Exhibit (b)(3)
Draft of August 5, 1999
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Worldwide Sports & Recreation, Inc.
Note Agreement
Dated as of August 5, 1999
Re: $22,800,000 12% Senior Subordinated Notes
Due August 5, 2007,
Warrants to Purchase Common Stock
and
Purchase of Series A Preferred Stock and Common Stock
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Table of Contents
(Not a part of the Agreement)
Page
Section 1. Description of Notes and Commitment................................ 1
Section 1.1. Description of Notes............................... 1
Section 1.2. Warrants to Purchase Common Stock.................. 2
Section 1.3. Purchase of Preferred Stock and Common Stock....... 2
Section 1.4. Federal Tax Treatment.............................. 2
Section 1.5. Guaranties of Notes................................ 2
Section 1.6. Commitment and Closing Date........................ 2
Section 2. Prepayment of Notes................................................ 3
Section 2.1. Required Prepayments............................... 3
Section 2.2. Optional Prepayments............................... 3
Section 2.3. Notice of Optional Prepayments..................... 4
Section 2.4. Prepayment of Notes upon Change of Control......... 5
Section 2.5. Application of Prepayments......................... 6
Section 2.6. Direct Payment..................................... 6
Section 3. Representations.................................................... 7
Section 3.1. Representations of the Company and the Subsidiary
Guarantors......................................... 7
Section 3.2. Representations of the Purchaser................... 7
Section 4. Closing Conditions................................................. 8
Section 4.1. Closing Date Conditions............................ 8
Section 5. Company Covenants.................................................. 13
Section 5.1. Corporate Existence, Etc........................... 13
Section 5.2. Insurance.......................................... 13
Section 5.3. Taxes, Claims for Labor and Materials; Compliance
with Laws.......................................... 13
Section 5.4. Maintenance, Etc................................... 14
Section 5.5. Nature of Business................................. 14
Section 5.6. Plan of Merger..................................... 14
Section 5.8. Leverage Ratio..................................... 14
Section 5.9. Fixed Charge Coverage.............................. 15
Section 5.10. Interest Coverage Ratio............................ 16
Section 5.11. Minimum EBITDA..................................... 17
Section 5.12. Limitations on Liens............................... 18
Section 5.13. Disposition of Assets.............................. 20
Section 5.14. Mergers and Consolidations......................... 20
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Section 5.15. Loans and Investments.............................. 21
Section 5.16. Limitations on Indebtedness........................ 21
Section 5.17. Contingent Obligations............................. 22
Section 5.18. Restricted Payments................................ 23
Section 5.19. Repurchase of Notes................................ 24
Section 5.20. Transactions with Affiliates....................... 24
Section 5.21. Termination of Pension Plans....................... 24
Section 5.22. Prohibition of Change in Fiscal Year............... 24
Section 5.23. Sale or Discount of Receivables.................... 24
Section 5.24. Partnerships and Joint Ventures.................... 25
Section 5.25. Issuance of Stock or Partnership Interests......... 25
Section 5.26. Hedging Contracts.................................. 25
Section 5.27. Additional Subsidiary Guarantors................... 25
Section 5.28. Amendment or Waivers of Certain Documents:
Restrictions Relating to Prepayment of the Notes... 25
Section 5.29. Reports and Rights of Inspection................... 27
Section 5.30. Agreement of Obligors during Standstill Period..... 31
Section 6. Subordination of Subordinated Indebtedness Liabilities............. 32
Section 7. Events of Default and Remedies Therefor............................ 37
Section 7.1. Events of Default.................................. 37
Section 7.2. Notice to Holders.................................. 38
Section 7.3. Acceleration of Maturities......................... 39
Section 7.4. Rescission of Acceleration......................... 39
Section 8. Amendments, Waivers and Consents................................... 40
Section 8.1. Consent Required................................... 40
Section 8.2. Solicitation of Holders............................ 40
Section 8.3. Effect of Amendment or Waiver...................... 40
Section 9. Interpretation of Agreement........................................ 40
Section 9.1. Definitions........................................ 40
Section 9.2. Accounting Principles.............................. 57
Section 9.3. Directly or Indirectly............................. 57
Section 10. Miscellaneous...................................................... 57
Section 10.1. Registered Notes................................... 57
Section 10.2. Exchange of Notes.................................. 58
Section 10.3. Loss, Theft, Etc. of Notes......................... 58
Section 10.4. Expenses, Stamp Tax Indemnity...................... 58
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative.. 59
Section 10.6. Notices............................................ 59
Section 10.7. Successors and Assign.............................. 60
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Section 10.8. Survival of Covenants and Representations.......... 60
Section 10.9. Severability....................................... 60
Section 10.10. Governing Law...................................... 60
Section 10.11. Submission to Jurisdiction; Waiver of Jury Trial... 61
Section 10.12. General Indemnity; Special Environmental Indemnity
and Covenant Not to Xxx............................ 61
Section 10.13. Interest........................................... 63
Section 10.14. Captions........................................... 63
Signature Page.................................................................. 64
Attachments to Note Agreement:
Schedule I -- Name and Address of Purchaser and Amount of Commitment
Schedule II -- Indebtedness; Subsidiaries; and Disclosures as of the Closing
Date
Exhibit A -- Form of 12% Senior Subordinated Note Due August 5, 2007
Exhibit B -- Form of Warrants
Exhibit C -- Form of Subsidiary Guaranty Agreement
Exhibit D-1 -- Representations and Warranties of the Company
Exhibit D-2 -- Representations and Warranties of the Subsidiary Guarantors
Exhibit E -- Description of Special Counsel's Closing Opinion
Exhibit F -- Description of Closing Opinion of Counsel to the Company
Exhibit G -- Description of Closing Opinion of Special Canadian Counsel to
the Company
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Worldwide Sports & Recreation, Inc.
0000 Xxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Note Agreement
Re: $22,800,000 12% Senior Subordinated Notes
Due August 5, 2007,
Warrants to Purchase Common Stock
and
Purchase of Series A Preferred Stock and Common Stock
Dated as of
August 5, 1999
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Worldwide Sports & Recreation, Inc., a Delaware
corporation, agrees with you as follows:
Section 1. Description of Notes and Commitment.
Section 1.1. Description of Notes. The Company will authorize the issue
and sale of $22,800,000 aggregate principal amount of its 12% Senior
Subordinated Notes (the "Notes") to be dated the date of issue, to bear interest
from such date at the rate of 12% per annum, payable quarterly on the fifth day
of February, May, August and November in each year (commencing November 5, 1999)
and at maturity and to bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the
Overdue Rate after the date due, whether by acceleration or otherwise, until
paid, to be expressed to mature on August 5, 2007, and to be substantially in
the form attached hereto as Exhibit A. Interest on the Notes shall be computed
on the basis of a 360-day year of twelve 30-day months. The Notes are not
subject to prepayment or redemption at the option of the Company prior to their
expressed maturity date except on the terms and conditions and in the amounts
and with the premium, if any, set forth in (S)2 of this Agreement. You are
hereinafter sometimes referred to as the "Purchaser". The terms which are
capitalized herein shall have the meanings set forth in (S)9.1 unless the
context shall otherwise require.
Section 1.2. Warrants to Purchase Common Stock. In consideration of, and
as an inducement to, your purchase of the Notes, the Company agrees to deliver
to you on the Closing Date (as defined below) warrants of the Company in the
form of Exhibit B attached hereto and made a part hereof to purchase 58,202
shares (subject to adjustment as provided in said warrants) of the Common Stock
of the Company for an exercise price of $0.01 per share (the "Warrants"). The
number of shares which may be acquired upon the exercise of the Warrants and the
price per share are subject to adjustment in the manner and on the terms and
conditions set forth in the Warrants.
Section 1.3. Purchase of Preferred Stock and Common Stock. In addition to
your Purchase of the Notes and Warrants as provided herein, and as required by
(S)4.1(l), on the Closing Date you shall purchase 22,060 shares of the Company's
Series A Preferred Stock at a price of $100.00 per share and 53,000 shares of
the Company's Common Stock at a price of $1.00 per share (the Series A Preferred
Stock of the Company and the Common Stock of the Company purchased by the
Purchaser on the Closing Date is hereinafter referred to as the "Strip Equity").
Section 1.4. Federal Tax Treatment. The regulations of the Internal
Revenue Service now in effect require a determination of the value of the
Warrants of the Company being delivered on the Closing Date. Accordingly, it is
therefore agreed by the Company and you that for Federal income tax purposes the
amount of the issue price allocated to the Warrants to be issued to you on the
date hereof is $52,500, which shall be the value ascribed to such Warrants by
the Company, you and any subsequent holder of the Notes or Warrants for all
purposes, including the preparation of tax returns and the preparation of the
Company's financial statements.
Section 1.5. Guaranties of Notes. The payment of the Notes and the
performance by the Company of its obligations under this Agreement shall be
absolutely and unconditionally guaranteed by the Subsidiary Guarantors pursuant
to one or more Subsidiary Guaranty Agreements each in the form attached hereto
as Exhibit C (the "Subsidiary Guaranty Agreements").
Section 1.6. Commitment and Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, (i) Notes in the principal amount set forth
opposite your name on Schedule I hereto and the Warrants at an aggregate
purchase price of 100% of the principal amount thereof and (ii) the Strip Equity
at a purchase price of $2,258,772, all on the Closing Date hereafter mentioned.
Delivery of the Notes, Warrants and Strip Equity will be made at the
offices of Katten, Muchin & Zavis, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, against payment therefor in Federal Reserve or other funds current and
immediately available at the principal office of The First National Bank of
Chicago as set forth in the funding instructions delivered pursuant to (S)4.1(p)
in the amount of the purchase price at 10:00 A.M., Chicago time, on August 5,
1999 or such later date (not later than August 6, 1999) as shall mutually be
agreed upon by the Company and the Purchaser (the "Closing Date"). The Notes
delivered to you on the Closing Date will be
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delivered to you in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee as may be specified in Schedule I attached hereto. The Warrants
delivered to you on the Closing Date will be delivered to you in the form of a
single Warrant in the form attached hereto as Exhibit B (unless otherwise
specified by you), registered in your name or in the name of such nominee as may
be specified in Schedule I attached hereto. The shares of Series A Preferred
Stock and Common Stock delivered to you on the Closing Date will be delivered to
you in the form of stock certificates evidencing such shares, registered in your
name or in the name of such nominee as may be specified in Schedule I attached
hereto.
Section 2. Prepayment of Notes.
Section 2.1. Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Company agrees that on August 5, 2006, it will prepay and
apply and there shall become due and payable on the principal Indebtedness
evidenced by the Notes an amount equal to the lesser of (a) $11,400,000 or (b)
the principal amount of the Notes then outstanding. The entire remaining
principal amount of the Notes shall become due and payable on August 5, 2007. No
premium shall be payable in connection with any required prepayment made
pursuant to this (S)2.1.
In the event that the Company shall prepay less than all of the Notes
pursuant to (S)2.2, the amounts of the prepayments required by this (S)2.1 shall
be reduced by an amount which is the same percentage of such required prepayment
as the percentage that the principal amount of Notes prepaid pursuant to (S)2.2
is of the aggregate principal amount of outstanding Notes immediately prior to
such prepayment.
Section 2.2. Optional Prepayments. (a) In addition to the payments
required by (S)2.1, the Company shall have the privilege, at any time and from
time to time, of prepaying the outstanding Notes, either in whole or in part
(but if in part then in a minimum principal amount of $1,000,000), by payment of
the principal amount of the Notes, or portion thereof to be prepaid, together
with accrued interest thereon to the date of such prepayment, and, subject to
(S)2.2(b), the Prepayment Compensation Amount.
(b) Notwithstanding the provisions of (S)2.2 and (S)2.4, no Prepayment
Compensation Amount shall be payable in connection with any prepayment of all,
but not less than all, of the Notes pursuant to (S)2.2 or (S)2.4 if, and only
if, both of the following conditions are satisfied:
(1) the prepayment of Notes pursuant to (S)2.2 or (S)2.4 is made
in connection with a Liquidity Event; and
(2) the Realizable IRR or Realized IRR, as applicable, as of the
date of such prepayment is equal to or greater than the Target IRR as of
such date.
(c) If, in connection with a Liquid Public Offering, any holder of
Warrants and/or Warrant Shares is subject to a lock-up or hold-back or other
restriction which prevents the sale of
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the Warrant Shares for a period of 180 days or less, then the Company shall pay
to the holders of the Notes the Prepayment Compensation Amount then due in
connection with the prepayment of the Notes pursuant to this (S)2.2. Thereafter,
on the date the lock-up or hold-back or other restriction expires, the Company
will calculate the Realizable IRR with respect to the Notes, Warrants and/or
Warrant Shares as of such date based upon the then-applicable market price for
which the Warrant Shares may then, in fact, be sold in the public market.
Written notice of such calculation shall be promptly delivered by the Company to
the holders of the Notes and Warrants and/or Warrant Shares. If such calculation
of the Realizable IRR demonstrates that no Prepayment Compensation Amount is
payable but was paid to the holders of the Notes in connection with the
prepayment of the Notes pursuant to the Initial Public Offering, then the
holders of the Notes shall, reasonably promptly after receiving and approving
such Realizable IRR calculation, pay to the Company an amount equal to such
Prepayment Compensation Amount previously paid to such holders but without
interest.
Section 2.3. Notice of Optional Prepayments. (a) The Company will give
written notice of any prepayment of the Notes pursuant to (S)2.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (1) such date fixed for prepayment, (2) the
principal amount of the holder's Notes to be prepaid on such date, (3) the
accrued interest applicable to the prepayment, (4) whether a Prepayment
Compensation Amount is payable or, if the Company claims that no Prepayment
Compensation Amount is then due in respect of such prepayment by virtue of the
provisions of (S)2.2(b), a statement to such effect, together with a reasonably
detailed computation of the Realizable IRR or Realized IRR, as applicable, by
the Company, calculated with respect to the specified prepayment date and (5) if
a computation of the Realizable IRR or Realized IRR is included in such notice,
a statement that, pursuant to (S)2.3(b), any holder of the Notes disagreeing
with such computation must provide written notice of such disagreement to the
Company within 15 days of such holder's receipt of the Company's notice. Notice
of optional prepayment having been so given, the aggregate principal amount of
the Notes specified in such notice, together with accrued interest thereon and
the Prepayment Compensation Amount, if any, payable with respect thereto shall
become due and payable on the prepayment date specified in said notice, provided
that if the Company gives written notice of a prepayment pursuant to (S)2.2 in
connection with an anticipated Liquidity Event or refinancing of the Notes, it
is understood and agreed that the obligation of the Company to prepay the Notes
pursuant to the requirements of this (S)2.3(a) is subject to the occurrence of
the Liquidity Event giving rise to such notice of optional prepayment. In the
event that such Liquidity Event does not occur on the date specified for
prepayment, the prepayment shall be deferred until and shall be made on the date
on which such Liquidity Event occurs. The Company shall keep the holders of the
Notes reasonably and timely informed of any such deferral of the date of
prepayment and the date on which such Liquidity Event is expected to occur.
(b) In the event that any holder of Notes shall disagree with the
calculation of the Realizable IRR or Realized IRR set forth by the Company in
the notice given pursuant to (S)2.2(c), (S)2.3(a), (S)2.4(a) or (S)2.4(b), such
holder, by written notice to the Company given within 15 days after receipt by
the holder of the notice given by the Company pursuant to (S)2.2(c), (S)2.3(a),
(S)2.4(a) or (S)2.4(b), may demand that the Company obtain a calculation of the
Realizable IRR by a Valuation Agent. In the event that any holder makes such a
demand, the calculation of
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the Realizable IRR or Realized IRR by the Valuation Agent shall be conclusive in
the absence of manifest error.
