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Put Restructuring Agreement

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Sectors: Materials and Construction
Governing Law: Delaware, View Delaware State Laws
Effective Date: September 25, 2003
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EXHIBIT 10.1


RESTRUCTURING AGREEMENT


THIS RESTRUCTURING AGREEMENT (this "Agreement") is entered into as of the 25th day of September 2003, by and among the following parties:


STERLING CONSTRUCTION COMPANY, INC. (f/k/a Oakhurst Company, Inc.) a Delaware corporation ("SCC;")


STERLING HOUSTON HOLDINGS, INC., (f/k/a Sterling Construction Company, Inc.) a Delaware corporation ("SHH;")


THE STOCKHOLDERS OF SHH whose names appear on the signature pages of this Agreement under the heading and hereby defined as the "Selling Stockholders;"


HARE & CO. A/C BANK OF NEW YORK ("Hare;")


THE HOLDERS OF CERTAIN PROMISSORY NOTES originally issued by SCC or an affiliate of SCC to James R. Manning whose names appear on the signature pages of this Agreement under the heading and hereby defined as the "Manning Noteholders;"


MAARTEN D. HEMSLEY ("Mr. Hemsley;") and


ROBERT M. DAVIES ("Mr. Davies.")


The Manning Noteholders, Mr. Hemsley and Mr. Davies are sometimes referred to herein collectively as the "Other Noteholders."


BACKGROUND


Pursuant to that certain Securities Purchase Agreement dated as of July 13, 2001 between SCC, SHH and certain funds holding shares of SHH, SCC issued a promissory note to North Atlantic Small Companies Investment Trust Plc in the aggregate amount of principal and interest due at maturity of four million sixty thousand dollars ($4,060,000.00) that was subsequently assigned to Hare.


Pursuant to that certain Transaction Agreement entered into in July 2001 between SCC, SHH and the Selling Stockholders, SCC among other things purchased from the Selling Stockholders certain shares of SHH common stock and issued certain promissory notes to the Selling Stockholders. The promissory notes held by Hare and the Selling Stockholders are identical except as to amount and holder and each is hereinafter referred to as a "Zero Coupon Note."


Pursuant to the Transaction Agreement, SCC also granted to the Selling Stockholders the right to sell (put) their remaining shares of SHH common stock to SCC at any time after the third anniversary of the closing of the Transaction Agreement and prior to the fourth anniversary thereof (the "Put") at a price of one hundred five dollars and twenty-six cents ($105.26) per share (the "Exercise Price.")


If the Put is exercised, SCC is required within ninety (90) days to pay to each of the Selling Stockholders the Exercise Price and any applicable Earnout Payment in immediately available funds. In the event of its inability to do so, SCC is required to issue a secured note in lieu thereof. In addition, according to their terms, all of the Zero Coupon Notes become due and payable on the date SCC is required to pay the Exercise Price to the Selling Stockholders.


Depending on the date the Put is exercised, the cash requirement resulting from the exercise of the Put could be approximately $19.5 million.


SCC and the Selling Stockholders now wish to amend the Transaction Agreement, but only to the extent necessary to enable SCC to pay the Exercise Price and the Earnout Payment with a combination of cash and securities.


SCC, the Selling Stockholders and Hare now wish to amend the Zero Coupon Notes to provide for their payment with a combination of cash and securities.


Page 1 of 6


In addition, SCC and the Other Noteholders wish to amend and restate in their entirety (a) two promissory notes originally issued by SCC to James R. Manning and currently held by the Manning Noteholders (the "Manning Notes;") (b) a promissory note issued by SCC to Mr. Hemsley (the "Hemsley Note;") and two promissory notes issued to Mr. Davies, (in one of which Mr. Hemsley has a participation interest) one by SCC and the other by a wholly owned subsidiary of SCC and transferred by merger to SCC. The Manning Notes, the Hemsley Note and the Davies Notes are sometimes referred to collectively as the "Other Notes."


Capitalized terms used but not defined herein shall have the meanings given to them in the Transaction Agreement.


1. CONSIDERATION. Accordingly, the parties are entering into this Agreement
for and in consideration of the foregoing recitals, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.


2. EXERCISE PRICE. The Selling Stockholders hereby agree to amend Section
1.2(a) and Section 1.2(c) of the Transaction Agreement to read as set forth
in Exhibit A so that in lieu of the payment in cash by SCC of the Exercise
Price, SCC shall have the option of paying the Exercise Price by means of
the following (the "Alternate Exercise Price Payment Method:")


2.1 Cash in the aggregate amount of $2,415,525, subject to Section 7,
below;


2.2 Five-year amortizing subordinated promissory notes bearing interest
payable quarterly in arrears at the annual rate of 12%, repayable in
twenty (20) quarterly installments of principal and interest, the
first of which shall be due three full calendar months following the
date of issuance, such note to be in the form set forth herein and
attached hereto as Exhibit B (each a "Five-Year Note") in the
aggregate original principal amount of $6,353,913; and


2.3 A five-year subordinated cash availability note repayable in a single
payment on its maturity date that accrues 14% interest, compounded
annually, and that is subject to the mandatory prepayment of interest
and principal upon the achievement by SCC of defined cash flow
targets, such notes to be in the form set forth herein and attached
hereto as Exhibit C (each a "Cash Availability Note") in the aggregate
principal amount of $3,230,562; provided however, that SCC shall have
sixty (60) days after the Put Election Date in which to negotiate with
the Selling Stockholders the issuance of shares of SCC common stock in
lieu of the issuance of some or all of the Cash Availability Notes.


The allocation of the foregoing cash, Five-Year Notes and Cash Availability
Notes (and any shares of SCC common stock issued in lieu of the latter)
among the Selling Stockholders shall be in accordance with such arrangement
as they may unanimously agree upon. The acceptance by a Selling Stockholder
of cash, a Five-Year Note, a Cash Availability Note and/or shares of SCC
common stock in payment of the Exercise Price to which he is entitled shall
be conclusive evidence of such Selling Stockholder's acceptance of such
allocation for all purposes. Failing unanimous agreement on the manner of
allocation, SCC shall issue t
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