THE SECURITY REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, OR AN
EXEMPTION FROM REGISTRATION THEREUNDER.
THIS NOTE IS SUBJECT TO THE TERMS OF THE
SUBORDINATION AGREEMENT DATED THE DATE HEREOF BETWEEN THE INITIAL
HOLDER OF THIS NOTE AND JPMORGAN CHASE BANK, N.A., AS
ADMINISTRATIVE AGENT, AND NO PAYMENTS HEREON MAY BE MADE, OR
ACTIONS TAKEN TO ENFORCE THIS NOTE, IN VIOLATION OF SUCH
SUBORDINATION AGREEMENT.
SENIOR SUBORDINATED PROMISSORY
NOTE
|
$11,180,000
|
Elkhart, Indiana
|
FOR VALUE RECEIVED, PATRICK INDUSTRIES, INC., an
Indiana corporation (hereinafter referred to as the “
Borrower ”),
hereby promises to pay to the order of TONTINE CAPITAL PARTNERS,
L.P., and its successors and assigns (hereinafter referred to as
“ Holder ”), in the manner hereinafter provided, the principal sum
of ELEVEN MILLION ONE HUNDRED EIGHTY THOUSAND DOLLARS
($11,180,000), as it may be increased herein, in immediately
available funds and in lawful money of the United States of
America, together with interest thereon, all in accordance with the
provisions hereinafter specified. This Note is one of $13,975,000
in aggregate principal amount of Senior Subordinated Promissory
Notes (each a “ Note
” and collectively, the “
Notes ”) issued
pursuant to the Securities Purchase Agreement dated April 10, 2007,
among the Borrower and the original purchasers of the Notes (the
“ Purchase Agreement
”), and is subject to the provisions set forth
therein.
1.
Accrual of Interest .
Interest shall accrue on the outstanding principal amount hereof
(including any PIK Interest, as hereafter defined) at (i) a rate
equal to nine and one-half percent (9.50%) per annum for the period
beginning on the date hereof and ending on the first anniversary of
the date hereof (the “ Initial
Period ”) and (ii) a rate equal to
thirteen and one-half percent (13.50%) per annum for the period
following the Initial Period. Interest shall be calculated
hereunder on the basis of the actual number of days
elapsed.
2.
Payment of Interest .
Commencing on December 31, 2007, the Borrower shall pay interest on
this Note semi-annually in arrears on each June 30 and December 31
of each calendar year and on the Maturity Date (as hereafter
defined), or if any such day is not a business day, on the next
succeeding business day (each an “ Interest Payment Date ”), to
Holder. Interest payable on this Note shall be paid on each
Interest Payment Date, at the election of the Borrower, (i) in cash
or (ii) in kind, in which event the amount of the principal
outstanding under this Note shall be increased by the amount of
such interest payment (“ PIK
Interest ”) on such Interest
Payment Date and interest shall then accrue on the increased
principal amount. During the continuance of an Event of Default,
notwithstanding anything else to the contrary contained in this
Note, interest payable on the outstanding principal hereunder,
including any PIK Interest, shall bear interest at the then
applicable interest rate set forth in Section 1 plus two percent
(2%) per annum and such interest shall be payable upon
demand.
3.
Scheduled Principal Payments
. The Borrower shall make payments of principal to
Holder as follows: (i) on the first anniversary of this Note, the
sum of $1,118,000, which represents 10% of original principal
amount of this Note, (ii) on the second anniversary of this Note,
the sum of $4,472,000, which represents 40% of original principal
amount of this Note, and (iii) on May 18, 2010 (the “
Maturity Date ”),
a final payment of the sum of the outstanding principal balance of
this Note, including the amount of any PIK Interest, together with
accrued and unpaid interest thereon, and all other obligations and
indebtedness owing hereunder, if not sooner paid.
4.
Prepayment . This Note
may be prepaid in whole or in part at any time without premium or
penalty. Any prepayment of principal shall be accompanied by
payment of any interest, if any, accrued and unpaid through the
date of such prepayment.
5.