Section 2.4. Prepayment of Notes upon Change of Control. (a) In the event
that any Change of Control shall occur or the Company shall have knowledge of
any proposed Change of Control that is likely to occur, the Company will give
written notice (the "Company Notice") of such fact in the manner provided in
(S)10.6 hereof to the holders of the Notes. The Company Notice shall be
delivered promptly upon receipt of such knowledge by the Company and in any
event no later than three Business Days following the occurrence of any Change
of Control. The Company Notice shall (1) describe the facts and circumstances of
such Change of Control in reasonable detail, (2) make reference to this (S)2.4
and the right of the holders of the Notes to require prepayment of the Notes on
the terms and conditions provided for in this (S)2.4, (3) offer in writing to
prepay all, but not less than all, of the outstanding Notes, together with
accrued interest to the date of prepayment and the Prepayment Compensation
Amount, or, if the subject Change of Control is a Liquid Change of Control and
the Company claims that no Prepayment Compensation Amount is then due in respect
of such prepayment by virtue of the provisions of (S)2.2(b), a statement to such
effect, together with a reasonably detailed computation of the Realized IRR by
the Company, calculated with respect to the specified prepayment date, (4)
specify a date for such prepayment (the "Change of Control Prepayment Date"),
which Change of Control Prepayment Date shall be not more than 90 days nor less
than 30 days following the date of such Company Notice and (5) if a computation
of the Realized IRR is included in such notice, a statement that, pursuant to
(S)2.3(b), any holder of the Notes disagreeing with such computation must
provide written notice of such disagreement to the Company within 15 days of
such holder's receipt of the Company's notice. Each holder of the then
outstanding Notes shall have the right to accept such offer and require
prepayment of the Notes held by such holder in full by written notice to the
Company (a "Noteholder Notice") given not later than 20 days after receipt of
the Company Notice. The Company shall on the Change of Control Prepayment Date
prepay in full all of the Notes held by holders which have so accepted such
offer of prepayment, provided that the obligation of the Company to prepay the
Notes pursuant to the requirements of this (S)2.4(a) is subject to the
occurrence of the Change of Control giving rise to such notice of optional
prepayment. In the event that such Change of Control does not occur on the date
specified for prepayment, the prepayment shall be deferred until and shall be
made on the date on which such Change of Control occurs. The Company shall keep
the holders of the Notes reasonably and timely informed of any such deferral of
the date of prepayment and the date on which such Change of Control is expected
to occur. The prepayment price of the Notes payable upon the occurrence of any
Change of Control shall be an amount equal to 100% of the outstanding principal
amount of the Notes so to be prepaid and accrued interest thereon to the date of
such prepayment, and subject to (S)2.2(b), the Prepayment Compensation Amount.
(b)(1) Without limiting the foregoing, notwithstanding any failure on the
part of the Company to give the Company Notice herein required as a result of
the occurrence of a Change of Control, each holder of the Notes shall have the
right by delivery of written notice to the Company to require the Company to
prepay, and the Company will prepay, such holder's Notes in full, together with
accrued interest thereon to the date of prepayment, and, subject to (S)2.2(b),
the Prepayment Compensation Amount. Notice of any required prepayment pursuant
to this (S)2.4(b)(1) shall be delivered by any holder of the Notes which was
entitled to, but did not
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receive, such Company Notice to the Company within 30 days after such holder has
actual knowledge of both such Change of Control and the failure of the Company
to comply with the notice requirements of (S)2.4(a). On the date (the "Change of
Control Delayed Prepayment Date") designated in such holder's notice (which
shall be not more than 90 days nor less than 30 days following the date of such
holder's notice), the Company shall prepay in full all of the Notes held by such
holder, together with accrued interest thereon to the date of prepayment, and,
subject to (S)2.2(b), the Prepayment Compensation Amount. If the holder of any
Note gives any notice pursuant to this (S)2.4(b)(1), the Company shall give a
Company Notice (including all information and calculations required in (S)2.4(a)
hereof) within five Business Days of receipt of such notice and identify the
Change of Control Delayed Prepayment Date to all other holders of the Notes and
each of such other holders shall then and thereupon have the right to accept the
Company's offer to prepay the Notes held by such holder in full and require
prepayment of such Notes by delivery of a Noteholder Notice within 20 days
following receipt of such Company Notice; provided only that any date for
prepayment of such holder's Notes shall be the Change of Control Delayed
Prepayment Date. On the Change of Control Delayed Prepayment Date, the Company
shall prepay in full the Notes of each holder thereof which has accepted such
offer of prepayment at a prepayment price equal to 100% of the outstanding
principal amount of the Notes so to be prepaid and accrued interest thereon to
the date of such prepayment, and, subject to (S)2.2(b), the Prepayment
Compensation Amount.
(2) Compliance with the provisions of this (S)2.4(b) shall not be deemed
to constitute a waiver of, or consent to, any Default or Event of Default caused
by any violation of the provisions of (S)2.4(a).
(c) In the event any Change of Control shall also constitute an event of
default under the Senior Credit Agreement, any prepayment of the Notes pursuant
to (S)2.2 or (S)2.4 in connection with such Change of Control shall be subject
to the terms of (S)6 unless the Senior Lenders shall waive the event of default
arising in connection with such Change in Control.
Section 2.5. Application of Prepayments. All partial prepayments made
pursuant to (S)2.1 or (S)2.2 shall be applied on all outstanding Notes ratably
in accordance with the unpaid principal amounts thereof. All partial prepayments
made pursuant to (S)2.4 shall be applied only to the Notes of the holders who
have elected to participate in such prepayment.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has given
written notice to the Company requesting that the provisions of this (S)2.6
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to you, to your nominee or to such
subsequent Institutional Holder at your address or your nominee's address set
forth in Schedule I hereto or such other address as you, your nominee or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is designated for
you or your nominee on Schedule I hereto or in any written notice to the Company
from you, from your nominee or from any such subsequent Institutional Holder,
the Company will make such payments in immediately available funds to such bank
account, no later than 11:00 a.m. Chicago,
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Illinois time on the date due, marked for attention as indicated, or in such
other manner or to such other account in any United States bank as you, your
nominee or any such subsequent Institutional Holder may from time to time direct
in writing. If for any reason whatsoever the Company does not make any such
payment by such 11:00 a.m. transmittal time, such payment shall be deemed to
have been made on the next following Business Day and such payment shall bear
interest at the Overdue Rate.
Section 3. Representations.
Section 3.1. Representations of the Company and the Subsidiary Guarantors.
(a) The Company represents and warrants that all representations and warranties
set forth in Exhibit D-1 are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
(b) The Subsidiary Guarantors represent and warrant that all
representations and warranties set forth in Exhibit D-2 are true and correct as
of the date hereof and are incorporated herein by reference with the same force
and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent, and in
entering into this Agreement the Company understands, that you are acquiring the
Notes for the purpose of investment and not with a view to the distribution
thereof, and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes; it being understood, however, that the
disposition of your property shall at all times be and remain within your
control and you are an accredited investor within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended.
(b) You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(1) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-
60 (issued July 12, 1995) and there is no employee benefit plan, treating
as a single plan, all plans maintained by the same employer or employee
organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plan, exceed ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus
surplus, as set forth in the NAIC Annual Statement filed with your State of
domicile; or
(2) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (2), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
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(3) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part l(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a Person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (3); or
(4) the Source is a governmental plan; or
(5) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (5); or
(6) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates that you or such
transferee are relying on any representation contained in paragraph (2), (3) or
(5) above, the Company shall deliver on the Closing Date and on the date of any
applicable transfer a certificate, which shall either state that (i) it is
neither a party in interest nor a "disqualified person" (as defined in Section
4975(e)(2) of the Code), with respect to any plan identified pursuant to
paragraphs (2) or (5) above, or (ii) with respect to any plan, identified
pursuant to paragraph (3) above, neither it nor any "affiliate" (as defined in
Section V(c) of the QPAM Exemption) has at such time, and during the immediately
preceding one year, exercised the authority to appoint or terminate said QPAM as
manager of any plan identified in writing pursuant to paragraph (3) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plan. As used in this (S)3.2(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
Section 4. Closing Conditions.
Section 4.1. Closing Date Conditions. Your obligation to purchase the
Notes, the Warrants and the Strip Equity on the Closing Date shall be subject to
the performance by the Company of its agreements hereunder and under the
Warrants which by the terms hereof are to be performed at or prior to the time
of delivery of the Notes, the Warrants and the Strip Equity and to the following
further conditions precedent:
-8-
(a) Closing Certificate of the Company. You shall have received a
certificate dated the Closing Date, signed by the President or a Vice
President of the Company, the truth and accuracy of which shall be a
condition to your obligation to purchase the Notes, the Warrants and the
Strip Equity proposed to be sold to you and to the effect that (1) the
representations and warranties of the Company set forth in Exhibit D-1
hereto are true and correct on and with respect to the Closing Date, (2)
the Company has performed all of its obligations hereunder which are to be
performed on or prior to the Closing Date, and (3) no Default or Event of
Default has occurred and is continuing.
(b) Closing Certificates of Subsidiary Guarantors. You shall have
received a certificate dated the Closing Date, signed by the President or a
Vice President of each Subsidiary Guarantor, the truth and accuracy of
which shall be a condition to your obligation to purchase the Notes, the
Warrants and the Strip Equity proposed to be sold to you and to the effect
that (i) the representations and warranties of such Subsidiary Guarantor
set forth in Exhibit D-2 hereto are true and correct on and with respect to
the Closing Date, (ii) such Subsidiary Guarantor has performed all of its
obligations hereunder and under its Subsidiary Guaranty Agreement which are
to be performed on or prior to the Closing Date, and (iii) no Default or
Event of Default has occurred and is continuing.
(c) Subsidiary Guaranty Agreement. Each of the Subsidiary
Guarantors shall have executed and delivered to you a Subsidiary Guaranty
Agreement.
(d) Legal Opinions. You shall have received from (a) Xxxxxxx and
Xxxxxx, who are acting as your special counsel in this transaction, (b)
Xxxxxxxx & Xxxxxx, Ltd., counsel for the Company and (c) Xxxxxx Xxxxxxx,
special Canadian counsel for the Company, their respective opinions dated
the Closing Date, in form and substance satisfactory to you, and covering
the matters set forth in Exhibits E, F and G, respectively, hereto.
(e) Existence and Authority. On or prior to the Closing Date, you
shall have received, in form and substance reasonably satisfactory to you
and your special counsel, such documents and evidence with respect to the
Company and each Subsidiary Guarantor as you may reasonably request in
order to establish the existence and good standing of the Company and each
Subsidiary Guarantor and the authorization of the transactions contemplated
by this Agreement, the Warrants, the Stock Purchase Agreement, the
Registration Rights Agreement and the Subsidiary Guaranty Agreements.
(f) Charter and By-laws. The charter and by-laws of the Company and
each Subsidiary Guarantor shall in all respects be satisfactory in form and
substance to you and your special counsel.
(g) Related Transactions. On the Closing Date:
(1) the Senior Credit Agreement and the Senior Secured
Security Documents shall be in form and substance satisfactory to you
and your special
-9-
counsel, shall have been duly executed and delivered by the parties
thereto and shall be in full force and effect and you shall have
received true, correct, and complete copies of each thereof;
(2) (i) the WSR Merger Documentation shall be in form and
substance satisfactory to you and your special counsel, shall have
been duly executed and delivered by the parties thereto, shall be in
full force and effect and you shall have received a true, correct and
complete copy thereof, (ii) the aggregate net merger consideration to
be paid by the Company under the WSR Merger Documentation shall not
exceed $134,000,000 plus (or minus) the Final Working Capital
Adjustment (as defined in and pursuant to the WSR Merger
Documentation), and (iii) the Company shall have consummated the WSR
Merger pursuant to the WSR Merger Documentation otherwise on terms and
conditions satisfactory to you and your special counsel;
(3) the Seller Junior Subordinated Notes shall be in form and
substance satisfactory to you and your special counsel, shall have
been duly executed and delivered by the Company in the aggregate
principal amount of $5,000,000, shall be in full force and effect and
you shall have received true, correct and complete copies thereof;
(4) the Company shall have entered into an employment
agreement with Xxxxxx Xxxxxxx, an employee of WSR, prior to the WSR
Merger, which employment agreement shall be for a duration of at least
three years from the Closing Date and shall otherwise be in form and
substance satisfactory to you and your special counsel;
(5) the Company shall have consummated term loans in an
aggregate principal amount equal to $54,000,000, and revolving loans
in an aggregate principal amount not to exceed $20,000,000 plus (or
minus) the Final Working Capital Adjustment (as defined in and
pursuant to the WSR Merger Documentation) and shall have the ability
to draw not less than $10,000,000 of revolving loan capacity, in each
such case, pursuant to the Senior Credit Agreement;
(6) the Indebtedness of the Company owing to The First
National Bank of Chicago and Pexco Holdings, Inc. shall have been paid
in full pursuant to the Company Payout Letters and any existing
secured Liens shall have been released and discharged in full and you
shall have received evidence thereof satisfactory to you and your
special counsel; and
(7) The Company shall have received contributions to capital
from Wind Point Partners of at least $25,648,000 in exchange for
Preferred Stock and Common Stock of the Company, and all documentation
evidencing or relating to such equity investments, including purchase
agreements and stockholder agreements, shall be in form and substance
satisfactory to you and your special counsel.
-10-
(h) Application of Certain Proceeds; Statement of Sources and Uses
of Proceeds. Concurrently with the delivery of the Notes, the Warrants and
the Strip Equity to you on the Closing Date, the Company shall apply all of
the proceeds from the sale of the Notes and the Warrants, $54,000,000
aggregate principal amount in term loans, $20,000,000 plus (or minus) the
Final Working Capital Adjustment (as defined in and pursuant to the WSR
Merger Documentation) of the revolving loans drawn under the Senior Credit
Agreement and $36,050,000 of the proceeds from the sale of the Preferred
Stock and Common Stock of the Company pursuant to this Agreement and the
Stock Purchase Agreement, to the payment of (1) the merger consideration
pursuant to the WSR Merger Documentation, and (2) certain transactional
costs incurred in connection with such merger, with the remainder of such
proceeds to be used as general working capital by the Company, and you
shall have received evidence of such payment satisfactory in form and
substance to you and your special counsel. Without limiting the foregoing,
you shall receive from the Company on or prior to the Closing Date a
detailed statement setting forth all the sources and uses of funds from
wherever derived relating to the merger pursuant to the WSR Merger
Documentation satisfactory in form and substance to you and your special
counsel.
(i) Closing Date Financial Statements. On the Closing Date you shall
have received from the Company a pro forma balance sheet of the Company and
its Subsidiaries, in form and substance reasonably satisfactory to you,
which shall reflect the financial condition of the Company after giving
effect to the consummation of the transactions contemplated by the WSR
Merger Documentation, the Senior Credit Agreement, the issuance and sale of
the Notes, the Warrants, the Series A Preferred Stock of the Company and
the Common Stock of the Company and the use of the proceeds of the
foregoing transactions.
(j) Insurance. On or prior to the Closing Date, you shall have
received certificates dated the Closing Date executed by the independent
insurance broker of the Company evidencing that all insurance required
hereunder and under the Senior Credit Agreement and the Senior Security
Documents is in effect and that all premiums due thereon have been paid in
full.
(k) Environmental Reports. On or prior to the Closing Date, you
shall have received environmental reports from Environmental Resources
Management in form, scope, depth and substance satisfactory to you and your
special counsel (the "Environmental Reports"), which Environmental Reports
shall be dated as of June 16, 1999, and you shall be entitled to rely upon
such Environmental Reports as if the same were addressed to you in a form
satisfactory to you and your special counsel.
(l) Purchase of Series A Preferred Stock and Common Stock. On the
Closing Date, the Stock Purchase Agreement shall have been duly executed
and delivered by all parties thereto and the Company and the parties to the
Stock Purchase Agreement shall have consummated the purchase in the
aggregate of 352,000 shares of Series A Preferred Stock of the Company for
a price of $100.00 per share and 850,000 shares of Common Stock of the
Company for a price of $1.00 per share, and all documentation with respect
-11-
to such Series A Preferred Stock and Common Stock, including without
limitation the Stock Purchase Agreement and the Stockholders Agreement,
shall have been duly executed and delivered by the parties thereto and
shall be in form and substance satisfactory to you and your special
counsel.
(m) Consent of Holders of Other Securities. Any consents or
approvals required to be obtained from any holder or holders of any
outstanding Security of the Company and any amendments of agreements
pursuant to which any Security may have been issued which shall be
necessary to permit the consummation of the transactions contemplated
hereby and by the WSR Merger Documentation shall have been obtained and all
such consents or amendments shall be satisfactory in form and substance to
you and your special counsel.
(n) Regulatory Agency Approvals. On or prior to the Closing Date,
you shall have received true and correct copies of all material licenses,
orders, permits and approvals, including without limitation, all zoning and
licenses, orders, permits and approvals, of all state and local
governmental licensing or regulatory agencies having jurisdiction over any
real property owned or leased by any of the Company required under
applicable laws, regulations and ordinances for the operation of such real
property.
(o) Private Placement Numbers. On or prior to the Closing Date,
special counsel to the Purchaser shall have duly made the appropriate
filings with Standard & Poor's CUSIP Service Bureau, as agent for the
National Association of Insurance Commissioners, in order to obtain private
placement numbers for the Notes, the Warrants, the Series A Preferred Stock
and the Common Stock.
(p) Funding Instructions. At least three Business Days prior to the
Closing Date, you shall have received written instructions executed by a
Responsible Officer of the Company directing the manner of the payment of
funds and setting forth (1) the name and address of the transferee bank,
(2) such transferee bank's ABA number, (3) the account name and number into
which the purchase price for the Notes is to be deposited, and (4) the name
and telephone number of the account representative responsible for
verifying receipt of such funds.
