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WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this " Agreement "
) dated as of December 11, 2008 is among PATRICK INDUSTRIES, INC.,
an Indiana corporation (the " Company "), and the holders of
Warrants (as defined below) listed on the signature page hereof
(along with their permitted transferees, the " Holders
").
WHEREAS, to induce the lenders under the Credit Agreement dated
as of May 18, 2007 among the Company, various lenders and JPMorgan
Chase Bank, N.A., as administrative agent, to enter into a Second
Amendment and Waiver to such Credit Agreement on the date hereof,
the Company has agreed to issue warrants (the " Warrants ")
to purchase up to an aggregate of 474,049 shares, subject to
adjustment, of its common stock, without par value (the " Common
Stock ").
WHEREAS, the Company and the Holders have agreed to set forth
herein the terms of the Warrants and certain agreements relating
to, among other things, the exercise and transfer of the
Warrants.
NOW, THEREFORE, for valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions . As used in this Agreement, the
following terms shall have the following meanings:
" Additional Shares of Common Stock " means (without
duplication) all shares (including treasury shares) of Common Stock
issued or sold (or, pursuant to Section 3.3 or 3.4 ,
deemed to be issued) by the Company on or after the date hereof,
whether or not subsequently reacquired or retired by the Company,
other than (a) shares issued upon the exercise of the Warrants and
(b) such number of additional shares as may become issuable upon
the exercise of the Warrants by reason of adjustments required
pursuant to the provisions of such Warrants as in effect on the
date hereof.
" Applicable Number of Shares " means at any date of
determination a number of shares of Common Stock equal to the
difference between (a) the Initial Number of Shares, less (b) the
number of shares of Common Stock which were issued pursuant to the
exercise of any Warrant, as determined immediately prior to such
date (giving effect to any stock splits or combinations, or any
dividends paid or payable in shares of Common Stock, after the
issuance of such shares).
" Business Day " means any day other than a Saturday or a
Sunday or a day on which commercial banking institutions in the
City of New York are authorized by law to be closed. Any reference
to "days" (unless Business Days are specified) shall mean calendar
days.
" Common Stock " has the meaning specified
in the recitals to this Agreement and includes any capital stock
into which the Common Stock shall have been changed or any capital
stock resulting from any reclassification of Common Stock, and all
other capital stock of any class or classes (however designated) of
the Company the holders of which have the right, without limitation
as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
" Company " has the meaning specified in the introduction
to this Agreement.
" Convertible Security " means any evidence of
indebtedness, share of stock (other than Common Stock) or other
security directly or indirectly convertible into or exercisable or
exchangeable for Additional Shares of Common Stock.
" Current Market Price " means, on any date specified
herein, the average of the daily Market Price during the five
consecutive trading days before such date, except that, if on any
such date the shares of Common Stock are not listed or admitted for
trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the
Market Price on such date.
" Exchange Act " means the Securities Exchange Act of
1934.
" Exercise Notice " has the meaning specified in
Section 2.1(a) .
" Exercise Price " means the Initial Price, as adjusted
from time to time as provided herein.
" Expiration Date " means 11:59 p.m., New York City time,
on December 11, 2018.
" Fair Value " means, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a
security, the Market Price, and (iii) in all other cases, the fair
value thereof (as of a date which is within 20 days of the date as
of which the determination is to be made) determined in good faith
jointly by the Company and a Majority of the Holders;
provided that if such parties are unable to reach agreement
within a reasonable period of time, the Fair Value shall be
determined in good faith by an independent investment banking firm
selected jointly by the Company and a Majority of the Holders or,
if that selection cannot be made within ten days, by an independent
investment banking firm selected by the American Arbitration
Association in accordance with its rules; and provided ,
further , that the Company shall pay all of the fees and
expenses of any third parties incurred in connection with
determining the Fair Value.
" Holder " has the meaning specified in the introduction
to this Agreement.
" Initial Number of Shares " means 474,049 shares of
Common Stock.
" Initial Price " means $1.00 per share.
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" Majority of the Holders " means Holders
of Warrants that would be, upon exercise of the Warrants, entitled
to purchase more than 50% of all shares of Common Stock then
issuable under all of the Warrants.