Manner and Application of Payments
. All amounts payable in cash hereunder shall be
payable to Holder by wire transfer of immediately available
funds. Payments hereunder shall be applied
first to interest and then to principal outstanding hereunder,
except that if Holder has incurred any cost or expense in
connection with the enforcement or collection of the obligations of
the Borrower hereunder, Holder shall have the option of applying
any monies received from the Borrower to payment of such costs or
expenses plus interest thereon before applying any of such monies
to any interest or principal then due.
6.
No Security . This Note is an unsecured
obligation of the Borrower and no collateral accompanies the
obligations hereunder.
7.
Subordination . The
indebtedness of the Borrower evidenced by this Note, including the
principal and interest, is subordinated and junior in right of
payment to all Senior Liabilities under and as defined in the
Subordination Agreement dated the date hereof (the “
Subordination Agreement ”) between the initial Holder and JPMorgan Chase Bank,
N.A., as Administrative Agent, as more fully set forth in the
Subordination Agreement.
8.
Treatment of Notes .
All Notes issued pursuant to the Purchase Agreement or subsequently
issued in replacement thereof shall rank pari passu as to the payment of
principal and interest. Further, the Notes and any notes
subsequently issued in replacement thereof shall rank senior as to
the payment of principal and interest with all present and future
indebtedness for money borrowed of the Borrower or any of its
subsidiaries other than (i) the Senior Liabilities, (ii)
indebtedness existing on the date hereof and identified on Schedule
8 to this Note and extensions, renewals and replacements of any
such indebtedness that do not increase the outstanding principal
amount thereof and (iii) indebtedness of the Borrower or any of its
subsidiaries incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including capital lease
obligations and any indebtedness assumed in connection with the
acquisition of any such assets or secured by a lien on any such
assets prior to the acquisition thereof, and extensions, renewals
and replacements of any indebtedness that do not increase the
outstanding principal amount thereof.
9.
Events of Default .
Each of the following acts, events or circumstances shall
constitute an Event of Default (each an “
Event of Default ”) hereunder:
2
(i)
the Borrower shall default in the payment when due
(in accordance with the terms of the Notes) of any principal,
including PIK Interest, interest or other amounts owing hereunder
or under any other Note, and such default is not cured within three
(3) business days of the due date;
(ii)
any representation or warranty made by the Borrower
in the Purchase Agreement to shall have been false or misleading in
any material respect on the date as of which such representation or
warranty was made;
(iii)
the Borrower shall fail to perform or observe any
material agreement, covenant or obligation arising under any
provision hereof, under any other Note or the Purchase Agreement
for more than thirty (30) days following receipt by the Borrower of
a notice from Holder indicating any such violation;
(iv)
any default by the Borrower under the terms of the
Senior Liabilities, which results in the acceleration of the Senior
Liabilities;
(v)
(a) the Borrower shall commence a voluntary case
concerning itself under any bankruptcy, insolvency or similar laws
or statutes (including Title 11 of the United States Code, as
amended, supplemented or replaced) (collectively, the
“ Bankruptcy Code
”); or (b) an involuntary case is commenced
against the Borrower and is not dismissed within ninety (90) days;
or (c) a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the property
of the Borrower or the Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect relating to
the Borrower or there is commenced against the Borrower any such
proceeding; or (d) any order of relief or other order approving any
such case or proceeding is entered; or (e) the Borrower is
adjudicated insolvent or bankrupt; or (f) the Borrower makes a
general assignment for the benefit of creditors; or (g) the
Borrower shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts; or (h) the
Borrower shall by any act or failure to act consent to, approve of
or acquiesce in any of the foregoing; and
(vi)
this Note or any other Note shall cease to be in
full force and effect, or shall cease to provide the rights, powers
and privileges purported to be created hereby.
Subject to the Subordination Agreement, if an Event
of Default, other than an Event of Default described in Section
9(v), occurs, the Holder by written notice to the Borrower may
declare the principal of and accrued interest on this Note to be
immediately due and payable. Upon a declaration of acceleration,
such principal and interest will become immediately due and
payable. If an Event of Default described in Section 9(v) occurs,
the principal of and accrued interest on this Note then outstanding
will become immediately due and payable without any declaration or
other act on the part of the Holder.