(q) Special Counsel Fees. Concurrently with the delivery of the
Notes, the Warrants and the Strip Equity to you on the Closing Date, the
charges and disbursements of Xxxxxxx and Xxxxxx, your special counsel,
reflected in a statement for services delivered to the Company two Business
Days prior to the Closing Date shall have been paid by the Company.
(r) Legality of Investment. The Notes, the Warrants and the Strip
Equity to be purchased by you shall be legal investments for you under the
laws of each jurisdiction to which you may be subject (without resort to
any so-called "basket provisions" to such laws).
-12-
(s) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, the Warrants and the
Strip Equity, and all documents necessary to the consummation thereof,
shall be satisfactory in form and substance to you and your special
counsel, and you shall have received a copy (executed or certified as may
be appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.
(t) Waiver of Conditions. If on the Closing Date the Company fails
to tender to you the Notes, the Warrants and the Strip Equity to be issued
to you on such date or if the conditions specified in this (S)4.1 have not
been fulfilled, you may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in this (S)4.1 have not been fulfilled, you may waive
compliance by the Company with any such condition to such extent as you may
in your sole discretion determine. Nothing in this (S)4.1(u) shall operate
to relieve the Company of any of its obligations hereunder or to waive any
of your rights against the Company.
Section 5. Company Covenants.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and keep
in full force and effect, and will cause each Subsidiary to preserve and keep in
full force and effect, its corporate existence and all licenses and permits
necessary to the proper conduct of its business, the absence of which could
reasonably be expected to have a Material Adverse Effect, provided that the
foregoing shall not prevent any transaction permitted by (S)5.13 or (S)5.14.
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers and in such forms and amounts and against such risks as are customary
for corporations of established reputation engaged in the same or a similar
business and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with Laws.
(a) The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a Lien upon any property of the Company or such Subsidiary;
provided the Company or such Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Subsidiary or any material interference with the use
thereof by the Company or such Subsidiary, and (2) the Company or such
Subsidiary shall set aside on its books, reserves deemed by it to be adequate
with respect thereto.
-13-
(b) The Company will promptly comply, and will cause each Subsidiary to
promptly comply, with all laws, ordinances or governmental rules and regulations
to which it is subject, including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA, the Fair Housing Act, the American
With Disabilities Act of 1990, as amended, and all Environmental Laws, the
violation of which could have a Material Adverse Effect or would result in any
Lien not permitted under (S)5.12.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all repairs, replacements, renewals and additions so that
at all times the efficiency thereof shall be maintained except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
Section 5.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.
Section 5.6. Plan of Merger. The Company shall cause the WSR Merger to
take place on the Closing Date.
Section 5.7. [Intentionally Omitted.]
Section 5.8. Leverage Ratio The Company shall not permit its Leverage
Ratio determined as of any date set forth below for the twelve months then ended
to be greater than the maximum ratio set forth in the table below opposite such
date:
Date Maximum Leverage Ratio
---- ----------------------
October 31, 1999 6.90 to 1.00
January 31, 2000 6.85 to 1.00
April 30, 2000 6.70 to 1.00
June 30, 2000 6.60 to 1.00
September 30, 2000 6.50 to 1.00
December 31, 2000 6.35 to 1.00
March 31, 2001 6.30 to 1.00
June 30, 2001 6.25 to 1.00
-14-
Date Maximum Leverage Ratio
---- ----------------------
September 30, 2001 5.75 to 1.00
December 31, 2001 5.75 to 1.00
March 31, 2002 5.75 to 1.00
June 30, 2002 5.75 to 1.00
September 30, 2002 5.25 to 1.00
December 31, 2002 5.25 to 1.00
March 31, 2003 5.25 to 1.00
June 30, 2003 5.25 to 1.00
September 30, 2003 4.75 to 1.00
December 31, 2003 4.75 to 1.00
March 31, 2004 4.75 to 1.00
June 30, 2004 4.75 to 1.00
September 30, 2004 4.00 to 1.00
Last day of each calendar quarter 4.00 to 1.00
thereafter
For purposes of this (S)5.8, the term "Leverage Ratio" shall mean, as of
the date of any measurement, the ratio of (a) Total Indebtedness to (b) EBITDA
for the twelve month period ending on the date of measurement.
Section 5.9. Fixed Charge Coverage. (a) The Company shall not permit its
Fixed Charge Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such period:
Period Minimum Fixed Charge Coverage Ratio
------ -----------------------------------
August 1, 1999 through 0.95 to 1.00
October 31, 1999
August 1, 1999 through 0.95 to 1.00
January 31, 2000
August 1, 1999 through 0.95 to 1.00
April 30, 2000
August 1, 1999 through 0.95 to 1.00
-00-
Xxxx 00, 0000
(x) The Company shall not permit its Fixed Charge Coverage Ratio
determined as of the last day of any calendar quarter set forth below for the
twelve months then ended to be less than the minimum ratio set forth in the
table below opposite such date:
Calendar Quarter Minimum Fixed Charge
----------------
Coverage Ratio
--------------
Calendar quarter ending September 30,
2000 0.95 to 1.00
Each calendar quarter commencing
with the quarter ending December 31,
2000 and each calendar quarter
thereafter 1.00 to 1.00
(c) For purposes of (S)5.9(a) and (S)5.9(b), the term "Fixed Charge
Coverage Ratio" shall mean, as of the date of any measurement, the ratio of (a)
Cash Flow for the period of calculation to (b) Fixed Charges for such period.
Section 5.10. Interest Coverage Ratio. (a) The Company shall not permit its
Interest Coverage Ratio determined for any period set forth below to be less
than the minimum ratio set forth in the table below opposite such period:
Period Ending Minimum Interest
-------------
Coverage Ratio
--------------
August 1, 1999 through 1.30 to 1.00
October 31, 1999
August 1, 1999 through 1.30 to 1.00
January 31, 2000
August 1, 1999 through 1.30 to 1.00
April 30, 2000
August 1, 1999 through 1.30 to 1.00
June 30, 2000
(b) The Company shall not permit its Interest Coverage Ratio determined as
of the last day of any calendar quarter set forth below for the twelve months
then ended to be less than the minimum ratio set forth in the table below
opposite such period:
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Calendar Quarter Ending Minimum Interest
----------------------- Coverage Ratio
--------------
September 30, 2000 1.45 to 1.00
December 31, 2000 1.45 to 1.00
March 31, 2001 1.45 to 1.00
June 30, 2001 1.45 to 1.00
September 30, 2001 1.50 to 1.00
December 31, 2001 1.50 to 1.00
March 31, 2002 1.60 to 1.00
June 30, 2002 1.60 to 1.00
September 30, 2002 1.75 to 1.00
December 31, 2002 1.75 to 1.00
March 31, 2003 1.75 to 1.00
June 30, 2003 1.75 to 1.00
September 30, 2003 1.75 to 1.00
December 31, 2003 and each calendar 2.00 to 1.00
quarter thereafter
(c) For purposes of (S)5.10(a) and (S)5.10(b), the term "Interest Coverage
Ratio" shall mean, as of the date of any measurement, the ratio of (a) EBITDA of
the Company and its Subsidiaries for the period of calculation to (b) Net
Interest Expense for such period.
Section 5.11. Minimum EBITDA. (a) The Company shall not permit
EBITDA for any period set forth below to be less than the amount set forth below
for such period:
Period Minimum EBITDA
------ --------------
August 1, 1999 through $ 5,200,000
October 31, 1999
August 1, 1999 through $ 8,300,000
January 31, 2000
August 1, 1999 through $ 9,400,000
April 30, 2000
August 1, 1999 through $10,900,000
June 30, 2000
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(b) The Company shall not permit EBITDA for the twelve month period ending
on the last day of any calendar quarter set forth below to be less than the
amount set forth below for such period:
Calendar Quarter Ending Minimum EBITDA
----------------------- --------------
September 30, 2000 $12,900,000
December 31, 2000 13,300,000
March 31, 2001 13,600,000
June 30, 2001 14,000,000
September 30, 2001 14,900,000
December 31, 2001 15,800,000
March 31, 2002 16,000,000
June 30, 2002 16,600,000
September 30, 2002 17,500,000
December 31, 2002 18,100,000
March 31, 2003 19,000,000
June 30, 2003 19,600,000
September 30, 2003 20,200,000
December 31, 2003 20,500,000
March 31, 2004 20,700,000
June 30, 2004 21,100,000
September 30, 2004 21,400,000
Each calendar quarter thereafter 22,200,000
Section 5.12. Limitations on Liens. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien existing on the Property of the Company or its
Subsidiaries on the Closing Date and set forth in Schedule II securing
Indebtedness outstanding on such date and permitted by (S)5.16(d),
including replacement Liens, provided that (i) the indebtedness secured by
such Lien immediately prior to such replacement is not increased and (ii)
such Lien is not extended to any other Property not currently subject to
such Lien;
-18-
(b) any Lien created under the Senior Credit Agreement and the
Senior Security Documents;
(c) Liens for taxes, fees, assessments or other governmental charges
(i) which are not delinquent or remain payable without penalty, or (ii) the
non-payment thereof is permitted by (S)5.3, provided that, in respect of
this clause (ii), all such Liens secure claims in the aggregate at any time
outstanding for the Company and its Subsidiaries not exceeding $200,000;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the Ordinary Course of
Business which are not delinquent for more than ninety (90) days or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings diligently prosecuted, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject thereto
and for which adequate reserves in accordance with GAAP are being
maintained;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the Ordinary Course of Business in
connection with workers' compensation, unemployment insurance and other
social security legislation or to secure the performance of tenders,
statutory obligations, surety, stay, customs and appeals bonds, bids,
leases, governmental contract, trade contracts, performance and return of
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money) or to secure liability to insurance carriers;
(f) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all
such Liens secure claims in the aggregate at any time outstanding for the
Company and its Subsidiaries do not exceed $750,000;
(g) easements, rights-of-way, zoning and other restrictions, minor
defects or other irregularities in title, and other similar encumbrances
incurred in the Ordinary Course of Business which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract
from the value of the Property subject thereto or interfere in any material
respect with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(h) Liens on any Property acquired or held by the Company or its
Subsidiaries in the Ordinary Course of Business, securing Indebtedness
incurred or assumed for the purpose of financing (or refinancing) all or
any part of the cost of acquiring such Property and permitted under
(S)5.16(d); provided that (i) any such Lien attaches to such Property
concurrently with or within twenty (20) days after the acquisition thereof,
(ii) such Lien attaches solely to the Property so acquired in such
transaction, and (iii) the principal amount of the debt secured thereby
does not exceed 100% of the cost of such Property;
(i) Liens securing Capital Lease Obligations permitted under
(S)5.16(d);
-19-
(j) any interest or title of a lessor or sublessor under any lease
permitted by this Agreement;
(k) Liens arising from precautionary UCC financing statements filed
under any lease permitted by this Agreement; and
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution.
Section 5.13. Disposition of Assets. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any Property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the Ordinary Course of Business;
(b) dispositions not otherwise permitted hereunder which are made
for fair market value the Net Proceeds of which are applied in accordance
with the Senior Credit Agreement substantially on the terms existing in the
Senior Credit Agreement on the Closing Date; provided, that (i) at the time
of any disposition, no Event of Default shall exist or shall result from
such disposition, (ii) the aggregate value of all assets so sold by the
Company and its Subsidiaries, together, shall not exceed in any fiscal year
$1,500,000 and (iii) after giving effect to such disposition, the Company
is in compliance on a pro forma basis with the covenants set forth in
(S)(S)5.7 through 5.11, inclusive, recomputed for the most recent month for
which financial statements have been delivered; and
(c) mergers, consolidations and dispositions permitted by (S)5.14.
Section 5.14. Mergers and Consolidations. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) upon not less than five (5) Business Days prior written notice
to the holders of the Notes, any Subsidiary of the Company may merge with,
or dissolve or liquidate into, a Wholly-Owned Subsidiary of the Company,
provided that such Wholly-Owned Subsidiary shall be the continuing or
surviving corporation; and
(b) the Company or any Subsidiary may merge or consolidate with
another Person in connection with the acquisition of property or assets
permitted within the limitations of (S)5.15(h), provided that pursuant to
any such merger or consolidation, the Company or a Wholly-Owned Subsidiary
shall be the continuing or surviving corporation.
-20-
Section 5.15. Loans and Investments. The Company shall not and shall not
suffer or permit any of its Subsidiaries to (i) purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, including the establishment
or creation of a Subsidiary, or (ii) make or commit to make any Acquisitions, or
any other acquisition of all or substantially all of the assets of another
Person, or of any business or division of any Person, including without
limitation, by way of merger, consolidation or other combination or (iii) make
or commit to make any advance, loan, extension of credit or capital contribution
to or any other investment in, any Person including any Affiliate of the Company
(the items described in clauses (i), (ii) and (iii) are referred to as
"Investments"), except for:
(a) Investments in cash and Cash Equivalents;
(b) extensions of credit by the Company to any of its Wholly-Owned
Subsidiaries, provided the obligations of each obligor shall be evidenced
by notes;
(c) loans and advances to employees in the Ordinary Course of
Business not to exceed $250,000 in the aggregate at any time outstanding;
(d) reasonable travel, relocation and similar advance to officers
and employees of the Company made in the Ordinary Course of Business;
(e) loans and advances to customers, distributors and sales
representatives of the Company in the Ordinary Course of Business, not to
exceed $250,000 at any one time outstanding;
(f) loans, advances and extensions of credit existing on the date
hereof and listed in Schedule II attached hereto and made a part hereof;
(g) non-cash loans and advances to employees of the Company used to
acquire stock of the Company; and
(h) additional Investments consisting of the acquisition of
products, product lines or assets useful and to be used in the business of
the Company and its Subsidiaries, provided that the Indebtedness incurred
in connection with such acquisitions shall, in all events, be incurred and
outstanding within the limitations of this Agreement.
Section 5.16. Limitations on Indebtedness. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness evidenced by the Notes;
(b) Indebtedness incurred pursuant to the Senior Credit Agreement;
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(c) Indebtedness consisting of Contingent Obligations described in
clause (i) of the definition thereof and permitted pursuant to (S)5.17;
(d) Indebtedness existing on the Closing Date and set forth in
Schedule II including extensions and refinancings thereof which do not
-----------
increase the principal amount of such Indebtedness as of the date of such
extension or refinancing;
(e) Indebtedness not to exceed $2,500,000 in the aggregate at any
time outstanding, consisting of Capital Lease Obligations or secured by
Liens permitted by (S)5.12(h);
(f) unsecured intercompany Indebtedness permitted pursuant to
(S)5.15(b);
(g) other unsecured Indebtedness not exceeding in the aggregate at
any time outstanding $500,000; and
(h) Indebtedness not to exceed the principal amount of $5,000,000,
as the same may be increased as the result of the accrual of interest,
evidenced by the Seller Junior Subordinated Notes.
Section 5.17. Contingent Obligations. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Contingent Obligations except in respect of Indebtedness under this
Agreement, the Notes and the Subsidiary Guaranty Agreements, and except:
(a) endorsements for collection or deposit in the Ordinary Course of
Business;
(b) Hedging Contracts entered into in the Ordinary Course of
Business with prior written consent of the Required Holders (which consent
shall not be unreasonably withheld) or pursuant to (S)5.26;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule II, including
-----------
extension and renewals thereof which do not increase the amount of such
Contingent Obligations as of the date of such extension or renewal;
(d) Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety and appeal bonds, performance bonds and
other similar obligations;
(e) Contingent Obligations arising under indemnity agreements to
title insurers to cause such title insurers to issue to the Agent or the
Senior Lenders title insurance policies; and
(f) Contingent Obligations arising with respect to customary
indemnification obligations in favor of (i) sellers in connection with
Acquisitions permitted hereunder and (ii) purchasers in connection with
dispositions permitted under (S)5.13(b); and
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(g) Contingent Obligations in favor of the Agent or the Senior
Lenders in connection with Indebtedness incurred under the Senior Credit
Agreement.
