Exhibit 10(q)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND ACCORDINGLY MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR LAWS
OR PURSUANT TO AN EXEMPTION THEREFROM. THE PRINCIPAL
AMOUNT OF THIS NOTE, AND INTEREST IN RESPECT THEREOF, IS
SUBORDINATED TO THE PAYMENT IN FULL OF ALL SENIOR
INDEBTEDNESS AND IS SUBJECT TO SET-OFF, AS DESCRIBED RN
THIS NOTE.
DEFLECTO HOLDINGS, INC.
NON-NEGOTIABLE SUBORDINATED NOTE
DUE APRIL 30, 2004
$5,000,000 Deerfield, Illinois
FOR VALUE RECEIVED, the undersigned, DEFLECTO HOLDINGS, INC., a
Delaware corporation (together with its successors, the "Corporation"),
hereby promises to pay to XXXXXXX X. XXXXX (together with its successors
and permitted assigns, the "Holder"), at 380 Gulf of Mexico, Unit 526,
Longboat Key, Florida 34228, the aggregate principal amount of Five Million
Dollars ($5,000,000) on the installment dates stated in Section 1.2 hereof
Certain capitalized terms are used in this Note as defined in Section 7.
Section 1. Payment.
1.1. Interest. Subject to Section 3, the outstanding principal amount
of this Note shall bear interest (computed on the basis of a 365 or 366 day
year, as the case may be) at a rate equal to eight and one-half percent (8
1/2%) per annum from (but excluding) the date hereof to (and including) the
Maturity Date. Subject to Section 3, such interest shall be payable (i)
annually in arrears, with respect to each fiscal year of the Corporation
(or portion thereof) on the 120th day following the end of such
Corporation's fiscal year (or portion thereof) ("Interest Payment Dates"),
commencing with the period ending December 31, 1998, and (ii) on the
Maturity Date.
1.2. Principal. Subject to Section 3, the Corporation shall pay the
principal amount in two (2 equal installments of $2,500,000 each on April
30, 2003 and on April 30, 2004, respectively.
1.3. Business Days. Whenever payment of principal of, or interest on,
this Note shall be due on a date that is not a Business Day, the date for
payment thereof shall be the next succeeding Business Day and interest due
on the unpaid principal and any other Amounts Payable hereunder shall
accrue during such extension and shall be payable on such succeeding
Business Day.
Section 2. Prepayments; Set-off.
2.1. Optional Prepayment. The Corporation shall have the right to
prepay the principal amount of this Note in whole or in part at any time,
or from time to time, without payment of any premium or penalty whatsoever,
together with interest thereon accrued to the date of prepayment, and any
such prepayment in excess of the accrued interest and any costs or expenses
due from the Corporation shall be applied to reduce the Corporation's
principal payment obligations under Section 1.2 in the order of maturity of
such payment obligations; provided, however, that so long as any Senior
Indebtedness remains outstanding and unpaid, any commitment to provide
Senior Indebtedness is outstanding, or any other amount is owing to the
holders of Senior Indebtedness, this Note may not be prepaid in whole or in
part, without the written consent of the holders of Senior Indebtedness.
2.2. Set-off. The Corporation shall have the right, without any
obligation, to set-off and reduce any Amounts Payable hereunder for any
obligations or liabilities of the Holder to the Corporation or any claims
by the Corporation against the Holder or any of the Sellers (as defined in
the Deflecto Purchase Agreement) in connection with the indemnification
obligations of the Sellers under the Deflecto Purchase Agreement. The
Holder, by accepting this Note, hereby acknowledges and agrees to the
foregoing provisions and any subsequent transferee or successor shall be
bound by the foregoing by becoming such transferee or successor.
Section 3. Free Cash Flow.
3.1. Payment Limitation. Notwithstanding any other provision of this
Note, the Corporation shall only be required to pay interest, principal or
any other Amounts Payable in respect of this Note if and to the extent the
Corporation's Free Cash Flow for the Corporation's fiscal year immediately
preceding the required payment date is sufficient and available to make
such payment. If the Corporation's Free Cash Flow for such fiscal year is
not sufficient to make such payments, then such payments will not be made
nor be required to be made under this Note, and the Corporation's payment
obligation under this Note will be deferred until the Corporation's Free
Cash Flow would permit payment under this Section 3, and such deferral of
payment will not be an Event of Default under this Note, provided that the
Maturity Date will not be deferred under this Section 3 for more than two
years, at which time, all principal of, interest on and other Amounts
Payable in respect of this Note will be due and payable.