10.
Remedies; Cumulative Rights
. In addition to the rights provided under Section
8, Holder shall also have any other rights that Holder may have
been afforded under any contract or agreement at any time,
including the Purchase Agreement, and any other rights that Holder
may have pursuant to applicable law. No delay on the part of Holder
in the exercise of any power or
3
right under this Note or under any other instrument
executed pursuant hereto shall operate as a waiver thereof, nor
shall a single or partial exercise of any power or right preclude
other or further exercise thereof or the exercise of any other
power or right.
No extension of time of the payment of this Note or
any other modification, amendment or forbearance made by agreement
with any person now or hereafter liable for the payment of this
Note shall operate to release, discharge, modify, change or affect
the liability of any co-borrower, endorser, guarantor or any other
person with regard to this Note, either in part or in whole. No
failure on the part of Holder or any holder hereof to exercise any
right or remedy hereunder, whether before or after the occurrence
of a default, shall constitute a waiver thereof, and no waiver of
any past default shall constitute a waiver of any future default or
of any other default. No failure to accelerate the debt evidenced
hereby by reason of an Event of Default hereunder or acceptance of
a past due installment, or indulgence granted from time to time
shall be construed to be a waiver of the right to insist upon
prompt payment thereafter, or to impose late payment charges, or
shall be deemed to be a novation of this Note or any reinstatement
of the debt evidenced hereby, or a waiver of such right of
acceleration or any other right, or be construed so as to preclude
the exercise of any right which Holder or any holder hereof may
have, whether by the laws of the State of Indiana, by agreement or
otherwise, and none of the foregoing shall operate to release,
change or affect the liability of the Borrower under this Note, and
the Borrower hereby expressly waives (to the extent allowed by law)
the benefit of any statute or rule of law or equity which would
produce a result contrary to or in conflict with the
foregoing.
11.
Waivers . Except for
the notices expressly required by the terms of this Note (which
rights to notice are not waived by the Borrower), the Borrower, for
itself and its successors and assigns, hereby forever waives
presentment, protest and demand, notice of protest, demand,
dishonor and non-payment of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or
enforcement of the payment of this Note, and waives and renounces
(to the extent allowed by law), all rights to the benefits of any
statute of limitations and any moratorium, appraisement, and
exemption now allowed or which may hereby be provided by any
federal or state statute or decisions against the enforcement and
collection of the obligations evidenced by this Note and any and
all amendments, substitutions, extensions, renewals, increases, and
modifications hereof.
12.
Attorneys’ Fees .
The Borrower agrees to pay all reasonable costs and expenses of
collection and enforcement of this Note when incurred, including
Holder’s reasonable attorneys’ fees and legal and court
costs, including any incurred on appeal or in connection with
bankruptcy or insolvency, whether or not any lawsuit or proceeding
is ever filed with respect hereto.
13.
Severability; Invalidity . The Borrower and Holder intend and believe that each
provision in this Note comports with all applicable local, state
and federal laws and judicial decisions. However, if any
provisions, provision, or portion of any provision in this Note is
found by a court of competent jurisdiction to be in violation of
any applicable local, state or federal ordinance, statute, law, or
administrative or judicial decision, or public policy, and if such
court would declare such portion, provision or provisions of this
Note to be illegal, invalid, unlawful, void or unenforceable as
written, then it is the intent of all parties hereto that such
portion, provision or provisions shall be given force and effect to
the fullest possible extent they are legal,
4
valid and enforceable, and the remainder of this
Note shall be construed as if such illegal, invalid, unlawful, void
or unenforceable portion, provision or provisions were severable
and not contained herein, and the rights, obligations and interest
of the Borrower and Holder hereof under the remainder of this Note
shall continue in full force and effect.
14.
Usury . All terms,
conditions and agreements herein are expressly