Section 5.18. Restricted Payments. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, (i) declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock,
partnership interests, membership interests or other equity securities, (ii)
purchase, redeem or otherwise acquire for value any shares of its capital stock,
partnership interests, membership interests or other equity securities or any
warrants, rights or options to acquire such shares, interests or securities now
or hereafter outstanding or (iii) make any payment or prepayment of principal
of, premium, if any, interest, redemption, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, Junior Subordinated
Indebtedness (the items described in clauses (i), (ii) and (iii) are referred to
as "Restricted Payments"); except that any Wholly-Owned Subsidiary of the
Company may declare and pay dividends to the Company or any Wholly-Owned
Subsidiary of the Company, and except that the Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock; and
(b) purchase or redeem the Warrants;
(c) redeem from management stockholders shares of the Company common
stock or warrants or options to acquire any such shares provided all of the
following conditions are satisfied:
(i) no Default or Event of Default has occurred and is
continuing or would arise as a result of such redemption;
(ii) after giving effect to such redemption, the Company is in
compliance on a pro forma basis with the covenants set forth in
(S)(S)5.7 through 5.11, recomputed for the most recent quarter for
which financial statements have been delivered;
(iii) the aggregate redemptions permitted (x) in any fiscal year
of the Company shall not exceed $500,000 and (y) during the term of
this Agreement shall not exceed $2,000,000; and
(iv) after giving effect to such redemption, the maximum
revolving loan balance available under the Senior Credit Agreement
exceeds the aggregate outstanding principal balance of revolving loans
under the Senior Credit Agreement by not less than $3,000,000;
(d) make regularly scheduled payments of interest with respect to
Junior Subordinated Indebtedness evidenced by the Seller Junior
Subordinated Notes, provided
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no Default or Event of Default has occurred and is continuing or would
arise as a result of such payment; and
(e) redeem stock in accordance with Sections 1.1 and/or 1.2 of the
Stockholders Agreement, provided the aggregate redemptions permitted during
the term of this Agreement pursuant to Sections 1.1 and 1.2 of the
Stockholders Agreement shall not exceed $500,000.
Section 5.19. Repurchase of Notes. Except as provided in (S)2.2 and
(S)2.4, neither the Company nor any of its Subsidiaries or any Affiliate may
repurchase or prepay or make any offer to repurchase or prepay any Notes.
Section 5.20. Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate; provided, that (a) so long as no Default or
Event of Default under (S)7.1(a) or (S)7.1(d) shall have occurred and be
continuing, the Company shall be permitted to pay (i) Wind Point Investors
L.L.C. and/or Wind Point Investors IV L.P. and/or their Affiliates fees
aggregating $1,000,000 to be paid in connection with the consummation of the
transactions contemplated by the WSR Merger Documentation, the Senior Credit
Agreement and this Agreement and (ii) annual financial and management consulting
fees aggregating $360,000, all pursuant to and in accordance with the Consulting
Agreement between the Company and Wind Point Investors, L.L.C. dated August 5,
1999, as in effect on the Closing Date and (b) the Company shall be permitted to
pay directors' fees and reimbursement of actual out-of-pocket expenses incurred
by directors in connection with attending board of director meetings not to
exceed in the aggregate, with respect to all such items, $100,000 in any fiscal
year of the Company.
Section 5.21. Termination of Pension Plans. The Company will not,
and will not permit any of its Subsidiaries to, withdraw from any Multiemployer
Plan or permit any employee benefit plan maintained by it to be terminated if
such withdrawal or termination could result in material withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a
Lien on any property of the Company or any Subsidiary pursuant to Section 4068
of ERISA.
Section 5.22. Prohibition of Change in Fiscal Year. The Company will
not, and will not permit any of its Subsidiaries to, change its Fiscal Year.
Section 5.23. Sale or Discount of Receivables. The Company will not,
and will not permit any of its Subsidiaries to, discount or sell with recourse,
or sell for less than the greater of the face value or market value thereof, any
of its notes receivable or accounts receivable.
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Section 5.24. Partnerships and Joint Ventures. The Company will not,
and will not permit any of its Subsidiaries to, act or participate as a general
or limited partner in any partnership or as a joint venturer in any joint
venture; provided that, the foregoing shall not restrict the ability of the
Company or any Subsidiary from entering into or establishing business
arrangements with third parties in connection with the manufacturing or other
production of goods, so long as such arrangements do not involve the sharing of
liabilities or the delegation of contracting power by the Company or any
Subsidiary with or to any such third party.
Section 5.25. Issuance of Stock or Partnership Interests. The Company will
not, and will not permit any of its Subsidiaries to, issue or distribute any
capital stock, partnership interests or other Securities for consideration or
otherwise; provided, however, that (a) a Wholly-owned Subsidiary may issue
equity Securities to the Company or to another Wholly-owned Subsidiary and (b)
the Company may issue shares of its Series A Preferred Stock in connection with
the Future Preferred Commitments provided for under the Stock Purchase
Agreement.
Section 5.26. Hedging Contracts. The Company will not, and will not permit
any of its Subsidiaries to, enter into any Hedging Contract with any Person
unless at the time of entering into such Hedging Contract the senior unsecured
long-term debt of such Person is rated "A" or better by Standard & Poor's Rating
Group, a division of XxXxxx-Xxxx, Inc., a New York corporation, or "A" by
Xxxxx'x Investors Service, Inc.
Section 5.27. Additional Subsidiary Guarantors. If at any time from and
after the Closing Date any Subsidiary shall guarantee the obligations of the
Company or any other Subsidiary under the Senior Credit Agreement or any Senior
Security Document, then in such event, the Company shall cause such Subsidiary
to promptly enter into a Guaranty of the Notes and, in connection therewith,
shall deliver to each of the holders of the Notes (a) an executed joinder
agreement to a Subsidiary Guaranty Agreement, (b) all such certificates,
resolutions, legal opinions and other related items in form and substance
satisfactory to the holders of the Notes and (c) all such amendments to this
Agreement as may reasonably be deemed necessary by the holders of the Notes in
order to reflect the existence of such additional Guaranty. The holders of the
Notes agree to release the obligations of any Subsidiary under any Subsidiary
Guaranty Agreement to which it is a party upon the request of the Company if and
to the extent the corresponding guaranty given pursuant to the Senior Credit
Agreement is released and discharged, provided that no Default or Event of
Default has occurred and is continuing, and provided, further, that in the event
any Subsidiary shall again become obligated under or with respect to any
previously discharged guaranty pursuant to the terms and provisions of such
guaranty or the Senior Credit Agreement, then the obligations of such Subsidiary
under such Subsidiary Guaranty Agreement shall ipso facto again benefit the
holders of the Notes.
Section 5.28. Amendment or Waivers of Certain Documents: Restrictions
Relating to Prepayment of the Notes. (a) The Company will not enter into any
oral or written amendment, supplement, alteration, waiver or other modification
of any of the terms or provisions of the Senior Credit Agreement or the Senior
Security Documents if the effect or result of any such amendment, supplement,
alteration, waiver or other modification is (1) to advance the date of any
required prepayment or repayment of any Senior Indebtedness Liabilities, (2) to
increase the interest rate payable in connection with the Senior Indebtedness
Liabilities by an amount greater
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than 2.0% per annum over the rate payable on the Closing Date (other than the
imposition of a default rate of interest), (3) to increase the amount of
permitted Senior Indebtedness Liabilities above the sum of $84,000,000 plus
$12,600,000, (4) to extend the term of the Senior Credit Agreement beyond August
5, 2006, or (5) to materially and adversely affect the interests of the holders
of the Notes or of the Company, except that if any event of default shall exist
under the Senior Credit Agreement, the terms of any amendment or modification
(but not any refinancing) are permitted hereby to materially and adversely
affect the interests of the Company if such amendment or modification is given
in consideration of a waiver or forbearance in respect of such event of default.
It is understood and agreed that any action permitted in this (S)5.28 shall not
be deemed or construed to mean (and not asserted to the contrary by the Agent,
the Senior Lenders or any replacement or replacements of any thereof) that the
terms of this (S)5.28 constitute a consent to any postponement or other
modification of the Company's obligation to make scheduled payments of principal
and interest, including the Company's obligation to repay the Notes on the
maturity date thereof, except as may be expressly provided in the circumstances
set forth Section 6 hereof.
Without limiting the foregoing, the Company will not enter into an
extension, renewal, or refunding of the Senior Credit Agreement and the Senior
Security Documents which would not otherwise be within and permitted by the
limitations of this (S)5.28(a).
(b) The Company will not enter into any oral or written amendment,
supplement, alteration, waiver or other modification of any of the terms or
provisions of the Seller Junior Subordinated Notes if the effect thereof is to:
(i) increase the interest rate on the Seller Junior Subordinated Notes, (ii)
shorten or accelerate the dates upon which payments of principal or interest are
due on such Seller Junior Subordinated Notes, (iii) change any event of default
or add or make more restrictive any agreement of the Company with respect to
such Seller Junior Subordinated Notes, (iv) change the subordination provisions
thereof, or (v) change or amend any other term if such change or amendment would
materially increase the obligations of the Company or confer additional material
rights on the holder of such Seller Junior Subordinated Notes in a manner
adverse to the Company, any of its Subsidiaries or the holders of the Notes.
(c) The Company will not enter into any material amendment or other change
to the Certificate of Incorporation or By-laws of the Company or to the terms
and provisions of any agreement or other instrument constituting or relating to
the capital stock of the Company in a manner adverse to, or which would
reasonably be expected to be adverse to, the holders of the Notes or Warrants or
which would, or would reasonably be expected to, adversely affect the Company's
or any Subsidiary's ability to perform their respective obligations under the
Note Documents.
(d) The Company will not, directly or indirectly, enter into any
restriction or limitation on its ability to prepay or repay the Notes other than
restrictions set forth in the Senior Credit Agreement as in effect on the
Closing Date, or restrictions no more onerous than those set forth in the Senior
Credit Agreement on the Closing Date contained in any credit or loan agreement
executed in connection with a permitted refinancing of such Senior Credit
Agreement.
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(e) The Company will not enter into any agreement containing any provision
which would be violated or breached by the performance of its obligations
hereunder, under the Notes, the Warrants, the Series A Preferred Stock, the
Stockholders Agreement, the Registration Rights Agreement or under any other
instrument or document delivered or to be delivered by it hereunder or in
connection herewith or which would violate or breach any provision hereof or
thereof.
Section 5.29. Reports and Rights of Inspection. The Company will keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full and correct entries will be made of all dealings or transactions of, or in
relation to, the business and affairs of the Company or such Subsidiary, in
accordance with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to you pursuant to this (S)5.29 and concurred in
by the independent public accountants referred to in (S)5.29(b)), and will
furnish to you so long as you are the holder of any Note and to each other
Institutional Holder of the then outstanding Notes (in duplicate if so specified
below or otherwise requested):
(a) Monthly Statements. As soon as available, but not later than
thirty (30) days after the end of each fiscal month of each year, a copy of
the unaudited consolidated and consolidating balance sheets of the Company
and each of its Subsidiaries, and the related consolidated and
consolidating statements of income, shareholders' equity and cash flows as
of the end of such month and for the portion of the fiscal year then ended,
all certified on behalf of Company by an appropriate Responsible Officer as
being complete and correct and fairly presenting, in accordance with GAAP,
the financial position and the results of operations of the Company and the
Subsidiaries, subject to normal year-end adjustments and absence of
footnote disclosure;
(b) Annual Statements. As soon as available, but not later than one
hundred and five (105) days after the end of each Fiscal Year, a copy of
the audited consolidated balance sheet of the Company as at the end of such
year and the related consolidated statements of income or operations,
shareholders' equity and cash flows for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous Fiscal Year, and
accompanied by the opinion of any "Big Five" or other nationally-recognized
independent public accounting firm reasonably acceptable to the Required
Holders which report shall state that such consolidated financial
statements present fairly in all material respects the financial position
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years. Such opinion shall not be qualified or
limited because of a restricted or limited examination by such accountant
of any material portion of the Company's or any Subsidiary's records;
(c) Audit Reports. Promptly upon receipt thereof, copies of any
reports submitted by the Company's certified public accountants in
connection with each annual, interim or special audit or review of any type
of the financial statements or internal control systems of the Company made
by such accountants, including any comment letters submitted by such
accountants to management of the Company in connection with their services;
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(d) SEC and Other Reports. Promptly after the same are sent, copies
of all financial statements and reports which the Company sends to its
shareholders generally; and promptly after the same are filed, copies of
all financial statements and regular, periodic or special reports which the
Company may make to, or file with, the Securities and Exchange Commission
or any successor or similar Governmental Authority and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, foreign, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof, written
notice of any of the following if the same would reasonably be expected to
have a Material Adverse Effect, together with a copy of any notice with
respect to such event that may be required to be filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the
Company or any member or its Controlled Group with respect to such event:
(1) an ERISA Event;
(2) the adoption of any new Qualified Plan that is subject to
Title IV of ERISA or Section 412 of the Code by any member of the
Controlled Group;
(3) the adoption of any amendment to a Qualified Plan that is
subject to Title IV of ERISA or Section 412 of the Code, if such
amendment results in a material increase in benefits or unfunded
liabilities; or
(4) the commencement of contributions by any member of the
Controlled Group to any Qualified Plan that is subject to Title IV of
ERISA or Section 412 of the Code;
(f) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of the chief financial officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: (1) the information and computations (in
sufficient detail) required in order to establish whether the Company was
in compliance with the requirements of (S)(S)5.6 through 5.18 at the end of
the period covered by the financial statements then being furnished, and
(2) whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the date
of the certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed
this Agreement and stating further whether, in making their audit, such
accountants have become aware of any Default or
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Event of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve accounting
matters or determinations, and if any such condition or event then exists,
specifying the nature and period of existence thereof;
(h) Management Reports. Together with each delivery of financial
statements pursuant to paragraphs (a) and (b) above: (1) to the extent
prepared by Company or its management, a management report, in reasonable
detail, signed by the chief financial officer of the Company, describing
the operations and financial condition of the Company and its Subsidiaries
for the month and the portion of the Fiscal Year then ended (or for the
fiscal year then ended in the case of annual financial statements), and (2)
a report setting forth in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the corresponding
figures from the most recent projections for the current Fiscal Year
delivered pursuant to paragraph (i) and discussing the reasons for any
significant variations;
(i) Projections. As soon as available and in any event no later than
thirty (30) days subsequent to each Fiscal Year of the Company, projections
of the Company's (and its Subsidiaries') consolidated and consolidating
financial performance for the forthcoming Fiscal Year on a month by month
basis;
(j) Senior Credit Agreement Amendments. Subject to (S)5.28(a), as
soon as possible and in event within 10 days of entering into a material
change, modification, amendment, revision, waiver or consent to the Senior
Credit Agreement or the Senior Security Documents, the Company shall
provide written notice (together with copies of all executed instruments
relating thereto) to the holders of the Notes of any such change,
modification, amendment, revision, waiver or consent to the Senior Credit
Agreement or the Senior Security Documents, as the case may be, along with
such other information as may be necessary to explain the reason for such
alteration, consent or waiver;
(k) Senior Credit Agreement Deliveries. Simultaneously with the
Company's delivery of reports, statements and other information required to
be delivered pursuant to the Senior Credit Agreement, the Company shall
deliver to the holders of the Notes copies of such reports, statements and
other information, without duplication with that which has been delivered
to the Senior Lenders in accordance with the terms thereof;
(l) Disclosure Schedules. Annually, concurrently with the Company's
delivery of the projections under paragraph (i) above, the Company shall
supplement in writing and deliver to the holders of the Notes revisions of
and supplements to the Schedules hereto related to Exhibit D hereof to the
extent necessary to disclose new or changed facts or circumstances after
the Closing Date; provided that delivery or receipt of such subsequent
disclosure shall not constitute a waiver by the holders of the Notes or a
cure of any Default or Event of Default resulting in connection with the
matters disclosed;
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(m) Notices. Promptly upon the occurrence thereof, written notice of
any of the following:
(1) the occurrence or existence of any Default or Event of
Default, or any event or circumstance that foreseeably will become a
Default or Event of Default under (S)5.7 through (S)5.18;
(2) any breach or non-performance of, or any default under, any
Contractual Obligation of the Company or any of its Subsidiaries, or
any violation of, or non-compliance with, any Requirement of Law (in
each case, after the expiration of all applicable notice, grace and
cure periods), which would reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect,
including a description of such breach, non-performance, default,
violation or non-compliance and the steps, if any, the Company or such
Subsidiary has taken, is taking or proposes to take in respect
thereof;
(3) any dispute, litigation, investigation, proceeding or
suspension which may exist at any time between the Company or any of
its Subsidiaries and any Governmental Authority which would reasonably
be expected to result, either individually or in the aggregate, in a
Material Adverse Effect;
(4) the commencement of, or any material development in, any
litigation or proceeding affecting the Company or any Subsidiary (i)
in which the amount of damages claimed is $500,000 (or its equivalent
in another currency or currencies) or more, (ii) in which injunctive
or similar relief is sought and which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect, or (iii) in
which the relief sought is an injunction or other stay of the
performance of this Agreement, the Notes or the Warrant;
(5) any of the following if the same would reasonably be
expected to have a Material Adverse Effect: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the Company or any of its
Subsidiaries or any of their respective properties pursuant to any
applicable Environmental Laws, (ii) any other Environmental Claims,
and (iii) any environmental or similar condition on any real property
adjoining the property of the Company or any Subsidiary that would
reasonably be anticipated to cause Company's or any of its
Subsidiaries' property or any part thereof to be subject to any
material restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws;
(6) any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of the Company delivered to
the holders of the Notes pursuant to this Agreement;
(7) any material change in accounting policies or financial
reporting practices by the Company or any of its Subsidiaries;
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(8) any labor controversy resulting in or threatening to result
in any strike, work stoppage, boycott, shutdown or other labor
disruption against or involving the Company or any of its Subsidiaries
if the same could reasonably be expected to have a Material Adverse
Effect; and
(9) the creation, establishment or acquisition of any
Subsidiary; and
(n) Requested Information. Promptly, such additional business,
financial, corporate affairs and other information as the holders of the
Notes may from time to time reasonably request.