3.2. Interest Accrual. If, as a result of Section 3.1, the Corporation
does not pay interest on an Interest Payment Date or on the Maturity Date,
then such unpaid interest will continue to accrue interest at the rate
stated in Section 1 until paid.
3.3. Principal and Amounts Payable Deferral. If, as a result of
Section 3.1, the Corporation does not pay principal or any other Amounts
Payable (other than interest) on any required payment date, then such
principal and Amounts Payable will be deferred and be paid at the Maturity
Date, together with interest on any principal and Amounts Payable so
deferred at the rate specified in Section 1.1.
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3.4. Allocation. If the Corporation's Free Cash Flow for any fiscal
year is available to pay some, but not all, of the required payments, then
such available Free Cash Flow will be allocated first to any outstanding
costs and expenses incurred by the Holder to enforce the Corporation's
payment obligations hereunder, second to required interest payments, third
to required principal payments, and then to required payments of any other
Amounts Payable.
Section 4. Corporate Transactions.
4.1. Sale of Assets. The Corporation will not, and will not permit
Deflecto to, sell or otherwise dispose of substantially all of its assets
in a single transaction or series of related transactions other than to an
Affiliate unless (a) in connection therewith this Note is prepaid in full
or (b) the acquiring entity expressly assumes the Corporation's obligations
under this Note; provided, however, that the assuming entity shall (i)
after giving effect to the acquisition have a net worth computed in
accordance with GAAP ("GAAP Net Worth") equal to not less than the
Corporation's GAAP Net Worth immediately prior to the acquisition and (ii)
not be in default under any financial obligations, Upon the assumption by
the acquiring entity of the Corporation's obligations under this Note, the
Corporation shall be released and discharged from its obligations and
liabilities hereunder, without the requirement of further notice or consent
from the Holder.
4.2. Merger. The Corporation will not, and will not permit Deflecto
to, consolidate or merge with or into any other corporation, other than (a)
the merger or consolidation of a Subsidiary with or into the Corporation or
Deflecto, (b) a merger Pursuant to which the Corporation or Deflecto, as
the case may be, is the surviving entity, or (c) a merger or consolidation
in which neither the Corporation nor Deflecto is the surviving entity and
pursuant to which the surviving or consolidated entity unconditionally
assumes each and all of the Corporation's or Deflecto's, as the case may
be, obligations under this Note.
4.3. Change of Control. This Note and all Amounts Payable hereunder
shall be immediately due and payable if the shareholders of the Corporation
or Deflecto on the date of this Note, or any Affiliates of such
shareholders, shall no longer hold at least 25 percent of all the voting
common stock of the Corporation, unless the failure to no longer hold at
least 25 percent of all the voting common stock of the Corporation is a
result of a merger or consolidation which meets the requirements of
Section 4.)
4.4. Dividends. Until this Note and all Amounts Payable hereunder are
paid in full, the Corporation will not make, and will not permit Deflecto
to make, all payments or any other distributions to stockholders of the
Corporation's capital stock as dividends or for the redemption or other
acquisitions of said capital stock or for any other purpose whatsoever
("Dividends ). For purposes of this Section, Dividends shall not include
any of the following payments between the Corporation and any Affiliate:
(a) any payments under any tax sharing agreement in connection with the
filing of consolidated federal and/or state income tax returns, provided
such payments do not exceed the Corporation's separate share of federal and
state income tax liability computed under such agreement, (b) any payments
under any management consulting agreement (a "Consulting Agreement")
between the Corporation or Deflecto and any Affiliate of the Corporation or
Deflecto, provided the annual payments thereunder (i) do not exceed one
percent (1%) of the Corporation's annual net sales on a consolidated basis
if the Corporation is not precluded from paying any Amounts Payable to the
Holder under Section 3.1 or Section 6 of this Note or (ii) do not exceed
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$430,000 if the Corporation is precluded from paying any Amounts Payable to
the Holder under Section 3.1 or Section 6 of this Note, or (c) the payment
of arm's length intercompany arrangements or transactions between the
Corporation or Deflecto and any Affiliate, provided the terms of any said
arrangements or transactions are comparable to those that would have been
accepted by an independent third party.
