectus filed as part of an effective
registration statement in reliance upon
Rule 430A promulgated under the
Securities Act), as amended or supplemented
by any prospectus supplement, with
respect to the terms of the offering of any
portion of the Registrable
Securities covered by the Registration
Statement, and all other amendments and
supplements to the Prospectus, including
post-effective amendments, and all
material incorporated by reference or
deemed to be incorporated by reference in
such Prospectus.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration
effected by preparing and filing a
registration statement in compliance with the
Securities Act, and the declaration or
ordering of effectiveness of such
registration statement by the SEC.
"REGISTRABLE SECURITIES" means (a) the Warrants; (b) the Warrant
Stock
issued or issuable upon exercise of the
Warrants; (c) any shares of capital
stock issued or issuable from time to time
(with any adjustments) in exchange
for or otherwise with respect to the
Warrant Stock referenced in clause (b); and
(d) any rights associated with the Warrant
Stock; provided, however, that any
such securities will cease to be
Registrable Securities at such time as they
have been sold under a registration
statement or pursuant to Rule 144, or at
such time as they are eligible to be sold
pursuant to Rule 144(k).
"REGISTRATION STATEMENT" means each registration statement required
to
be filed hereunder, including the
Prospectus, amendments and supplements to such
registration statement or Prospectus,
including pre- and post-effective
amendments, all exhibits thereto, and all
material incorporated by reference or
deemed to be incorporated by reference in
such registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the
Securities Act, as such Rule may be amended
from time to time, or any similar
rule or regulation hereafter adopted by the
Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the
Securities Act, as such Rule may be amended
from time to time, or any similar
rule or regulation hereafter adopted by the
Commission having substantially the
same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant to
the
Securities Act, as such Rule may be amended
from time to time, or any similar
rule or regulation hereafter adopted by the
Commission having substantially the
same effect as such Rule.
"SEC" or "COMMISSION"
means the United States Securities and Exchange
Commission.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"STOCKHOLDER" is defined in the preamble above.
"TRADING DAY" means any day on which a Trading Market is open
for
trading.
"TRADING MARKET" means any of the NASD OTC Bulletin Board,
NASDAQ
SmallCap Market, the Nasdaq National
Market, the American Stock Exchange or the
New York Stock Exchange.
"WARRANT STOCK" shall mean the shares of Class A Stock issued
or
issuable upon exercise of the Warrants, as
such number of shares may be adjusted
up or down pursuant to the terms of the
Warrant.
"WARRANTS" means those certain Common Stock Purchase Warrants
issued by
the Company to the Investors on March 26,
2004, to purchase shares of Class A
Stock.
SECTION 2
REGISTRATION
2.1 DEMAND REGISTRATION.
(a) At any time, upon the written demand of any Holder to the
Company (a "DEMAND REGISTRATION")
requesting that the Company effect the
registration under the Securities Act of
Registrable Securities of such Holder,
the Company will promptly give written
notice (a "DEMAND NOTICE") of such demand
to all other Holders. Each other Holder may
request that the Company effect the
registration under the Securities Act of
additional Registrable Securities of
such Holder by delivering written notice to
the Company specifying such number
of Registrable Securities within twenty
(20) days of receipt of the Demand
Notice. Within such 20-day period the
Company shall give written notice (a
"REGISTRATION NOTICE") to all Holders that
the Company will be filing a
Registration Statement pursuant to this
Section 2.1(a).
(b) The Company is obligated to effect only two (2) Demand
Registrations under Section 2.1(a);
provided, however, that (i) a registration
will not constitute a Demand Registration
under Section 2.1(a) until it has been
declared effective under the Securities Act
and (ii) if a registration statement
filed pursuant to Section 2.1(a) is
terminated or withdrawn by the Company
before the end of the Effectiveness Period,
such registration will not
constitute a Demand Registration and the
Company shall be obligated to pay the
expenses of an additional Demand
Registration under Section 2.1(a).
(c) On or prior to the Filing Date the Company shall prepare
and file with the Commission a Registration
Statement covering the Registrable
Securities for an offering to be made on a
continuous basis pursuant to Rule
415. The Registration Statement shall be on
Form S-3 (except if the Company is
not then eligible to register for resale
the Registrable Securities on Form S-3,
in which case such registration shall be on
another appropriate form in
accordance herewith). The Company shall
cause the Registration Statement to
become effective
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and remain effective as provided herein.
The Company shall use its best efforts
to cause the Registration Statement to be
declared effective under the
Securities Act as promptly as possible
after the filing thereof, but in any
event no later than the Effectiveness Date.
The Company shall use its best
efforts to keep the Registration Statement
continuously effective under the
Securities Act until the date which is the
earlier date of when (i) all
Registrable Securities have been sold or
(ii) all Registrable Securities may be
sold immediately without registration under
the Securities Act and without
volume restrictions pursuant to Rule
144(k), as determined by counsel to the
Company pursuant to a written opinion
letter to such effect, addressed and
acceptable to the Company's transfer agent
and the affected Holders (the
"EFFECTIVENESS PERIOD").