The Company will also permit you, so long as you are the holder of any Note, and
each Institutional Holder of the then outstanding Notes (or such Persons as
either you or such Institutional Holder may designate), to visit and inspect,
under the Company's guidance, any of the properties of the Company or any
Subsidiary, to examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with you the finances and affairs of the Company and
its Subsidiaries), all at such reasonable times and as often as may be
reasonably requested. Any visitation shall be at the sole expense of you or such
Institutional Holder and shall not be undertaken more than once in each calendar
year, unless a Default or Event of Default shall have occurred and be continuing
or the holder of any Note or of any other evidence of Indebtedness of the
Company or any Subsidiary gives any written notice or takes any other action
with respect to a claimed default, in which case, the frequency of such
visitation and inspections shall not be limited and any such visitation or
inspection shall be at the sole expense of the Company.
Without limiting the foregoing, the Company agrees that The Northwestern
Mutual Life Insurance Company and each other Institutional Holder of not less
than 30% of the aggregate principal amount of the then outstanding Notes, shall
have the right to receive all notices of, and to attend (either in person or by
telephonic conference), at the expense of such holders of the Notes, all
meetings of the Company's Board of Directors and any committees thereof and each
such Person shall be entitled to receive copies of all minutes of such meetings,
together with copies of any items distributed to the members of the Board of
Directors, whether or not such Person attends any such meeting.
Section 5.30. Agreement during Standstill Period. The Company agrees that,
so long as any Standstill Period shall be in effect, the Company will not, and
will not permit any Subsidiary to, sell, transfer or otherwise dispose of any
assets, or enter into or be a party to any transaction or agreement relating to
the sale, transfer or other disposition of any assets, other than dispositions
of assets made in compliance with the terms of Section 5.2(a) of the Senior
Credit Agreement as in effect on the Closing Date.
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Section 6. Subordination of Subordinated Indebtedness Liabilities.
The Subordinated Indebtedness Liabilities shall be subordinate and junior
in right of payment, to the extent and in the manner hereinafter set forth, to
the prior payment in full in cash (or in a manner satisfactory to the holders of
Senior Indebtedness Liabilities, in their sole discretion) of all Senior
Indebtedness Liabilities, whether now outstanding or hereafter incurred:
(a) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization, arrangement or other similar
proceedings in connection therewith, relative to the Company, any of its
Subsidiaries or to its or their creditors, as such, or to its property, and
in the event of any proceedings for voluntary liquidation, dissolution or
other winding-up of the Company or any of its Subsidiaries, whether or not
involving insolvency or bankruptcy, then the holders of Senior Indebtedness
Liabilities shall be entitled to receive from the Company and its
Subsidiaries payment in full of all Senior Indebtedness Liabilities owed
thereby in cash or other property acceptable to the holders of the Senior
Indebtedness Liabilities in their sole discretion (or to have such payment
duly provided for in a manner satisfactory to the holders of said Senior
Indebtedness Liabilities in their sole discretion) before the holders of
the Subordinated Indebtedness Liabilities are entitled to receive any
payment from the Company or its Subsidiaries in respect of the Subordinated
Indebtedness Liabilities owed thereby, and to that end the holders of
Senior Indebtedness Liabilities shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property or Securities, which may be payable
or deliverable in any such proceedings in respect of the Subordinated
Indebtedness Liabilities, excepting only Securities which are in all
respects subordinate and junior in right of payment to the payment in full
in cash (or in a manner satisfactory to the holders of Senior Indebtedness
Liabilities, in their sole discretion) of all Senior Indebtedness
Liabilities upon terms substantially similar to those contained in this
Agreement.
(b) Upon the happening of any Senior Indebtedness Payment Default,
the Company shall not be permitted to make and the holders of the
Subordinated Indebtedness Liabilities shall not be entitled to receive, any
payment on account thereof during the period beginning on the date such
Senior Indebtedness Payment Default shall occur and ending upon the
earliest of (1) the date such Senior Indebtedness Payment Default has been
waived in writing by the holders of the related Senior Indebtedness
Liabilities, (2) the date on which notice that such Senior Indebtedness
Payment Default shall have ceased to exist is given by any holder of the
related Senior Indebtedness Liabilities to the Company and the holders of
the Subordinated Indebtedness Liabilities, and (3) the date on which such
Senior Indebtedness Payment Default has been cured or shall have ceased to
exist. Upon the expiration of any period during which payments to the
holders of Subordinated Indebtedness Liabilities were withheld pursuant to
this paragraph (b), but subject to the provisions of paragraph (c) below,
the Company shall promptly make all payments to the holders of Subordinated
Indebtedness Liabilities so withheld.
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(c) Upon the happening of any Senior Indebtedness Material Covenant
Event of Default and the giving of written notice thereof by the Required
Lenders or an authorized agent of such Required Lenders to the holders of
the Subordinated Indebtedness Liabilities and to the Company in the manner
provided in (S)10.6 hereof (the date on which both such conditions have
been satisfied being herein referred to as a "Covenant Default Blockage
Commencement Date"), then the Company shall not be permitted to make and
the holders of the Subordinated Indebtedness Liabilities shall not be
entitled to receive any payment on account thereof during the period
beginning on the Covenant Default Blockage Commencement Date and ending
upon the earliest of (1) the date such Senior Indebtedness Material
Covenant Event of Default has been waived in writing by the Required
Lenders or by an authorized agent for the Required Lenders, (2) the date on
which notice that such Senior Indebtedness Material Covenant Event of
Default shall have ceased to exist is given by the Required Lenders or an
authorized agent of such Required Lenders to the Company and the holders of
the Subordinated Indebtedness Liabilities, and (3) the date on which such
Senior Indebtedness Material Covenant Event of Default has been cured;
provided, however, that (i) no more than two blockage periods under this
paragraph (c) may occur during any period of 365 consecutive days, (ii)
blockage periods under this paragraph (c) shall not be in effect in the
aggregate for more than 179 days during any period of 365 consecutive days,
and (iii) no facts or circumstances constituting a Senior Indebtedness
Material Covenant Event of Default existing on any Covenant Default
Blockage Commencement Date may be used as a basis for any subsequent
blockage period unless cured. Upon the expiration of any period during
which payments to the holders of Subordinated Indebtedness Liabilities were
withheld pursuant to this paragraph (c), but subject to the provisions of
paragraph (b) above, the Company shall promptly make all payments to the
holders of Subordinated Indebtedness Liabilities so withheld. It is
understood and agreed that if a blockage period under this paragraph (c) is
commenced in connection with a Senior Indebtedness Material Covenant Event
of Default resulting from the failure of the Company to deliver financial
statements, and upon the delivery of such financial statements, the
existence of a Senior Indebtedness Material Covenant Event of Default is
confirmed under Article VI of the Senior Credit Agreement, then the
blockage period commenced in connection with the failure to deliver
financial statements, coupled with a blockage period commenced promptly
following the confirmation of the Senior Indebtedness Material Covenant
Event of Default reflected in the such financial statements, shall
constitute a single blockage period for purposes of this paragraph (c).
(d) In reliance on and so long as the Company is in compliance with
the provisions of (S)5.30 hereof, no holder of Subordinated Indebtedness
Liabilities shall commence judicial enforcement of any of the rights and
remedies under this Agreement, the Notes or any other document or
instrument pertaining thereto, including, without limitation, the
initiation of any insolvency, bankruptcy, liquidation, readjustment,
reorganization or other similar proceedings relative to the Company or its
property or any Subsidiary, unless prior thereto a period of 90 days shall
have expired, which period shall have commenced on the earlier of (1) the
date on which such holder of Subordinated Indebtedness Liabilities shall
have provided the holders of Senior Indebtedness Liabilities (or, if the
holders of Senior Indebtedness Liabilities have an authorized agent, then
to
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such authorized agent) with written notice of the Event of Default giving
rise to any such remedy, suit or proceeding and (2) the date on which an
Event of Default arising under (S)7.1(a) or (b) shall have occurred;
provided, however, that the restrictions contained in this paragraph (d)
shall not apply with respect to the Company (i) to the extent necessary to
prevent the expiration of any applicable statute of limitations or similar
law, or (ii) after the earliest to occur of (x) the commencement of any
insolvency, bankruptcy, receivership, liquidation or reorganization
proceedings or arrangements relative to the Company or any Subsidiary
(other than any such proceeding or arrangement initiated by any holder of
Subordinated Indebtedness Liabilities), (y) the acceleration of all or any
portion of the Senior Indebtedness Liabilities or (z) the initiation by any
holder of Senior Indebtedness Liabilities of any suit, action or proceeding
in the nature of a foreclosure to enforce any rights, powers or remedies of
the holders of the Senior Indebtedness Liabilities with respect thereto.
(e) In the event that any holder of Subordinated Indebtedness
Liabilities shall obtain any cash or other assets of the Company, whether
by voluntary action of the Company, as a result of any administrative,
legal or equitable action, or otherwise, in violation of the provisions of
this Agreement, such holder of Subordinated Indebtedness Liabilities shall
pay, deliver and assign to, the holders of the Senior Indebtedness
Liabilities such cash or assets for application to the Senior Indebtedness
Liabilities within thirty Business Days of (1) in the case of any payment
received by the holders of Subordinated Indebtedness Liabilities when a
Senior Indebtedness Payment Default exists, if such holder of Subordinated
Indebtedness Liabilities is notified in writing of such fact by the holders
of the Senior Indebtedness Liabilities within 45 days of receipt of such
cash or other assets by such holder, and (2) in the case of any other
payment received in violation of this Agreement, if such holder of
Subordinated Indebtedness Liabilities is notified in writing of such fact
within 45 days of receipt by the holders of Senior Indebtedness Liabilities
of knowledge of the receipt by the holders of Subordinated Indebtedness
Liabilities of such cash or other assets.
(f) The Company will give prompt written notice to the holders of
Subordinated Indebtedness Liabilities of any default under any Senior
Indebtedness Liabilities and, in the event of any default, shall provide to
the holders of the Subordinated Indebtedness Liabilities the names and
addresses of the holders of the Senior Indebtedness Liabilities, and the
name and address of any agent acting on their behalf.
(g) The Company and the holders of Subordinated Indebtedness
Liabilities will not amend, supplement, alter, waive or otherwise modify
any of the terms or provisions of this Agreement, the Warrants or the Notes
without the prior written consent of the Senior Lenders if the effect or
result of any such amendment, supplement, alteration, waiver or other
modification is (1) to advance the date of any required prepayment or
repayment of any Subordinated Indebtedness Liabilities or any interest
payment related thereto, (2) to increase the interest rate or default rate
payable in connection with the Subordinated Indebtedness Liabilities, (3)
to increase the maximum principal amount of Subordinated Indebtedness
Liabilities (other than in connection with
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the capitalization of interest) or to add a put with respect to the Warrant
or Warrant Shares, (4) to make more restrictive any Event of Default or any
covenants contained therein or to add any Event of Default or covenant to
this Agreement as in effect on the Closing Date except changes which are
more restrictive to the same degree that corresponding changes are made to
the Senior Credit Agreement in accordance with (S)5.28(a) hereof, (5) to
amend any term or provision of Section 6 (or any definition used in Section
6) or (6) to change or amend any other term of this Agreement if such
change or amendment would result in a Default or an Event of Default under
the Senior Credit Agreement, increase the obligations of the Company or any
Subsidiary Guarantor or confer additional material rights on the holders of
Subordinated Indebtedness Liabilities in a manner materially adverse to the
Company, any such Subsidiary Guarantor or the holders of Senior
Indebtedness Liabilities.
No right of any present or future holder of any Senior Indebtedness
Liabilities of the Company to enforce subordination as herein provided shall at
any time or in any way be prejudiced or impaired by any failure to act on the
part of the holders of any Senior Indebtedness Liabilities or the Company, or by
any noncompliance by the Company with the terms, provisions and covenants of
this Agreement, regardless of any knowledge thereof that any such holder of
Senior Indebtedness Liabilities may have or be otherwise charged with.
The provisions hereof are solely for the purpose of defining the relative
rights of the holders of Senior Indebtedness Liabilities, on the one hand, and
the holders of the Subordinated Indebtedness Liabilities, on the other hand, and
nothing herein shall impair, as between the Company and the holders of the
Subordinated Indebtedness Liabilities, the obligation of the Company, which is
unconditional and absolute, to pay to the holders of the Subordinated
Indebtedness Liabilities the entire amount thereof in accordance with the terms
of the Notes and this Agreement, nor shall anything herein prevent the holder of
any Subordinated Indebtedness Liabilities from exercising all remedies otherwise
permitted by applicable law or under this Agreement or the Notes upon default
under this Agreement or the Notes, subject to the rights, if any, of holders of
Senior Indebtedness Liabilities as herein provided. In furtherance and not in
limitation of the foregoing provision, no provision of this Agreement shall
prevent or be deemed or construed to prevent any holder of Subordinated
Indebtedness Liabilities from accelerating the maturity thereof in accordance
with the provisions of (S)7.3 hereof.
Upon payment in full of the Senior Indebtedness Liabilities in cash or
other property acceptable to the holders of the Senior Indebtedness Liabilities
in their sole discretion, and in the event cash or other property otherwise
payable to the holders of Subordinated Indebtedness Liabilities shall have in
fact been applied pursuant to this Agreement to the Senior Indebtedness
Liabilities, then the holders of the Subordinated Indebtedness Liabilities shall
be subrogated to the rights of the holders of the Senior Indebtedness
Liabilities to receive payments or distributions of assets of the Company made
on or in respect of Senior Indebtedness Liabilities until all amounts
constituting Subordinated Indebtedness Liabilities and all other amounts payable
to the holders of the Subordinated Indebtedness Liabilities shall be paid in
full, and, for the purposes of such subrogation, no payments to the holders of
Senior Indebtedness Liabilities of any cash, property, stock or obligations to
which the holders of the Subordinated Indebtedness Liabilities would be entitled
shall, as between the Company, its creditors (other than the holders
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of Senior Indebtedness Liabilities) and the holders of the Subordinated
Indebtedness Liabilities, be deemed to be a payment by the Company to or on
account of Senior Indebtedness Liabilities.
In the event of any of the proceedings referred to in subparagraph (a)
above, if any holder of Subordinated Indebtedness Liabilities has not filed any
claim, proof of claim or other instrument of similar character necessary to
enforce the obligations of the Company in respect of the Subordinated
Indebtedness Liabilities held by such holder within 30 days before the
expiration of the time to file the same, then and in such event, but only in
such event, any holder of the Senior Indebtedness Liabilities may notify such
holder in the manner provided in (S)10.6 of such fact and that such holder of
the Senior Indebtedness Liabilities may, if such claim, proof of claim or other
instrument of similar character is not so filed by such holder of Subordinated
Indebtedness Liabilities at least 15 days before the expiration of the time to
file the same, as an attorney-in-fact for such holder of Subordinated
Indebtedness Liabilities, file any claim, proof of claim or such other
instrument of similar character on behalf of such holder of Subordinated
Indebtedness Liabilities. At any time within 10 days prior to the expiration of
the time to file such claim, proof of claim or other instrument, if such holder
of Subordinated Indebtedness Liabilities has not so filed the same, the holder
of the Senior Indebtedness Liabilities which has complied with the notice
provisions in the immediately preceding sentence may, then, as attorney-in-fact
for such holder of Subordinated Indebtedness Liabilities and at its sole
expense, file such claim, proof of claim or other instrument and such holder of
Subordinated Indebtedness Liabilities, by such holder's acceptance of such
holder's Notes, appoints such holder of the Senior Indebtedness Liabilities as
an attorney-in-fact for such holder of Subordinated Indebtedness Liabilities, to
so file any claim, proof of claim or such other instrument of similar character.