4.5. Loans Prohibited. So long, as any amount remains outstanding
under this Note, the Corporation shall not make, and shall not permit
Deflecto to make, any loans, advances or other extensions of credit to the
Corporation or any of its Affiliates, or except as expressly permitted by
the terms of this Note, engage in any transaction that would give rise to
any liability or other obligations owing to the Corporation or any of its
Affiliates, other than liabilities or obligations created in the ordinary
course of Deflecto's business.
Section 5. Defaults.
5.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Corporation shall fail to pay within ten Business Days of
the due date thereof any principal of this Note or shall fail to pay
within ten Business Days of the due date thereof any interest or any
other Amounts Payable hereunder and the same shall not have been cured
within 30 days after written notice thereof has been given by the
Holder to the Corporation,
(b) the Corporation shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors; or
(c) an involuntary case or other proceeding shall be commenced
against the Corporation seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 90 days; or an order
for relief shall be entered against the Corporation under the Federal
bankruptcy laws as now or hereafter in effect.
then, and in every such event, subject to the provisions of Section 6, the
Holder may, by notice to the Corporation and to the holders of Senior
Indebtedness, declare the principal amount of this Note together with
accrued interest thereon, to be, and such portions of the principal amount
of this Note (and accrued interest thereon) shall thereupon become, due and
payable on the tenth Business Day following delivery of such notice to the
Corporation and to the holders of Senior Indebtedness without presentment,
demand, protest or further notice of any kind, all of which are hereby
waived by the Corporation; provided, that (x) the Events of Defaults
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specified in paragraph (a) will be subject to Section 3, and (y) in the
case of any of the Events of Default specified in paragraph (b) or (c),
such portions of the principal amount of this Note (together with accrued
interest thereon) shall immediately (and without notice) become due and
payable without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Corporation.
Section 6. Subordination.
6.1. Loans Subordinated to Senior Indebtedness. Notwithstanding any
provision of this Note to the contrary, the Corporation covenants and
agrees, and the Holder by acceptance of this Note likewise covenants and
agrees, subject to the terms of Section 6.2(f), that all Amounts Payable
shall be subordinated to the extent set forth in this Section 6 to the
prior payment in full, in cash or cash equivalents satisfactory to the
holders of Senior Indebtedness, of all Senior Indebtedness. This Section 6
shall constitute a continuing offer to and covenant with all persons who
become holders of, or continue to hold, Senior Indebtedness (irrespective
of whether such Senior Indebtedness was created or acquired before or after
the issuance of this Note). The provisions of this Section 6 are made for
the benefit of all present and future holders of Senior Indebtedness (and
their successors and assigns), and shall be enforceable by them directly
against the Holder.
6.2. Priority and Payment Over of Proceeds in Certain Events.
(a) Upon any payment or distribution of assets of the
Corporation, whether in cash, property, securities or otherwise, in
the event of any dissolution, winding up or total or partial
liquidation, reorganization, arrangement, adjustment, protection,
relief or composition, or assignment for the benefit of creditors of
the Corporation, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership, reorganization, relief or other proceedings
or upon an assignment for the benefit of creditors or any other
marshaling of all or part of the assets and liabilities of the
Corporation (the foregoing events herein collectively referred to as
an "Insolvency Event"), all Senior Indebtedness shall First be paid in
full, in cash, or payment provided for in cash equivalents in a manner
satisfactory to the holders of Senior Indebtedness, before the Holder
shall be entitled to receive any payment or distribution of assets of
the Corporation relating to any Amounts Payable. Upon any Insolvency
Event, any payment or distribution of assets of the Corporation,
whether in cash, property, securities or otherwise, to which the
Holder would be entitled relating to any Amounts Payable, except for
the provisions of this Section 6, shall be made by the Corporation or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, directly to the
holders of the Senior Indebtedness or their representatives for
application to the payment or prepayment of all such Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
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(b) If (i) there has occurred and is continuing a default in the
payment of all or any portion of any Senior Indebtedness, unless and
until such default shall have been cured or waived, the Corporation
shall not make any payment on or with respect to any Amounts Payable
or acquire this Note (or any portion thereof) for cash, property,
securities or otherwise; or (ii) an event (not involving the
non-payment of any Senior Indebtedness) shall have occurred or, with
the (living of notice, or passage of time, or both, would occur, that
would allow holders of any Senior Indebtedness to accelerate or
otherwise demand the payment thereof, and the holders of the Senior
Indebtedness give notice of such event to the Corporation (the date