" Market Price " means, on any date specified herein, the
amount per share of Common Stock equal to (a) the last reported
sale price of the Common Stock at or prior to 4:00 p.m., New York
City time, on such date or, if no such sale takes place on such
date, the average of the closing bid and asked prices thereof as of
4:00 p.m., New York City time, on such date, in either case as
officially reported on the principal national securities exchange
on which the Common Stock is then listed or admitted for trading,
(b) if the Common Stock is not then listed or admitted for trading
on any national securities exchange but is traded in the
over-the-counter market, the last reported sale price of Common
Stock at or prior to 4:00 p.m., New York City time, on such date
or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof as of 4:00 p.m., New York City
time, on such date, in either case as reported by Bloomberg
Financial Markets, or (c) if Common Stock is not then listed or
admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date that
is within 20 days of the date as of which the determination is to
be made) determined in good faith jointly by the Company and a
Majority of the Holders; provided that if such parties are
unable to reach agreement within a reasonable period of time, the
Market Price shall be determined in good faith by an independent
investment banking firm selected jointly by the Company and a
Majority of the Holders or, if that selection cannot be made within
ten days, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules; and
provided , further , that the Company shall pay all
fees and expenses of any third party incurred in connection with
determining the Market Price.
" Options " means any rights, options or warrants to
subscribe for, purchase or otherwise acquire Additional Shares of
Common Stock or Convertible Securities.
" Other Securities " means any capital stock (other than
Common Stock) and other securities of the Company or any other
Person that the holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of
the Warrants, in lieu of or in addition to Common Stock, or which
at any time shall be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant
to Article IV or otherwise.
" Person " means any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock
company, limited liability company, unincorporated organization or
any other entity or organization, including a government or agency
or political subdivision thereof, and shall include any successor
(by merger or otherwise) of such entity.
" Purchase Price " has the meaning specified in
Section 2.1(a) .
" Registration Rights Agreement " means the Second
Amended and Restated Registration Rights Agreement dated as of the
date hereof among the Company, the Holders, Tontine Capital
Partners, L.P. and Tontine Capital Overseas Master Fund, L.P.
" Securities Act " means the Securities Act of 1933.
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" Warrants " has the meaning specified in the recitals to
this Agreement.
" Warrant Shares " means (a) any shares of Common Stock
(or Other Securities) issued or issuable upon the exercise of
Warrants and (b) any shares of Common Stock (or Other Securities)
issued subsequent to the exercise of any of the Warrants as a
dividend or other distribution with respect to, or resulting from a
subdivision of the outstanding shares of Common Stock (or Other
Securities) into a greater number of shares by reclassification,
stock split, reverse stock split or otherwise, or in exchange for
or in replacement of the Common Stock (or Other Securities) issued
upon such exercise.
" Waiver Notice " has the meaning specified in Section
2.4(a) .
Section 1.2 Interpretation . For purposes of this
Agreement, (a) definitions shall apply equally to the singular and
plural forms of the terms defined; (b) words of any gender shall be
deemed to include each other gender; (c) Article and Section
headings are for convenience only and shall not limit or otherwise
affect the meaning hereof; (d) the word "including" and words of
similar import shall be deemed to be followed by the phrase
"without limitation"; and (e) unless otherwise specified or the
context otherwise requires, (i) any reference to an agreement or
other document means such agreement or other document as amended,
restated or otherwise modified from time to time, (ii) any
reference to a Person shall be deemed to include such
Person’s successors and assigns, (iii) any reference to an
Article , a Section , an Exhibit or a
Schedule means an Article or a Section of, or an Exhibit or
Schedule to, this Agreement and (e) any reference to a statute or
regulation includes all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting
such statute or regulation
ARTICLE II
ISSUANCE AND EXERCISE OF WARRANTS
Section 2.1. Issuance of Warrants; Manner of Exercise;
Payment of the Purchase Price . (a) Subject to the terms and
conditions of this Agreement, the Company hereby issues to each
initial Holder a Warrant (each in the form of Exhibit A ) to
purchase, at the Exercise Price, shares of fully paid and
nonassessable Common Stock in the amount set forth on Schedule
A and listed adjacent to such Holder’s name. Each Warrant
may be exercised by the Holder thereof, in whole or in part, from
time to time prior to the Expiration Date, for a number of shares
of Common Stock not greater than the then-Applicable Number of
Shares determined as of the date of exercise, by surrendering to
the Company at its principal office such Warrant, with an Election
to Purchase Shares (an " Exercise Notice ") in the form of
Exhibit B (or a reasonable facsimile thereof) duly executed
by the Holder. An Exercise Notice shall specify the number of
shares of Common Stock to be issued to such Holder and shall be
accompanied by payment of the applicable purchase price (the "
Purchase Price ") in an amount equal to the product of (i)
the Exercise Price and (ii) the number of shares of Common Stock to
be issued.