Notwithstanding the foregoing, the holder of Subordinated Indebtedness
Liabilities shall nevertheless retain all rights to enforce such claim, proof of
claim or other instrument in its capacity as the holder of such Subordinated
Indebtedness Liabilities.
By its acceptance of any Note, each holder of the Subordinated Debt
Liabilities evidenced thereby acknowledges and agrees that:
(i) the holders of Senior Indebtedness Liabilities have relied on
the terms and provisions of this Section 6 in executing and delivering the
Senior Credit Agreement and in making the extensions of credit contemplated
thereby and shall continue to rely on such terms and provisions in making
extensions of credit from time to time pursuant to the Senior Credit
Agreement, and the provisions of this Section 6 are for the benefit of and
may be enforced by the holders of the Senior Indebtedness Liabilities;
(ii) the holders of Subordinated Indebtedness Liabilities will not
amend the provisions of this (S)6 (or any definition used in this (S)6)
without the prior written consent of the Required Lenders; and
(iii) the holders of the Subordinated Indebtedness Liabilities will
not challenge the validity or enforceability of the subordination
provisions contained in this (S)6.
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Section 7. Events of Default and Remedies Therefor
Section 7.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any required prepayment on
any of the Notes as provided in (S)2.1; or
(c) Default shall occur in the making of any payment of the principal
of any Note or premium, if any, thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in (S)5.7 through (S)5.18; or
(e) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which a Responsible Officer of the Company first
obtains knowledge of such default, or (2) the day on which written notice
thereof is given to the Company by the holder of any Note; or
(f) Default or the happening of any event shall occur in the
observance or performance of any covenant or agreement under the Senior
Credit Agreement or any Senior Security Document and such default or event
shall have resulted in the acceleration of the maturity of the Indebtedness
of the Company outstanding thereunder; or
(g) Default shall be made in the payment when due (whether by lapse
of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Indebtedness for borrowed money (other than
the Notes and other than Senior Indebtedness due and owing under the Senior
Credit Agreement, provision for which is made in clause (f) of this (S)7.1)
of the Company or any Subsidiary aggregating in excess of $1,000,000 and
such default shall continue beyond the period of grace, if any, allowed
with respect thereto; or
(h) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness for
borrowed money (other than the Notes and other than Senior Indebtedness due
and owing under the Senior Credit Agreement, provision for which is made in
clause (f) of this (S)7.1) of the Company or any Subsidiary aggregating in
excess of $1,000,000 may be issued and such default or event shall continue
for a period of time sufficient to permit the acceleration of the maturity
of any Indebtedness for borrowed money of the Company or any Subsidiary
outstanding thereunder; or
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(i) Any representation or warranty made by the Company herein, or
made by the Company or any Subsidiary Guarantor in any statement or
certificate furnished by the Company or any Subsidiary Guarantor in
connection with the consummation of the issuance and delivery of the Notes,
the Warrants or the Subsidiary Guaranty Agreements or furnished by the
Company or any Subsidiary Guarantor pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(j) Any Subsidiary Guaranty Agreement shall cease to be in full force
and effect for any reason, including without limitation a determination by
any governmental body or court that such agreement is invalid, void or
unenforceable, or any Subsidiary Guarantor shall contest or deny in writing
the validity or enforceability of any of its obligations under its
Subsidiary Guaranty Agreement; or
(k) (i) Final judgment or judgments, non-interlocutory orders,
decrees or arbitration awards for the payment of money aggregating in
excess of $500,000 (after excluding from such amount that portion thereof,
if any, covered by insurance for which the insurer has not denied its
liabilities in respect thereof) is or are outstanding against the Company
or any Subsidiary or against any property or assets of either and any one
of the same has remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 30 days from the date of its entry, or (ii)
any non-monetary judgment, order or decree shall be rendered against the
Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries shall lose export privileges, in any such instance which does
or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment, order or decree, by reason of a pending
appeal or otherwise, shall not be in effect; or
(l) A custodian, liquidator, trustee or receiver is appointed for the
Company or any Subsidiary or for the major part of the property of either
and is not discharged within 60 days after such appointment; or
(m) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company or any Subsidiary applies for
or consents to the appointment of a custodian, liquidator, trustee or
receiver for the Company or such Subsidiary or for the major part of the
property of either; or
(n) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against
the Company or any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or are not dismissed within 60 days after such
institution.
Section 7.2. Notice to Holders. When any Event of Default described in the
foregoing (S)7.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness for borrowed money of the Company gives any notice or
takes any other action with respect to a
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claimed default, the Company agrees to give notice within three Business Days of
such event to all holders of the Notes and the Warrants then outstanding.
Section 7.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of (S)7.1 has happened and is continuing,
any holder of any Note may, by notice in writing sent to the Company in the
manner provided in (S)10.6, declare the entire principal and all interest
accrued on such Note to be, and such Note shall thereupon become forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraphs (a) through (k), inclusive, of said (S)7.1 has happened
and is continuing, the holder or holders of 51% or more of the principal amount
of the Notes at the time outstanding may, by notice in writing to the Company in
the manner provided in (S)10.6, declare the entire principal and all interest
accrued on all Notes to be, and all Notes shall thereupon become, forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraph (l), (m) or (n) of (S)7.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to 5% of the principal amount of the outstanding Notes. No course of
dealing on the part of the holder or holders of any Notes nor any delay or
failure on the part of any holder of Notes to exercise any right shall operate
as a waiver of such right or otherwise prejudice such holder's rights, powers
and remedies. The Company further agrees, to the extent permitted by law, to pay
to the holder or holders of the Notes all costs and expenses incurred by them in
the collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
Section 7.4. Rescission of Acceleration. The provisions of (S)7.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(k), inclusive, of (S)7.1, the holders of 51% in aggregate principal amount of
the Notes then outstanding may, by written instrument filed with the Company,
rescind and annul such declaration and the consequences thereof, provided that
at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under (S)7.3) shall have been
duly paid; and
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(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to (S)7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
Section 8. Amendments, Waivers and Consents.
Section 8.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 51% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such amendment or waiver shall be
effective (a) which will change the time or amount of any payment (including any
payment required by (S)2.1) of the principal of or the interest on any Note or
change the principal amount thereof or change the rate of interest thereon, or
(b) which will change any of the provisions with respect to optional
prepayments, or (c) which will change the percentage of holders of the Notes
required to consent to any such amendment or waiver of any of the provisions of
this (S)8 or (S)7.
Section 8.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes or Warrants of any waiver or
amendment of any of the terms and provisions of this Agreement, the Notes or the
Warrants unless such remuneration is concurrently offered, on the same terms,
ratably to the holders of all Notes and Warrants then outstanding. Promptly and
in any event within 30 days of the date of execution and delivery of any such
waiver or amendment, the Company shall provide a true, correct and complete copy
thereof to each of the holders of the Notes and the Warrants.
Section 8.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
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Section 9. Interpretation of Agreement; Definitions.
Section 9.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Acquiring Person" shall mean a "person" or "group of persons" within the
meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended.
"Acquisition" shall mean any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition, of in excess of fifty percent (50%)
of the capital stock, partnership interests or equity of any Person or otherwise
causing any Person to become a Subsidiary of the Company, or (c) a merger or
consolidation or any other combination with another Person.
"Affiliate" shall mean any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (c) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agent" shall mean the Agent of the Senior Lenders under the Senior Credit
Agreement and the Senior Security Documents.
"Agreement" shall mean this Note Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in New York, New York or Chicago, Illinois are required by
law to close or are customarily closed.
"Capital Expenditures" shall mean, for any period, the sum of all
expenditures made, directly or indirectly, by the Company and its Subsidiaries
during such period that have been or should be capitalized in accordance with
GAAP.
"Capital Lease" shall mean any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease.
"Capital Lease Obligations" shall mean all monetary obligations of the
Company or any of its Subsidiaries under any Capital Leases.
"Cash Equivalents" shall mean: (a) securities issued or fully guaranteed or
insured by the United States Government or any agency thereof having maturities
of not more than six (6)
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months from the date of acquisition; (b) certificates of deposit, time deposits,
repurchase agreements, reverse repurchase agreements, or bankers' acceptances,
having in each case a tenor of not more than six (6) months, issued by any
Senior Lender, or by any U.S. commercial bank or any branch or agency of a non-
U.S. bank licensed to conduct business in the U.S. having combined capital and
surplus of not less than $250,000,000; (c) commercial paper of an issuer rated
at least A-1 by Standard & Poor's Corporation or P-1 by Xxxxx'x Investors
Service Inc. and in either case having a tenor of not more than three (3)
months; (d) investments in money market mutual funds having assets in excess of
$1,000,000,000.00 or more substantially all of the assets of which are comprised
of securities of the types described in clauses (a) through (c) above.
"Cash Flow" shall mean, with respect to any period, (a) EBITDA of the
Company and its Subsidiaries for such period less (b) that portion of the
Capital Expenditures made by the Company and its Subsidiaries during such period
which are financed under Capital Leases or other Indebtedness incurred or
assumed by the Company or any Subsidiary (excluding Indebtedness consisting of
draws under the Company's revolving loan facility).
"Change of Control" shall mean the earliest date on which (a) prior to the
Initial Public Offering, Wind Point Partners ceases to maintain in the aggregate
a direct or indirect beneficial equity interest in the Company at least equal to
40% of the aggregate equity interests of the Company, or (b) subsequent to the
Initial Public Offering, Wind Point Partners ceases to maintain in the aggregate
a direct or indirect beneficial equity interest in the Company at least equal to
33% of the aggregate equity interests of the Company, (c) prior to the Initial
Public Offering, Wind Point Partners (i) fails to own beneficially, directly or
indirectly, capital stock representing voting control of the Company or (ii)
ceases to have the right, either through the ownership of voting securities or
by contract, to designate or approve a majority (or such greater percentage as
shall constitute control) of the members of the board of directors of the
Company, or (d) Wind Point Partners cease to have a cash equity investment in
the Company of at least $22,750,000, in each instance, in (a), (b), (c) and (d)
free and clear of all Liens, rights, options, warrants or other similar
agreements or understandings, other than Liens in favor of the Agent for the
benefit of the Agent and the Senior Lenders.
"Change of Control Delayed Prepayment Date" shall have the meaning assigned
thereto in (S)2.4(b)(1).
"Change of Control Prepayment Date" shall have the meaning assigned thereto
in (S)2.4(a).
"Closing Date" shall have the meaning specified in (S)1.6.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Common Stock" shall mean and include any class of capital stock of any
corporation now or hereafter authorized, the right of which to share in
distributions of either earnings or assets of such corporation is without limit
as to any amount or percentage.
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"Company" shall mean Worldwide Sports & Recreation, Inc., a Delaware
corporation, and any Person who succeeds to all, or substantially all, of the
assets and business of Worldwide Sports & Recreation, Inc.
"Company Notice" shall have the meaning assigned thereto in (S)2.4(a).
"Company Payout Letters" shall mean those certain letters dated the Closing
Date from The First National Bank of Chicago and Pexco Holdings, Inc., addressed
to the Company and the Purchaser setting forth in reasonable detail a
description of the unpaid principal amount of and accrued interest and all other
amounts, if any, due and owing to such Persons and otherwise in form and
substance satisfactory to the Purchaser and their special counsel.
"Consolidated Net Income" shall mean, for any period, net income (or loss)
for the applicable period of measurement of the Company and its Subsidiaries on
a consolidated basis determined in accordance with GAAP, but excluding: (a) the
income (or loss) of any Person which is not a Subsidiary of the Company, except
to the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Subsidiaries in cash by such Person during such period
and the payment of dividends or similar distributions by that Subsidiary is not
at the time prohibited by operation of the terms of its charter or of any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary; (b) the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of the Company or is merged
into or consolidated with the Company or any of its Subsidiaries or that
Person's assets are acquired by the Company or any of its Subsidiaries; (c) the
proceeds of any life insurance policy; (d) gains (but not losses) from the sale,
exchange, transfer or other disposition of Property or assets not in the
Ordinary Course of Business of the Company and its Subsidiaries, and relaxed tax
effects in accordance with GAAP; and (e) any other extraordinary or non-
recurring gains (but not losses) of the Company or its Subsidiaries, and related
tax effects in accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (iii) under
any Hedging Contracts; (iv) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; or
(v) for the obligations of another through any agreement to purchase, repurchase
or otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another Person. The amount of any Contingent Obligation shall be equal
to the amount of the obligation so guaranteed or otherwise supported or, if not
a fixed and determined amount, the maximum amount so guaranteed or supported.
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"Contractual Obligations" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" shall mean the Company and all Persons (whether or not
incorporated) under common control or treated as a single employer with the
Company pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Covenant Default Blockage Commencement Date" shall have the meaning
assigned thereto in (S)6(c).
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"EBITDA" shall mean, for any period, the sum of (a) Consolidated Net Income
of the Company and its Subsidiaries during such period plus (b) all amounts
deducted from Consolidated Net Income during such period for depreciation and
amortization, plus (c) Net Interest Expense deducted from Consolidated Net
Income for such period, plus (d) all provisions for accrued taxes on or measured
by income made by the Company and its Subsidiaries during such period, to the
extent deducted in the determination of Consolidated Net Income, plus (e) any
extraordinary losses or losses from discontinued operations for such period, to
the extent such losses reduce Consolidated Net Income for such period, plus (f)
all permitted management fees to Wind Point Investors, L.L.C. and/or Wind Point
Investors IV, L.P. during such period, to the extent deducted in the
determination of Consolidated Net Income, plus (g) legal fees paid in connection
with the Export Investigation and Related Claims (as defined in the WSR Merger
Documentation) during such period, to the extent deducted in the determination
of Consolidated Net Income, plus (h) a one time add-back not to exceed $900,000
in the aggregate for severance costs incurred in calendar year 1999, plus (i)
non-recurring out-of-pocket third party expenses incurred in connection with the
WSR Merger and related transactions, including consulting fees, investment
banking fees, accountants fees and legal fees paid during such period, to the
extent deducted in the determination of Consolidated Net Income, and minus (j)
all reimbursements received by the Company, including by way of set-off, through
indemnification or by insurance, of legal fees incurred by the Company in
connection with the Export Investigation and Related Claims, to the extent such
legal fees were included in the calculation of EBITDA for the then current year
or any prior period.
For purposes of (S)5.8, EBITDA for any month set forth below included
within any trailing twelve month period ending on or before June 30, 2000, shall
be deemed to equal the amount set forth below for such month:
Month EBITDA
June, 1999 $1,487,000
May, 1999 852,000
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Month EBITDA
April, 1999 1,475,000
March, 1999 475,000
February, 1999 (167,000)
January, 1999 (113,000)
December, 1998 1,609,000
November, 1998 1,583,000
October, 1998 3,203,000
September, 1998 2,956,000
August, 1998 2,577,000
"Environmental Claims" shall mean all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon the presence, placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden or non-
sudden, accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Substance at, in, or from property,
whether or not owned by the Company.
"Environmental Law" shall mean any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, treaty, convention, ordinance or
other requirement relating to public health, safety or the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each case
applicable to the property of the Company and its Subsidiaries or the operation,
construction or modification of any thereof, including without limitation, the
following: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1976, the Safe Drinking Water
Control Act,
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the Clean Air Act of 1966, as amended, the Toxic Substances Control Act of 1976,
the Emergency Planning and Community Right-to-Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any similar
or implementing state law, and any state statute and any further amendments to
these laws providing for financial responsibility for cleanup or other actions
with respect to the release or threatened release of Hazardous Substances or
crude oil, or any fraction thereof, and all rules, regulations, guidance
documents and publications promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"ERISA Event" shall mean (a) a Reportable Event with respect to a Qualified
Plan or a Multiemployer Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA); (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination under Section 4041
or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a
Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure
by the Company or any member of the Controlled Group to make required
contributions to a Qualified Plan or Multiemployer Plan; (f) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate;
(h) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-
exempt prohibited transaction occurs with respect to any Plan for which the
Company or any Subsidiary of the Company may be directly or indirectly liable;
or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA
or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary
or disqualified person with respect to any Plan for which the Company or any
member of the Controlled Group may be directly or indirectly liable.
"Event of Default" shall have the meaning set forth in (S)7.1.
"Fixed Charges" shall mean, with respect to any period, the sum of (a) Net
Interest Expense for such period, (b) scheduled principal payments of
Indebtedness of the Company and its Subsidiaries for such period, (c) taxes paid
in cash by the Company and its Subsidiaries during such period, (d) dividends
paid in cash by the Company and its Subsidiaries during such period in respect
of capital stock of any class of the Company or any Subsidiary, (e) management
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fees paid in cash during such period, and (f) other Restricted Payments paid in
cash during such period.
"Fiscal Year" shall mean a fiscal year of the Company and its Subsidiaries
ending on December 31 of each calendar year.