that such notice is received by the Corporation is the "Notice Date"),
the Corporation shall not make any payment on or with respect to any
Amounts Payable or acquire this Note (or any portion hereof) for cash,
property, securities or otherwise during the period (the "Blockage
Period") commencing on the Notice Date and ending on the earlier of
(A) two years after the Notice Date if at the end of such two year
period such event is not the subject of judicial proceedings and such
Senior Indebtedness shall not have been accelerated, (B) the date such
event is cured or waived to the satisfaction of the holders of the
Senior Indebtedness, or (C) the date the holders of such Senior
Indebtedness shall have given notice to the Corporation of the
voluntary termination of the Blockage Period. By virtue of accepting
this Note and the benefits hereof, during any time period during which
payment of any part of Amounts Payable due under this Note is
prohibited by any of the terms of this Note, the Holder shall not be
entitled, and will not take any action, including any judicial
process, to accelerate, demand payment or enforce any Indebtedness in
respect of this Note or any other claim with regard to any Amounts
Payable. For purposes of clause (1) of the first sentence of this
Section 6.2(b), (1) no default in the payment of the principal portion
of Senior Indebtedness which is held by any Affiliate of the
Corporation shall be deemed to have occurred so long as principal
payments in at least the amounts set forth in Exhibit A have occurred
(and such amounts have not been reborrowed by the Corporation and such
amounts do not need to be reborrowed to make a payment of any Amounts
Payable hereunder); and (2) any payments of principal on the Senior
Indebtedness held by any Affiliate of the Corporation shall be
considered payments of the principal amounts set forth on Exhibit A in
the order of maturity. The previous sentence shall not apply to any
(x) Senior Indebtedness which is held by an entity that is not an
Affiliate of the Corporation or (y) acceleration of Senior
Indebtedness caused by an event described in clause (10) of this
Section 6.2(b).
(c) If, notwithstanding the foregoing provisions prohibiting
payments or distributions, the Holder shall have received any payment
of, or on account of, any Amounts Payable that was prohibited by this
Section 6, before all Senior Indebtedness shall have been paid in
full, then and in such event such payments or distributions shall be
received and held in trust for the holders of the Senior Indebtedness
and promptly paid over or delivered to the holders of the Senior
Indebtedness remaining unpaid thereof to the extent necessary to pay
in full, in cash or cash equivalents satisfactory to the holders of
the Senior Indebtedness, such Senior Indebtedness in accordance with
its terms after giving effect to any concurrent payment or
distribution to the holder of such Senior Indebtedness; provided, that
any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of
Senior Indebtedness.
(d) So long as any Senior Indebtedness remains outstanding, or
the commitment to make credit extensions of said Senior Indebtedness
shall not have been terminated, the Holder will not be entitled to
take, demand, or receive, directly or indirectly, by setoff,
redemption, purchase or in any manner, any voluntary prepayment or
other payment of any Amounts Payable in amounts or in a manner which
are in violation of the provisions of this Section 6.
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(e) Upon any payment or distribution of assets referred to in
Section 6.2(a), the Holder shall be entitled to rely upon any order or
decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, and
upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making any such payment or distribution
of assets, delivered to the Holder for the purpose of ascertaining the
persons entitled to participate in such distribution of assets, the
holders of Senior Indebtedness and other Indebtedness of the
Corporation, the amount thereof or payable thereon, the amount of
amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 6.
(f) Notwithstanding anything contained in this Note to the
contrary, the failure of the Corporation to deliver written notice to
the Holder of any event of default under the Senior Indebtedness shall
preclude the holders of Senior Indebtedness from recovering from the
Holder (and any future holder) any Amounts Payable that may be paid to
the Holder (and any future holder) by the Corporation after the date
of a default under the Senior Indebtedness and prior to such written
notice of default, it being understood and agreed by the Corporation
that any Amounts Payable paid to the Holder (and any future holder)
prior to the delivery to the Holder from the Corporation of written
notice of any event of default under the Senior Indebtedness shall be
the property of the Holder (or any future holder) and not be subject
to set-off, recoupment or disgorgement. The Corporation shall promptly
deliver written notice to the Holder (and any future holder) of the
Corporation's receipt of any default under the Senior Indebtedness.
6.3. Rights of Holders of Senior Indebtedness Not To Be Impaired, etc.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce the subordination and other terms and
conditions provided herein shall at any time in any way be prejudiced
or impaired by any act or failure to act by any such holder, or by any
noncompliance by the Corporation, with the terms and provisions and
covenants herein regardless of any knowledge thereof that any such
holder may have or otherwise be charged with, subject to the
limitations of paragraph 6.2(f).