(d) If: (i) the Registration Statement is not filed on or prior to
the
Filing Date; (ii) the Registration
Statement is not declared effective by the
Commission by the Effectiveness Date; (iii)
after the Registration Statement is
filed with and declared effective by the
Commission, the Registration Statement
ceases to be effective (by suspension or
otherwise) as to all Registrable
Securities to which it is required to
relate at any time prior to the expiration
of the Effectiveness Period (without being
succeeded immediately by an
additional registration statement filed and
declared effective) for a period of
time which shall exceed thirty (30) days in
the aggregate per year or more than
twenty (20) consecutive calendar days
(defined as a period of 365 days
commencing on the date the Registration
Statement is declared effective); or
(iv) the Common Stock is not listed or
quoted, or is suspended from trading on
any Trading Market for a period of three
(3) consecutive Trading Days (provided
the Company shall not have been able to
cure such trading suspension within
thirty (30) days of the notice thereof or
list the Common Stock on another
Trading Market); (any such failure or
breach being referred to as an "EVENT,"
and for purposes of clause (i) or (ii) the
date on which such Event occurs, or
for purposes of clause (iii) the date which
such thirty (30) day or twenty (20)
consecutive day period (as the case may be)
is exceeded, or for purposes of
clause (iv) the date on which such three
(3) Trading Day period is exceeded,
being referred to as "EVENT DATE";
provided, however, that with respect to the
Event Date referred to in clause (ii)
above, the Event Date shall be extended
for such time as the Effectiveness Date is
delayed as a direct result of the
Company receiving comments to the
Registration Statement from the Commission
that delays effectiveness of the
Registration Statement so long as the Company
has promptly responded to the Commission's
comments), then until the applicable
Event is cured, the Company shall pay to
each Holder an amount in cash, as
liquidated damages and not as a penalty,
equal to 1.0% for each thirty (30) day
period (prorated for partial periods) on a
daily basis of the original principal
amount of the Note. While such Event
continues, such liquidated damages shall be
paid not less often than each thirty (30)
days. Any unpaid liquidated damages as
of the date when an Event has been cured by
the Company shall be paid within
three (3) days following the date on which
such Event has been cured by the
Company.
(e) Within three (3) Business Days of the Effectiveness Date,
the
Company shall cause its counsel to issue a
blanket opinion, in a form acceptable
to the Holders, to the transfer agent
stating that the shares are subject to an
effective registration statement and can be
reissued free of restrictive legend
upon notice of a sale by the Holders and
confirmation by the Holders that they
have complied with the prospectus delivery
requirements, provided that the
Company has not advised the transfer agent
orally or in writing that the opinion
has been withdrawn. Copies of the blanket
opinion required by this Section
2.1(e) shall be delivered to the Holders
within the time frame set forth above.
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2.2 PIGGYBACK REGISTRATIONS. If at any time there is not an
effective
Registration Statement covering all of the
Registrable Securities and the
Company shall determine to prepare and file
with the Commission a registration
statement relating to an offering for its
own account or the account of others
under the Securities Act of any of its
equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the
Securities Act) or their then
equivalents relating to equity securities
to be issued solely in connection with
any acquisition of any entity or business
or equity securities issuable in
connection with stock option or other
employee benefit plans, then the Company
shall send to each Holder written notice of
such determination and, if within
thirty (30) days after receipt of such
notice, any such Holder shall so request
in writing, the Company shall include in
such registration statement all or any
part of such Registrable Securities such
Holder requests to be registered
subject to customary underwriter cutbacks
applicable to all Holders.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is
required by
the provisions hereof to effect the
registration of any Registrable Securities
under the Securities Act, the Company will,
as expeditiously as possible:
(a) prepare and file with the Commission the Registration
Statement with respect to such Registrable
Securities, respond as promptly as
possible to any comments received from the
Commission, and use its best efforts
to cause the Registration Statement to
become and remain effective for the
Effectiveness Period with respect thereto,
and promptly provide to the Holders
copies of all filings and Commission
letters of comment relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement
and the Prospectus used in connection
therewith as may be necessary to comply
with the provisions of the Securities
Act with respect to the disposition of all
Registrable Securities covered by the
Registration Statement and to keep such
Registration Statement effective until
the expiration of the Effectiveness
Period;
(c) furnish to the Holders such number of copies of the
Registration Statement and the Prospectus
included therein (including each
preliminary Prospectus) as the Holders
reasonably may request to facilitate the
public sale or disposition of the
Registrable Securities covered by the
Registration Statement;
(d) if required under applicable securities law, use its best
efforts to register or qualify the Holders'
Registrable Securities covered by
the Registration Statement under the
securities or "blue sky" laws of such
jurisdictions within the United States as
the Holders may reasonably request;
provided, however, that the Company shall
not for any such purpose be required
to qualify generally to transact business
as a foreign corporation in any
jurisdiction where it is not so qualified
or to consent to general service of
process in any such jurisdiction;
(e) list the Registrable Securities covered by the
Registration Statement with any securities
exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Holders at any time when a
Prospectus relating thereto is required to
be delivered under the Securities
Act, of the happening of any event of which
the Company has knowledge as a
result of which the Prospectus contained in
such
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Registration Statement, as then in effect,
includes an untrue statement of a
material fact or omits 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; and
(g) make available for inspection by the Holders and any
attorney, accountant or other agent
retained by the Holders, all publicly
available, non-confidential financial and
other records, pertinent corporate
documents and properties of the Company,
and cause the Company's officers,
directors and employees to supply all
publicly available, non-confidential
information reasonably requested by the
attorney, accountant or agent of the
Holders.