"GAAP" shall mean generally accepted accounting principles at the time.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, or (2)
to maintain working capital or any balance sheet or income statement condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (c) to lease property or to purchase Securities
or other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (d) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or federal authority
having jurisdiction over the property of the Company and its Subsidiaries or its
use, including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. (S)1317), as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. (S)6901 et seq.), as amended; (c) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S)9601 et seq.), as amended; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
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"Hedging Contracts" shall mean interest rate swap, exchange or cap
agreements or other similar agreements, the principal purpose of which is to
provide the Company or any of its Subsidiaries, as the case may be, with
protection against the fluctuation of interest rates.
"Indebtedness" of any Person shall mean, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the Ordinary Course of Business); (c) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
Property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease Obligations; (g)
all indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in Property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness; and (h) all
Contingent Obligations described in clause (i) of the definition thereof in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Initial Public Offering" shall mean the first issuance of shares of Common
Stock by the Company in which the Company receives no less than $35,000,000 of
gross proceeds pursuant to a public distribution in which the Common Stock of
the Company shall be listed and traded on a national or regional exchange or on
the NASDAQ National Market System.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company, (d) any
fraternal benefit society, (e) any pension, retirement or profit-sharing trust
or fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f)
any investment company or business development company, as defined in the
Investment Company Act of 1940, as amended, (g) any small business investment
company licensed under the Small Business Investment Act of 1958, as amended,
(h) any broker or dealer registered under the Securities Exchange Act of 1934,
as amended, or any investment adviser registered under the Investment Advisers
Act of 1940, as amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the investment of
public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended.
"Investments" shall have the meaning specified in (S)5.15.
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"Junior Subordinated Indebtedness" means the Seller Junior Subordinated
Note and all other Indebtedness of the Company or any of its Subsidiaries which
is subordinated in right of payment to the Notes.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
Capital Lease or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes and such
retention or vesting shall constitute a Lien.
"Liquid Change of Control" shall mean a Change of Control in connection
with which all Notes, Warrants and Warrant Shares are in fact prepaid and/or
purchased from the holders thereof.
"Liquid Public Offering" shall mean an Initial Public Offering pursuant to
which the Warrants are permitted to be converted into Warrant Shares and with
respect to which either (a) no restriction or limitation (such as a lock-up or
hold-back or other similar requirement of the Company or the underwriter) is
imposed or other restriction exists which prevents the holders of the Warrants
and/or Warrant Shares from selling any of the Warrant Shares into the public
market or (b) a lock-up or hold-back or other restriction is imposed or exists
for a period of 180 days or less on the holders of the Warrants and/or Warrant
Shares with respect to sales of the Warrant Shares and, in connection therewith,
the Company complies with the requirements of (S)2.2(c). Any Initial Public
Offering pursuant to which a lock-up or hold-back or other restriction is
imposed or exists for a period of more than 180 days on the holders of the
Warrants and/or Warrant Shares with respect to sales of the Warrant Shares shall
not be an event constituting a "Liquid Public Offering."
"Liquidity Event" shall mean either (a) a Liquid Public Offering or (b) a
Liquid Change of Control.
"Material Adverse Effect" shall mean (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Company or the Company and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Company or any of its
Subsidiaries to perform in any material respect its obligations under any Note
Document and avoid any Event of Default; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability of any Note Document.
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"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting preferred
stock at the voluntary or involuntary liquidating value of such preferred stock,
whichever is greater, and by valuing Minority Interests constituting common
stock at the book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in preferred
stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Interest Expense" shall mean, with respect to any period, (a) gross
interest expense in respect of Indebtedness of the Company and its Subsidiaries
required to be paid in cash during such period (including unused line fees, all
commissions, discounts, fees and other charges in connection with standby
letters of credit and similar instruments) determined on a consolidated basis,
less (b) interest income earned by the Company and its Subsidiaries during such
period.
"NML" shall mean The Northwestern Mutual Life Insurance Company.
"Noteholder Notice" shall have the meaning assigned thereto in (S)2.4(a).
"Note Documents" shall mean this Agreement, the Notes, the Warrants, the
Subsidiary Guaranty Agreements, the Stockholders Agreement, the Registration
Rights Agreement and all documents delivered to the holders of the Notes in
connection therewith.
"Notes" shall have the meaning assigned thereto in (S)1.1.
"Ordinary Course of Business" shall mean, in respect of any transaction
involving the Company or any Subsidiary of the Company, the ordinary course of
such Person's business, as conducted by any such Person in accordance with past
practice and undertaken by such Person in good faith and not for purposes of
evading any covenant or restriction in any Note Document.
"Overdue Rate" shall mean the lesser of (a) the maximum interest rate
permitted by law and (b) the greater of (1) 14% per annum and (2) the rate which
Xxxxxx Guaranty Trust Company of New York, New York, announces from time to time
as its prime lending rate as in effect from time to time, plus 2%.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall have the meaning specified in (S)5.12.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
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"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Preferred Stock" shall mean in respect of any corporation, shares of the
capital stock of such corporation which are entitled to preference or priority
over any other shares of the capital stock of such corporation in respect of
payment of dividends or distribution of assets upon liquidation.
"Prepayment Compensation Amount" shall mean, with respect to the principal
amount of Notes to which a Prepayment Compensation Amount is required to be
paid, an amount equal to the then applicable percentage set out below of the
principal amount of the Notes or portion thereof then being prepaid:
If Prepayment Is Due
During the 12-Month Period Percentage of
Ending August 5 Principal Amount
2000 5.0%
2001 4.0%
2002 3.0%
2003 2.0%
2004 1.0%
2005 and thereafter None.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchaser" shall have the meaning set forth in (S)1.1.
"Qualified Plan" shall mean a pension plan (as defined in Section 3(2) of
ERISA) intended to be tax-qualified under Section 401(a) of the Code and which
any member of the Controlled Group sponsors, maintains, or to which it makes, is
making or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.
"Realizable IRR" shall mean, at any time in connection with a Liquid Public
Offering in which the holders of the Warrants and/or Warrant Shares elect not to
sell such Warrants or Warrant Shares in connection therewith, that internal rate
of return in respect of the Notes, the Warrants and the Warrant Shares at such
time, calculated in accordance with generally accepted financial practice, such
calculation to be made based on the following assumptions:
(i) the entire outstanding principal of all the Notes is paid in
full at par, together with accrued interest thereon, on the date fixed for
prepayment pursuant to (S)2.3(a);
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(ii) the holders of the Notes and the Warrant Shares at such time
purchased their Notes or Warrant Shares, or both, on the Closing Date;
(iii) all Warrants (whether or not previously exercised) are
exercised immediately prior to the occurrence of the Initial Public
Offering, and that the holders thereof paid the exercise price therefor;
and
(iv) all Warrant Shares (whether or not previously sold) are sold
immediately upon the occurrence of the Initial Public Offering for cash at
the price (net of discounts and commissions) which would have been actually
received by the Holders of the Warrant Shares in connection with the
Initial Public Offering, and the proceeds of such sale are received by the
holders of the Notes and included in the determination of such internal
rate of return.
"Realized IRR" shall mean, at any time in connection with either (x) a
Liquid Change of Control or (y) a Liquid Public Offering in which the holders of
the Warrants and/or Warrant Shares do, in fact, sell such Warrants and Warrant
Shares in connection therewith, that actual internal rate of return realized in
respect of the Notes, the Warrants and the Warrant Shares, calculated in
accordance with generally accepted financial practice, such calculation to be
made based on the following assumptions:
(i) the actual payment of all the Notes (whether or not the holders
of all such Notes actually accept the offered prepayment in respect of such
Liquid Change of Control) at par, together with accrued interest thereon,
on the date fixed for prepayment pursuant to (S)2.3(a), (S)2.4(a) or
(S)2.4(b);
(ii) the holders of the Notes and Warrant Shares at such time
purchased their Notes or Warrant Shares, or both, on the Closing Date;
(iii) the Warrants actually exercised prior to the date fixed for
prepayment were exercised, and payment of the purchase price therefor made,
on the actual date(s) of exercise thereof;
(iv) any Warrant Shares actually sold prior to the date fixed for
prepayment were sold on the actual date of sale thereof, that the return in
respect of such Warrant Shares was equal to the price actually received by
the holders of Warrant Shares in connection with such sales (net of
discounts and commissions), and that the return was received on the date(s)
actually received by the holders of the Warrant Shares; and
(v) all Warrant Shares not actually previously sold are sold on the
date fixed for prepayment at the actual price in connection with such sale
(net of discounts and commissions), and the purchase price is received by
the holders of the Warrant Shares on such date.
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The calculation of Realizable IRR shall take into account the amount and timing
of partial prepayments (and the payment of any related Prepayment Compensation
Amounts made in connection with any partial prepayment) made prior to any such
calculation.
"Reportable Event" shall have the same meaning as in ERISA.
"Required Holders" shall mean the holders of 51% of the principal amount of
the Notes outstanding at the time of determination.
"Required Lenders" shall have the meaning set forth in the Senior Credit
Agreement from time to time.
"Requirement of Law" shall mean, as to any Person, any law (statutory or
common), ordinance, treaty, rule, regulation, order, policy, other legal
requirement or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.
"Responsible Officer" shall mean the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants or delivery of financial information, the chief financial officer or
the treasurer of the Company, or any other officer having substantially the same
authority and responsibility.
"Restricted Payments" shall have the meaning specified in (S)5.18.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Seller Junior Subordinated Note" shall mean that certain 9% Subordinated
Promissory Note of the Company dated the Closing Date, issued to Excorp Holdings
Limited in the aggregate principal amount of $5,000,000, as such amount shall be
increased due to accrued interest.
"Senior Credit Agreement" shall mean that certain Credit Agreement dated as
of August 5, 1999 by and among the Company, Antares Capital Corporation, as a
lender and as Agent for all lenders, and the other financial institutions party
thereto from time to time, as in effect on the Closing Date, or as amended,
supplemented, refinanced or replaced from time to time in accordance with the
terms of this Agreement, including, without limitation, the terms of (S)5.28.
"Senior Indebtedness Liabilities" shall mean (a) the principal amount of
all Indebtedness of the Company existing under the Senior Credit Agreement, (b)
commitment fees, letter of credit participation fees, premium or break costs, if
any, due and owing in respect of said Indebtedness, (c) interest due and owing
in respect of said Indebtedness (including, without limitation, any such
interest accruing subsequent to the filing by or against the Company of any
proceeding brought under the Bankruptcy Act of 1978, as amended, but only to the
extent that
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such interest is allowed as a claim pursuant to the provisions of said Act), (d)
all other claims for reimbursements, expenses and out-of-pocket expenses
incurred as a result of the protection of collateral or the enforcement of the
Senior Credit Agreement and the Senior Security Documents in an amount up to but
not exceeding $750,000 at any time outstanding (and not previously reimbursed by
operation of Section 6 hereof) and (e) all amounts payable under any guaranties,
howsoever arising, by the Company or any of its Subsidiaries of amounts
described in clauses (a) through (d), above; provided, however, that the
aggregate amount of the principal included in Senior Indebtedness Liabilities
shall not at any time exceed an amount equal to the Maximum Senior Principal
Amount minus the cumulative aggregate amount of all permanent reductions in the
maximum commitment amount in respect of any revolving credit, working capital,
letter of credit, term loan or similar credit facility under which Senior
Indebtedness Liabilities shall be outstanding. As used herein, the term "Maximum
Senior Principal Amount" shall mean $96,600,000.
"Senior Indebtedness Material Covenant Event of Default" shall mean any
default by the Company under (a) Section 7.1(a), (b) Section 4.1(b) for the
months of October 1999, January 2000, April 2000 and the last month of each
calendar quarter thereafter, (c) Section 4.2(b) or (d) Article VI, in each case,
of the Senior Credit Agreement, as from time to time amended or supplemented as
and to the extent permitted under this Agreement, other than a Senior
Indebtedness Payment Default.
"Senior Indebtedness Payment Default" shall mean any default by the Company
to make any payment or mandatory prepayment of principal or interest with
respect to any Senior Indebtedness Liabilities.
"Senior Lenders" shall mean each financial institution which from time to
time is a lender under the Senior Credit Agreement.
"Senior Security Documents" shall mean (a) all agreements, instruments or
documents pursuant to which any real or personal property and/or interests in
property owned by the Company are or shall be subjected to Liens securing Senior
Indebtedness Liabilities, and (b) all Guaranties of Subsidiaries given in favor
of the Senior Lenders, all as provided in the Senior Credit Agreement.
"Stock Purchase Agreement" shall mean that certain Purchase Agreement dated
as of August 5, 1999 among the Company, Wind Point Partners and certain other
purchasers pursuant to which the Company shall sell to such purchasers the
Company's Series A Preferred Stock and Common Stock.
"Stockholders Agreement" shall mean that certain Stockholders Agreement
dated as of August 5, 1999 among the Company, Wind Point Partners, Excorp
Holdings Limited, B. Xxxxxx Xxxxxxx, The Northwestern Mutual Life Insurance
Company and Antares Capital Corporation.
"Strip Equity" shall have the meaning assigned therein in (S)1.3.
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"Subordinated Indebtedness Liabilities" shall mean (a) the principal amount
of all Indebtedness of the Company owing in respect of the Notes, (b) premium,
if any, due and owing in respect of said Indebtedness, (c) interest due and
owing in respect of said Indebtedness, (d) all other amounts from time to time
owing to the holders of the Notes and Warrants pursuant to this Agreement, the
Warrants or the Notes, and (e) all amounts payable under any guaranties,
howsoever arising, by the Company of amounts described in clauses (a) through
(d), above; provided, however, that "Subordinated Indebtedness Liabilities"
shall not include any costs or expenses incurred by any holder of the Notes, or
any agent or advisor acting on behalf of any holder of the Notes, in connection
with the collection of any amounts payable in respect of the Notes upon the
occurrence of any Default or Event of Default or thereon, including, without
limitation, all fees and disbursements of counsel representing any holder of the
Notes or any such agent or advisor.
The term "subsidiary" shall mean as to any particular parent corporation
any corporation of which more than 50% (by number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent corporation.
The term "Subsidiary" shall mean a subsidiary of the Company.
"Subsidiary Guarantors" shall mean, collectively, Bushnell Corporation, a
Delaware corporation, Old WSR, Inc., a Delaware corporation, Bushnell
Corporation of Canada, a corporation organized under the laws of the Province of
Ontario, Canada, Xxxx Corporation, a New York corporation, Xxxx Sports, Inc., a
New York corporation, and each other Subsidiary which becomes a party to a
Subsidiary Guaranty Agreement pursuant to (S)5.27 hereof.
"Subsidiary Guaranty Agreements" shall have the meaning assigned thereto in
(S)1.5.
"Target IRR" shall mean, as of any date set forth in the chart below, the
internal rate of return calculated in accordance with generally accepted
financial practice, set forth in the chart corresponding to such date:
If Target IRR Calculation is
Made During the 12-Month Target IRR (from Closing Date to
Period Ending August 5 the Date of Such Calculation)
2000 25.0%
2001 22.0%
2002 20.0%
2003 20.0%
2004 17.0%
"Total Indebtedness" shall mean, as of the date of any measurement, the sum
of (a) the average revolving loan balance outstanding under the Senior Credit
Agreement as of the last day of each of the 12 calendar months ended on and
prior to the date of measurement, (b) the outstanding principal amount of the
term loans outstanding under the Senior Credit Agreement as of the date of
measurement, (c) the principal portion of Capital Lease Obligations and
Indebtedness secured by purchase money Liens as of the date of measurement, (d)
Indebtedness evidenced by the Notes as of the date of measurement, (e) Junior
Subordinated Indebtedness
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evidenced by the Seller Junior Subordinated Notes as of the date of measurement
and (f) all other Indebtedness of the Company and its Subsidiaries as of the
date of measurement.
Notwithstanding the foregoing, the first year after the Closing Date, the
average revolving balance outstanding under the Senior Credit Agreement shall be
calculated using average month-end balances for a 12 month period based upon a
combination of actual month-end balances plus proforma balances for each
successive month necessary to compute a 12 month average. Accordingly, with
respect to the calculation pursuant to clause (a) above of the average revolving
loan balance outstanding under the Senior Credit Agreement as of October 31,
1999, January 31, 2000, April 30, 2000 and June 30, 2000, such average shall be
calculated using (a) the actual revolving loan balance outstanding under the
Senior Credit Agreement as of the last day of each calendar month, commencing
August 31, 1999, through and including the last day of the most recent calendar
month, and (b) the applicable Proforma Revolving Loan Balance set forth below
for the immediately succeeding months necessary to compute a 12 month average.