(b) This Section 6 may not be amended without the written consent
of each holder of the Senior Indebtedness and of the Holder, and any
purported amendment without such consent shall be void. No holder of
Senior Indebtedness shall be prejudiced in such holder's right to
enforce the subordination and other terms and conditions of this Note
by any act or failure to act by the Corporation or anyone in custody
of its assets or property.
6.4. Subrogation. Subject to and upon the payment in full of all
Senior Indebtedness, the Holder shall be subrogated, to the extent of
payments or distributions made to the holders of Senior Indebtedness
pursuant to or by reason of this Section 6, to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of
the Corporation made on such Senior Indebtedness until all amounts due
under this Note shall be paid in full, and for the purposes of such
subrogation, no payments or distributions to holders of such Senior
Indebtedness of any cash, property or securities to which the Holder would
be entitled except for the provisions of this Section 6, and no payment
over pursuant to the provisions of this Section 6 to holders of such Senior
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Indebtedness by the Holder, shall, as among the Corporation, its creditors
(other than holders of such Senior Indebtedness) and the Holder be deemed
to be a payment by the Corporation to or on account of such Senior
Indebtedness, it being understood that the provisions of this Section 6 are
solely for the purpose of defining the relative rights of the holders of
such Senior Indebtedness, on the one hand, and the Holder, on the other
hand.
6.5. Obligations of the Corporation Unconditional. Nothing contained
in this Note is intended to or shall impair, as between the Corporation and
the Holder, the obligation of the Corporation, which is absolute and
unconditional, to pay to the Holder all Amounts Payable, as and when the
same shall become due and payable in accordance with their terms, or to
affect the relative rights of the Holder and other creditors of the
Corporation (other than the holders of Senior Indebtedness), except as
provided in Section 6.2(b).
6.6. Section 6 Not To Prevent Events of Default. The failure to make a
payment of any Amounts Payable by reason of any provision of this Section 6
shall not be construed as preventing the Occurrence of an Event of Default
under Section 5.1 hereof, except as provided in Section 6.2(b).
6.7. Additional Rights of Holders of Senior Indebtedness. If the
Senior Indebtedness has not been paid in full, in cash or cash equivalents
satisfactory to the holders of Senior Indebtedness, at a time in which the
Corporation is subject to an Insolvency Event, (a) the holders of the
Senior Indebtedness are hereby irrevocably authorized, but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution received in respect of any such Insolvency Proceeding and give
acquittance therefor and to file claims and proofs of claim, as their
interests may appear, and (b) the Holder shall duly and promptly take, for
the account of the holders of the Senior Indebtedness, as their interests
may appear, such actions as the holders of the Senior Indebtedness may
request to collect and receive all Amounts Payable by the Corporation in
respect of this Note and to file appropriate claims or proofs of claim in
respect of this Note. Upon request by the Corporation, the Holder of this
Note shall deliver to the holders of Senior Indebtedness or parties
contemplating becoming holders of Senior Indebtedness a written statement
confirming that (i) the provisions (including the subordination provisions)
of this Note are in full force and effect; and (ii) that such party is or
will be entitled to rely upon and enjoy the benefits of the provisions
(including the subordination provisions) of this Note as a holder of Senior
Indebtedness.
6.8. Senior Indebtedness Changes. By virtue of accepting this Note and
the benefits hereof, the Holder hereby waives any and all notice of
renewal, extension or accrual of any of the Senior Indebtedness, present or
future, and agrees and consents that without notice to or consent of the
Holder: (a) the obligations and liabilities of the Corporation or any other
party or parties under any of the Senior Indebtedness may, from time to
time, in whole or in part, be renewed, refinanced, replaced, extended,
refunded, modified, amended, accelerated, compromised, supplemented,
terminated, increased, decreased, sold, exchanged, waived or released, (b)
the holders of Senior Indebtedness and their representatives may exercise
or refrain from exercising any right, remedy or power granted by any
document creating, evidencing or otherwise related to the Senior
Indebtedness or at law, in equity, or otherwise, with respect to the Senior
Indebtedness or in connection with any collateral security or lien (legal
or equitable) held, given or intended to be given therefor (including,
without limitation, the right to perfect any lien or security interest
created in connection therewith), (c) any and all collateral security
and/or liens (legal or equitable) at any time, present or future, held,
given or intended to be given for the Senior Indebtedness, and any rights
or remedies of the holders of Senior Indebtedness and their representatives
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in respect thereof, may, from time to time, in whole or in part, be
exchanged, sold, surrendered, released, modified, perfected, unperfected,
waived or extended by the Holders and their representatives; (d) any
balance or balances of funds with any holder of Senior Indebtedness at any
time standing to the credit of the Corporation or any guarantor of any of
the Senior Indebtedness may, from time to time, in whole or in part, be
surrendered or released; all as the holders of Senior Indebtedness, their
representatives or any of them may deem advisable and all without
impairing, abridging, diminishing, releasing or affecting the subordination
to the Senior Indebtedness provided for herein; and (e) the Corporation may
incur any amount or type of Senior Indebtedness (including Senior
Indebtedness owed to Affiliates), or modify, restate, refinance, replace or
amend any Senior Indebtedness from time to time, on terms and conditions
acceptable to the Corporation, without notice to or approval by the Holder.