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(b) Payment of the Purchase Price may be made as
follows: (i) in United States currency by cash or delivery of a
certified check or bank draft payable to the order of the Company
or by wire transfer to the Company; (ii) by cashless exercise
pursuant to Section 2.1(c) ; (iii) by surrender to the
Company for cancellation of certificates representing shares of
Common Stock of the Company owned by the Holder (properly endorsed
for transfer in blank) having a Current Market Price on the date of
Warrant exercise equal to the Purchase Price; or (iv) by any
combination of the methods described in clauses (i) ,
(ii) and (iii) .
(c) A Holder may exercise a Warrant in whole or in part without
payment in cash of the Purchase Price by electing to receive upon
such exercise the "Net Number" of shares of Common Stock determined
according to the following formula:
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Net Number =
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(A x B) – (A x C)
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For purposes of the foregoing formula:
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A =
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the total number of shares with respect to which
such Warrant is then being exercised.
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B =
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the Market Price of the shares of Common Stock
(or Other Securities) on the date immediately preceding the date of
the relevant Exercise Notice.
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C =
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the Exercise Price then in effect.
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Section 2.2 When Exercise Effective . Each exercise of a
Warrant shall be deemed to have been effected as of the later to
occur of (a) the Company’s receipt of payment of the Purchase
Price and (b) immediately prior to the close of business on the
Business Day on which such Warrant is surrendered to the Company as
provided in Section 2.1 , and at such time of effectiveness
the Person or Persons in whose name or names such shares of Common
Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 2.3 shall be deemed to have become the
holder or holders of record thereof for all purposes.
Section 2.3 Delivery of Stock Certificates, etc.; Charges,
Taxes and Expenses . (a) As soon as practicable after each
exercise of a Warrant, in whole or in part, and in any event within
three Business Days thereafter, the Company shall either (1) cause
to be issued in the name of and delivered to the Holder thereof or,
subject to Article X , such other Person as the Holder may
direct, a certificate or certificates for the number of shares of
Common Stock (or Other Securities) to which the Holder shall be
entitled upon such exercise; or (2) if a transfer agent or
registrar has been appointed for the Common Stock (or Other
Securities) that participates in The Depository Trust Company
("DTC") Fast Automated Securities Transfer Program or any successor
program and the Holder so elects, cause the number of shares of
Common Stock (or Other Securities) to which the Holder shall be
entitled upon such exercise to be credited to the Holder’s or
its designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system or any successor system.
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(b) If any such exercise is for less than all of
the then-Applicable Number of Shares as of the date of exercise
purchasable under the applicable Warrant, the Company shall issue
to the applicable Holder a new Warrant in like form for the
unexercised portion thereof.
(c) The Company will pay any documentary stamp taxes
attributable to the initial issuance of shares of Common Stock upon
the exercise of Warrants; provided that the Company shall
not be required to pay any tax or taxes that may be payable in
respect of any transfer involved in the issue of any Warrants or
any shares of Common Stock (or Other Securities) issuable upon
exercise thereof in a name other than that of the Holder of such
Warrant.
(d) The Company shall pay all taxes (other than Federal, state
or local income taxes) that may be payable in connection with the
execution and delivery of this Agreement or the issuance of the
Warrants or the Common Stock (or Other Securities) issuable upon
the exercise of any Warrant or in connection with any modification
of this Agreement or the Warrants, and shall hold each Holder
harmless without limitation as to time against all liabilities with
respect to all such taxes. The obligations of the Company under
this Section 2.3(d) shall survive any termination of this
Agreement and any exercise, cancellation or termination of the
Warrants. The Company and the Holders agree that the Warrants and
the obligations under the Credit Agreement, dated as of May 18,
2007, as amended, are being issued without original issue discount
within the meaning of Section 1273 of the Internal Revenue Code of
1986, as amended, and shall report on that basis for federal income
tax purposes.
Section 2.4 Limitations on Exercise . (a) Notwithstanding
anything to the contrary set forth in this Agreement, at no time
may a Holder of a Warrant exercise the Warrant to the extent (but
only to the extent) that after giving effect to such exercise, the
Holder (together with the Holder’s affiliates) would
beneficially own (as determined in accordance with Section 13(d) of
the Exchange Act) in excess of 4.99% of the number of shares of
Common Stock outstanding immediately after giving effect to such
exercise; provided that upon a Holder providing the Company
with 61 days’ notice (a " Waiver Notice ") that such
Holder would like to waive this Section 2.4(a) with regard
to any shares of Common Stock issuable upon exercise of a Warrant,
this Section 2.4(a) will be of no force or effect with
regard to all or a portion of such Warrant as referenced in such
Waiver Notice.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, at no time may a Holder of a Warrant exercise the
Warrant to the extent (but only to the extent) that after giving
effect to such exercise, the Holder (together with the
Holder’s affiliates) would beneficially own (as determined in
accordance with Section 13(d) of the Exchange Act) in excess of
9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to such exercise; provided
that upon a Holder providing the Company with a Waiver Notice that
such Holder would like to waive this Section 2.4(b) with
regard to any shares of Common Stock issuable upon exercise of a
Warrant, this Section 2.4(b) shall be of no force or effect
with regard to all or a portion of such Warrant as referenced in
such Waiver Notice.