For example, the average revolving loan balance as of January 31, 2000 shall be
calculated using actual revolving loan balances outstanding under the Senior
Credit Agreement as of August 31, 1999, September 30, 1999, October 31, 1999,
November 30, 1999, December 31, 1999 and January 31, 2000 and Proforma Revolving
Loan Balances (as set forth below) for February 29, 2000, March 31, 2000, April
30, 2000, May 31, 2000, June 30, 2000 and July 31, 2000.
Month Proforma Revolving
Loan Balance
November 30, 1999 $19,024,000
December 31, 1999 $10,360,000
January 31, 2000 $ 4,602,000
February 29, 2000 $ 3,590,000
March 31, 2000 $ 5,864,000
April 30, 2000 $ 7,806,000
May 31, 2000 $10,227,000
June 30, 2000 $15,241,000
July 31, 2000 $18,457,000
"Valuation Agent" shall mean any firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or related Person
of, the Company) of recognized national standing retained by the Company and
reasonably acceptable to the holders of the Notes, and whose fees and
disbursements shall be borne by the holders of the Notes unless the Realizable
IRR determined by the Valuation Agent is less than 95% of the Realizable IRR
determined by the Company, in which event such fees and disbursements shall be
borne by the Company.
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"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Warrant Shares" shall mean all shares of Common Stock of the Company
issuable upon exercise of any of the Warrants.
"Warrants" shall have the meaning set forth in (S)1.2.
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of its Wholly-
owned Subsidiaries.
"Wind Point Partners" shall mean, collectively, Wind Point Partners III,
L.P., Wind Point Partners IV, L.P., Wind Point IV Executive Advisors L.P., Wind
Point Investors L.L.C., Wind Point Partners IV, L.P., and Wind Point III
Executive Advisors Partners, L.P.
"WSR Merger" shall mean the transaction pursuant to which WSR Acquisition
Co., Inc. is merged into Worldwide Sports & Recreation, Inc., pursuant to the
terms and conditions of the WSR Merger Documentation.
"WSR Merger Documentation" shall mean that certain Agreement and Plan of
Merger and Recapitalization, dated as of June 1, 1999, among Wind Point
Partners, the Company, WSR, Excorp Holdings Limited, and Pacific Investments
(BVI) Limited.
Section 9.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 9.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
Section 10. Miscellaneous.
Section 10.1. Registered Notes. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes, and
the Company will register or transfer or cause to be registered or transferred,
as hereinafter provided, any Note issued pursuant to this Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon compliance
with the legend thereon and surrender thereof at the principal office of the
Company duly endorsed or accompanied by a
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written instrument of transfer duly executed by the holder of such Note or its
attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
NML agrees to use reasonable efforts to provide the Company with notice of
any pending or completed sale of any Note or Warrant, provided that the failure
to provide such notice to the Company shall not give rise to any liability of or
other consequence to NML.
Section 10.2. Exchange of Notes. At any time and from time to time, upon
not less than three days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to (S)10.1,
this (S)10.2 or (S)10.3, and, upon surrender of such Note at its office, the
Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, or Notes in the
denomination of $1,000,000 (or such lesser amount as shall constitute 100% of
the Notes of such holder) or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
Section 10.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 10.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement, the Notes, the Warrants, the Stock
Purchase Agreement, the Stockholders Agreement, the Strip Equity and the
Registration Rights Agreement and the transactions contemplated hereby and
thereby, including but not limited to expenses incurred in connection with
subsequent Stock Closings under the Stock Purchase Agreement, the charges and
disbursements of Xxxxxxx and
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Xxxxxx, your special counsel, duplicating and printing costs and charges for
shipping the Notes, the Strip Equity and Warrants, adequately insured to you at
your home office or at such other place as you may designate, and all such
expenses relating to any amendments, waivers or consents pursuant to the
provisions hereof (whether or not the same are actually executed and delivered),
including, without limitation, any amendments, waivers, or consents resulting
from any work-out, renegotiation or restructuring relating to the performance by
the Company of its obligations under this Agreement, the Notes, the Warrants,
the Stock Purchase Agreement, the Stockholders Agreement, the Strip Equity and
the Registration Rights Agreement. The Company also agrees to pay, within 15
days of receipt thereof, supplemental statements of Xxxxxxx and Xxxxxx for
disbursements unposted or not incurred as of the Closing Date. The Company
agrees that it will pay and save you harmless against any and all liability with
respect to stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Warrants, the Stockholders Agreement, the Strip Equity
or the Registration Rights Agreement, whether or not any Notes are then
outstanding. The Company agrees to protect and indemnify you against any
liability for any and all brokerage fees and commissions payable or claimed to
be payable to any Person in connection with the transactions contemplated by
this Agreement (other than those incurred by a holder). Without limiting the
foregoing, the Company agrees to pay the cost of obtaining the private placement
numbers for the Notes, the Warrants, the Preferred Stock of the Company and the
Common Stock of the Company and authorize the submission of such information as
may be required by Standard & Poor's CUSIP Service Bureau for the purpose of
obtaining such numbers.
Section 10.5. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to, and are not exclusive of, any rights or remedies
any such holder would otherwise have.
Section 10.6. Notices. All communications provided for hereunder shall be
in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Company at
Worldwide Sports & Recreation, Inc.
0000 Xxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Chief Executive Officer and Chief Financial Officer
Facsimile: (000) 000-0000
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With copies to:
Wind Point Partners
Xxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx XxxXxxxx and Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
and
Wind Point Partners
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
or to such other address as the Company may in writing designate to you or to a
subsequent holder of the Note initially issued to you; provided, however, that a
notice to you by overnight air courier shall only be effective if delivered to
you at a street address designated for such purpose in Schedule I, and a notice
by facsimile communication shall only be effective if confirmed by transmission
of a copy thereof by prepaid overnight air courier.
Section 10.7. Successors and Assign. This Agreement shall be binding upon
the Company and their successors and assigns and shall inure to your benefit and
to the benefit of your successors and assigns, including each successive holder
or holders of any Notes.
Section 10.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
Section 10.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 10.10. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with Illinois law,
including all matters of construction, validity and performance.
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Section 10.11. Submission to Jurisdiction; Waiver of Jury Trial. (a) Any
legal action or proceeding with respect to this Agreement or the Notes or any
document related thereto shall be brought in the courts of the State of Illinois
or of the United States of America for the Northern District of Illinois and in
no other courts, and, by execution and delivery of this Agreement, the Company
hereby accepts for itself and in respect of its property generally and
unconditionally, the jurisdiction of the aforesaid courts. The Company hereby
irrevocably and unconditionally waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have to the bringing of any
action or proceeding in such respective jurisdiction.
(b) The Company, NML and each subsequent holder of the Notes by its
acceptance thereof waive any right to have a jury participate in resolving any
dispute, whether sounding in contract, tort, or otherwise, between them arising
out of, connected with, related to or incidental to the relationship established
between them in connection with this agreement, any financing agreement, any
loan party document or any other instrument, document or agreement executed or
delivered in connection herewith or the transactions related hereto. The parties
hereto hereby agree and consent that any such claim, demand, action or cause of
action shall be decided by court trial without a jury and that any of them may
file an original counterpart or a copy of this agreement with any court as
written evidence of the consent of the parties hereto the waiver of their right
to trial by jury.
(c) Nothing contained in this (S)10.11 shall be deemed or construed
to bind the holders of the Notes and the holders of the Indebtedness outstanding
under the Senior Credit Agreement with respect to the jurisdiction or venue of
any legal action or proceedings involving such Persons with respect to the
transactions contemplated by this Agreement and the Senior Credit Agreement.
Section 10.12. General Indemnity; Special Environmental Indemnity and
Covenant Not to Xxx. (a) The Company agrees to defend, protect, indemnify and
hold harmless the Purchaser and each other holder of the Notes, each Person
claiming by, through, under or on account of any foregoing and the respective
directors, trustees, officers, counsel, consultants, agents and employees
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for and consultants of such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against such Indemnitees (whether direct, indirect, or consequential and whether
based on any Federal or state laws or other statutory regulations, including,
without limitation, securities and commercial laws and regulations, under common
law or at equitable cause or on contract or otherwise, arising from or in
connection with the past, present or future operations of the Company or its
predecessors in interest) in any manner relating to or arising out of the Notes,
this Agreement, the Warrants, the Stock Purchase Agreement, the Stockholders
Agreement, the Strip Equity or any other document or agreement, or any act,
event or transaction related or attendant thereto, the agreements of the
Purchaser and the holders of the Notes contained herein), or the use or intended
use of the proceeds from the issuance of the Notes (collectively the
"Indemnified
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Matters"); provided that the Company shall have no obligation to any Indemnitee
hereunder with respect to Indemnified Matters to the extent that any of such
loses, claims, damages, liabilities or related expenses are found in a final
judgment by a court of competent jurisdiction to have arisen from the willful
misconduct or gross negligence of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is volative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. This indemnification shall
survive the payment in full of the Notes and the termination of this Agreement,
the Warrants, the Stock Purchase Agreement, the Stockholders Agreement and the
Registration Rights Agreement.
The general indemnity provided for in this (S)10.12(a), as it relates to
the transactions contemplated under the Stock Purchase Agreement, the
Stockholders Agreement and the Strip Equity, shall apply only with respect to
the transactions consummated on the Closing Date, but not to the consummation of
any Future Preferred Commitment under the Stock Purchase Agreement. All rights
and remedies in respect of such Future Preferred Commitments shall be as
provided in the Stock Purchase Agreement, the Stockholders Agreement and the
Registration Rights Agreement, as applicable, and as are otherwise available at
law and in equity.
(b)(1) Without limiting clause (a) of this (S)10.12, the Company hereby
also agrees to defend, protect, indemnify and hold harmless from time to time
the Indemnitees from and against any and all losses, claims, cost recovery
actions, administrative orders or proceedings, damages, personal injuries,
property damages and liabilities to which any such Indemnitee may become subject
under any Environmental Law applicable to, and arising out of the ownership or
operation of, the Company or any of its Subsidiaries (collectively, the
"Indemnitors") or any of their respective properties: (i) as a result of the
breach, violation or non-compliance by any Indemnitors with any Environmental
Law applicable to any Indemnitors, (ii) due to past ownership of any of their
respective properties or past activity on any of their respective properties
which, though lawful and fully permissible at the time, could result in present
liability, (iii) the presence, release or disposal of Hazardous Substances by
any Indemnitors, or at any of their respective properties, or (iv) any
environmental, health or safety condition at any property of any Indemnitors.
The provisions of this (S)10.12(b) shall survive payment in full of all of the
Notes and termination of this Agreement, the Warrants, the Stock Purchase
Agreement, the Stockholders Agreement and the Registration Rights Agreement and
shall survive the transfer of any Notes or Warrants issued hereunder.
(2) Without limiting the provisions of clause (b)(1) of this
(S)10.12, each Indemnitor, its successors and assigns, hereby waives, releases
and covenants not to bring against any of the Indemnitees any demand, claim,
cost recovery action or lawsuit they may now or hereafter have or accrue arising
from (i) any Environmental Law now or hereafter enacted applicable to, and
arising out of the ownership or operations of, any Indemnitor, (ii) the
presence, use, release, storage, treatment or disposal of Hazardous Substances
on or at any of the properties owned or operated by any Indemnitor, (iii) the
breach, violation or non-compliance by any Indemnitor with any Environmental Law
or environmental covenant applicable to, and the arising out of the
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ownership or operations of, any Indemnitor, or (iv) any environmental, health or
safety condition at any property of any Indemnitor.
Section 10.13. Interest. In the event the obligation of the Company to pay
interest on the principal balance of the Notes is or becomes in excess of the
maximum interest rate which the Company or any Subsidiary is permitted by law to
contract or agree to pay, giving due consideration to the execution date of this
Agreement and the consummation of the transactions herein and therein
contemplated, then, in that event, the rate of interest applicable with respect
to the Notes shall be deemed to be immediately reduced to such maximum rate and
all previous payments in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not of interest. Without limiting the
foregoing, it is the intention of the parties hereto that each holder of the
Notes shall conform to usury laws, if any, applicable to it. Accordingly, if the
transactions with any holder of the Notes contemplated hereby would be usurious
under such applicable laws, then, notwithstanding anything to the contrary in
the Notes, this Agreement or any other agreement entered into in connection with
or as security for or guaranteeing this Agreement or the Indebtedness evidenced
by the Notes, it is agreed as follows: (a) the aggregate of all consideration
which constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received by each holder of the Notes under the Notes
payable to such holder, this Agreement, the Subsidiary Guaranty Agreements or
under any other agreement entered into in connection with or as security for or
guaranteeing this Agreement or the Notes shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be credited
automatically, if theretofore paid, on the principal amount of the Indebtedness
owed to such holder or, if no Indebtedness to such holder is outstanding, shall
be refunded to the Company by such holder, and (b) in the event that the
maturity of any Note is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to such holder may never include more than the maximum amount allowed
by such applicable law and excess interest, if any, to such holder shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such holder on the principal amount of
the Indebtedness owed to such holder by the Company or, if no Indebtedness to
such holder is then outstanding, shall be refunded by such holder to the
Company.
Section 10.14. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
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The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
Worldwide Sports & Recreation, Inc.
By:________________________________
Its:_____________________________
Accepted as of August 5, 1999.
The Northwestern Mutual Life
Insurance Company
By:________________________________
Its:_____________________________
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Principal Amount
Name And Address Of Notes
Of Purchaser To Be Purchased
The Northwestern Mutual $22,800,000
Life Insurance Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Securities Department
Telecopier Number: (000) 000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Worldwide Sports & Recreation, Inc., 12% Senior Subordinated Notes, Due August
5, 2007, PPN 98160# AA4, principal, premium or interest") to:
Bankers Trust Company (ABA #0210-01033)
00 Xxxx Xxxxxx
Insurance Xxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: The Northwestern Mutual Life Insurance Company
Account Number 00-000-000
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed, Attention: Securities Operations.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
SCHEDULE I
(to Note Agreement)
SCHEDULE II
[Prepared by Company]
Indebtedness, Subsidiaries And Disclosures
SCHEDULE II
(to Note Agreement)
This Note Has Not Been Registered Under The United States Securities Act Of
1933, As Amended, Or Any State Securities Laws And May Be Reoffered And Sold
Only If Registered Pursuant To The Provisions Of Said Securities Act And
Applicable State Securities Laws Or If An Exemption From Registration Is
Available.
The Obligations Evidenced By This Note Are Subject To The Terms Of Subordination
Set Forth In The Note Agreement Referred To Below. Reference Should Be Made To
The Note Agreement For A Complete Statement Of The Terms Of Such Subordination.
Worldwide Sports & Recreation, Inc.
12% Senior Subordinated Note
Due August 5, 2007
No.
____________, ____
PPN 98160# AA4
$
Worldwide Sports & Recreation, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the fifth day of August, 2007
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 12% per annum from the date hereof until maturity, payable quarterly on
the fifth day of February, May, August and November in each year (commencing
November 5, 1999) and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the Overdue Rate after the due date, whether by
acceleration or otherwise, until paid. "Overdue Rate" shall mean the lesser of
(a) the maximum interest rate permitted by law and (b) the greater of (1) 14%
per annum and (2) the rate which Xxxxxx Guaranty Trust Company of New York, New
York, announces from time to time as its prime lending rate as in effect from
time to time, plus 2%.
Exhibit A
(to Note Agreement)
Both the principal hereof and interest hereon are payable at the principal
office of the Company in Overland Park, Kansas in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts. If any amount of principal, premium, if
any, or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day" means any day other than a
Saturday, Sunday or other day on which banks in New York, New York or Chicago,
Illinois are required by law to close or are customarily closed.
This Note is one of the Company's $22,800,000 maximum principal amount 12%
Senior Subordinated Notes, due August 5, 2007 (the "Notes"), issued or to be
issued under and pursuant to the terms and provisions of the Note Agreement,
dated as of August 5, 1999 (the "Note Agreement"), entered into by the Company
with the original Purchaser therein referred to and this Note and the holder
hereof are entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreement to all the benefits provided for thereby or
referred to therein. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits, including, without limitation, rights and
benefits contained in the Warrants (as defined in the Note Agreement).
This Note and the holder hereof are also entitled equally and ratably with
the holders of all other Notes to the rights and benefits provided pursuant to
the terms and provisions of certain Subsidiary Guaranty Agreements (as such term
is defined in the Note Agreement). Reference should be made to the foregoing for
a statement of the nature and extent of the benefits afforded thereby.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments are
required to be made thereon, all in the events, on the terms and in the manner
and amounts as provided in the Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company, duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
A-2
This Note and said Note Agreement are governed by and construed in
accordance with the laws of Illinois, including all matters of construction,
validity and performance.
Worldwide Sports & Recreation, Inc.
By:___________________________________
Its:__________________________________
A-3