2.4 REGISTRATION EXPENSES. All expenses relating to the
Company's
compliance with Sections 2 and 3 hereof,
including, without limitation, all
registration and filing fees, printing
expenses, fees and disbursements of
counsel and independent public accountants
for the Company, transfer taxes fees
and expenses (including reasonable counsel
fees) incurred in connection with
complying with state securities or "blue
sky" laws, fees of the NASD, transfer
taxes, fees of transfer agents and
registrars, fees of, and disbursements
incurred by, one counsel for the Holders
(to the extent such counsel is required
due to Company's failure to meet any of its
obligations hereunder), are called
"REGISTRATION EXPENSES". All selling
commissions applicable to the sale of
Registrable Securities, including any fees
and disbursements of any special
counsel to the Holders beyond those
included in Registration Expenses, are
called "SELLING EXPENSES." The Company
shall only be responsible for all
Registration Expenses.
2.5 REPRESENTATIONS AND WARRANTIES.
(a) The Common Stock of the Company is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act
and the Company has timely filed all
proxy statements, reports, schedules,
forms, statements and other documents
required to be filed by it under the
Exchange Act. The Company has filed (i) its
Annual Report on Form 10-K for the fiscal
year ended December 31, 2002 and (ii)
its Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 2003
(collectively, the "SEC REPORTS"). Each SEC
Report was, at the time of its
filing, in substantial compliance with the
requirements of its respective form
and none of the SEC Reports, nor the
financial statements (and the notes
thereto) included in the SEC Reports, as of
their respective filing dates,
contained any untrue statement of a
material fact or omitted to state a material
fact required to be stated therein or
necessary to make the statements therein,
in light of the circumstances under which
they were made, not misleading. The
financial statements of the Company
included in the SEC Reports comply as to
form in all material respects with
applicable accounting requirements and the
published rules and regulations of the
Commission or other applicable rules and
regulations with respect thereto. Such
financial statements have been prepared
in accordance with GAAP applied on a
consistent basis 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 or
may be condensed) and fairly present in
all material respects the financial
condition, the results of operations and the
cash flows of the Company and its
Subsidiaries, on a consolidated basis, as of,
and for, the periods presented in each such
SEC Report.
(b) The Common Stock is listed for trading on the Nasdaq
National Market and satisfies all
requirements for the continuation of such
listing. The Company has not received
7
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any notice that its Common Stock will be
delisted from the Nasdaq National
Market (except for prior notices which have
been fully remedied) or that the
Common Stock does not meet all requirements
for the continuation of such
listing.
(c) Neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf, has
directly or indirectly made any offers
or sales of any security or solicited any
offers to buy any security under
circumstances that would cause the offering
of the Securities pursuant to the
Note Agreement to be integrated with prior
offerings by the Company for purposes
of the Securities Act which would prevent
the Company from selling the Common
Stock pursuant to Rule 506 under the
Securities Act, or any applicable
exchange-related stockholder approval
provisions, nor will the Company or any of
its Affiliates or Subsidiaries take any
action or steps that would cause the
offering of the Securities to be integrated
with other offerings.
(d) The Warrants and the shares of Warrant Stock which the
Holders may acquire pursuant to the
Warrants are all restricted securities under
the Securities Act as of the date of this
Agreement. The Company will not issue
any stop transfer order or other order
impeding the sale and delivery of any of
the Registrable Securities at such time as
such Registrable Securities are
registered for public sale or an exemption
from registration is available,
except as required by federal or state
securities laws.
(e) The Company understands the nature of the Registrable
Securities issuable upon the exercise of
the Warrants and recognizes that the
issuance of such Registrable Securities may
have a potential dilutive effect.
The Company specifically acknowledges that
its obligation to issue the
Registrable Securities is binding upon the
Company and enforceable regardless of
the dilution such issuance may have on the
ownership interests of other
shareholders of the Company.
(f) Except for agreements made in the ordinary course of
business, there is no agreement that has
not been filed with the Commission as
an exhibit to a registration statement or
to a form required to be filed by the
Company under the Exchange Act, the breach
of which could reasonably be expected
to have a material and adverse effect on
the Company and its Subsidiaries, or
would prohibit or otherwise interfere with
the ability of the Company to enter
into and perform any of its obligations
under this Agreement in any material
respect.
2.6 INDEMNIFICATION. In the event any Registrable Securities
are
included in a registration statement
pursuant to this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the members,
managers, shareholders, partners,
officers and directors of each Holder, any
underwriter (as defined in the
Securities Act) for suc