ARTICLE III
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ADJUSTMENT OF COMMON STOCK ISSUABLE UPON
EXERCISE;
ADJUSTMENT OF EXERCISE PRICE
Section 3.1 Adjustment of Number of Shares . From and
after the date hereof, upon each adjustment of the Exercise Price
as a result of the calculations made in this Article III ,
each Warrant shall thereafter evidence the right to receive, at the
adjusted Exercise Price, that number of shares of Common Stock
(calculated to the nearest one-hundredth of a share) obtained by
dividing (i) the product of the aggregate number of shares covered
by such Warrant immediately prior to such adjustment and the
Exercise Price in effect immediately prior to such adjustment of
the Exercise Price by (ii) the Exercise Price in effect immediately
after such adjustment of the Exercise Price.
Section 3.2 Adjustment of Exercise Price . (a)
Issuance of Additional Shares of Common Stock . If the
Company at any time after the date hereof issues or sells
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 3.3 or
3.4 ) without consideration or for a consideration per share
less than the Exercise Price in effect immediately prior to such
issue or sale, then, subject to Section 3.8 , the Exercise
Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest .001 of a cent) determined by
multiplying such Exercise Price by a fraction:
(i) the numerator of which shall be the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issue
or sale and (B) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued or sold
would purchase at such Exercise Price, and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this Section
3.2(a) , (x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to Section 3.3
or 3.4 , such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be
outstanding.
(b) Dividends and Distributions . If the Company at any
time after the date hereof declares, orders, pays or makes a
dividend or other distribution (including any distribution of
additional capital stock or other securities or property or Options
by way of dividend or spin-off, reclassification, recapitalization,
reorganization or similar corporate rearrangement) on the Common
Stock, then (in each such case), subject to Section 3.9 ,
the Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders
of any class of securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying
such Exercise Price by a fraction:
(x) the numerator of which shall be the Market Price in effect
on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the
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commencement of ex-dividend trading, less the
Fair Value of such dividend or distribution applicable to one share
of Common Stock, and
(y) the denominator of which shall be such Market Price.
Section 3.3 Treatment of Options and Convertible
Securities . If the Company at any time after the date hereof
issues, sells, grants or assumes, or shall fix a record date for
the determination of holders of any class of securities of the
Company entitled to receive, any Options or Convertible Securities
(whether or not the rights thereunder are immediately exercisable),
then (in each such case) the maximum number of Additional Shares of
Common Stock (as set forth in the instrument relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, upon the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading); provided that such Additional Shares
of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 3.5
) of such shares would be less than the Exercise Price in effect on
the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend
trading), as the case may be; and provided , further
, that in any such case in which Additional Shares of Common Stock
are deemed to be issued:
(a) whether or not the Additional Shares of Common Stock
underlying such Options or Convertible Securities are deemed to be
issued, no further adjustment of the Exercise Price shall be made
upon the subsequent issue or sale of Convertible Securities or
shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, except in
the case of any such Options or Convertible Securities that contain
provisions requiring an adjustment, subsequent to the date of the
issue or sale thereof, of the number of Additional Shares of Common
Stock issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities by reason of (x) a
change of control of the Company, (y) the acquisition by any Person
or group of Persons of any specified number or percentage of the
voting securities of the Company or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a
separate issuance of Additional Shares of Common Stock, Options or
Convertible Securities, as the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number
of Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise),
the Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or
date prior to the commencement of ex-dividend trading, as the case
may be, with respect thereto), and any subsequent adjustments based
thereon, shall,
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upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, that are outstanding at
such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not
have been exercised or the expiration of any rights of conversion
or exchange under any such Convertible Securities that (or purchase
by the Company and cancellation or retirement of any such
Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Exercise Price computed
upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or retirement, as
the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, or for the issue or
sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange,
and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue or
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section
3.5 ) upon the issue or sale of such Convertible Securities
with respect to which such Options were actually exercised;
(d) no readjustment pursuant to clause (b) or (c)
above shall have the effect of increasing the Exercise Price by
an
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