6.9. Waivers. In the event the holders of Senior Indebtedness elect to
exercise their remedies to liquidate any collateral given to secure the
Senior Indebtedness, the Holder hereby waives any right it may have to
contest the validity of or the value obtained as a result of the exercise
of remedies by the holders of Senior Indebtedness, including, but not
limited to, a foreclosure, a sale pursuant to the Uniform Commercial Code
or the acceptance by the holders of Senior Indebtedness in lieu of
foreclosure. The Holder further waives any right it may have either in or
out of any bankruptcy or similar proceeding to challenge any action taken
by the holders of Senior Indebtedness as either a preference or fraudulent
conveyance and further agrees not to take any active role in such a
proceeding other than the filing of claim any such proceeding which claim
shall be subordinate (to the extent set forth above) to the claims of the
holders of Senior Indebtedness.
Section 7. Definitions.
For purposes of this Note, the following terms have the meanings
set forth below:
"Affiliate" means Jordan Industries, Inc. and its respective
direct and indirect Subsidiaries, and any other person that directly, or
indirectly through one or more intermediaries, controls or is controlled by
or is under common control with them.
"Amounts Payable" means all principal of, interest on, premium, if
any, fees, costs, expenses, indemnities or any other amounts due (including
any voluntary prepayment) from the Corporation under this Note, and all
claims against or liabilities of the Corporation in respect of this Note.
"Business Day" means any day except a Saturday, Sunday or other
days on which commercial banks in New York City are required or authorized
by law to close.
"Capital Expenditures" means the capital expenditures of the
Corporation, determined in accordance with generally accepted accounting
principles, consistently applied.
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"Closing Date" means the date on which the transactions
contemplated by the Deflecto Purchase Agreement are consummated.
"Default" means any condition or event that constitutes an Event
of Default or that with notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Deflecto" means collectively, Deflecto Corporation, an Indiana
corporation, Deflect-O Products Limited, an Ontario corporation, Deflecto
Canada, Ltd. and Literature Display Products, LLC, along with any future
Subsidiaries of any of such companies.
"Deflecto Purchase Agreement" means the Agreement for Purchase and
Sale, dated as of January 23, 1998, among the Corporation and all of the
stockholders of Deflecto, as the same has been or may be amended from time
to time.
"Free Cash Flow" means, for any period, (i) the consolidated net
income (or net deficit) of the Corporation (or any successor to the
Corporation as permitted under Article 4) and its Subsidiaries (excluding,
however, (A) all extraordinary and other non-recurring items of income, but
not loss, and (B) all interest income as reflected in the Corporation's
financial statements), plus (ii) interest (including deferred financing
fees and expense) and other expense in respect of the Corporation's
Indebtedness (including intercompany Indebtedness or Indebtedness owed to
Affiliates) charged, accrued or otherwise allocated against such net income
plus (iii) expenses for amortization charged, accrued or otherwise
allocated against such net income, plus (iv) expenses for depreciation
(including increased depreciation and increased inventory values resulting
from purchase accounting in connection with acquisitions and business
combinations) charged, accrued or otherwise allocated against such net
income; plus (v) any reductions in Working Capital from the beginning to
the end of such period; minus (vi) payments of interest and principal on
Indebtedness (other than required interest and principal payments on this
Note) paid or accrued during such period or otherwise payable on the
applicable payment date; provided, however, the aggregate amount of the
principal payments on the Senior Indebtedness included in the calculation
of Free Cash Flow shall equal the amount set forth on Exhibit A for the
period in question, whether or not paid during such period and whether or
not such payments are greater or less than such amounts set forth on
Exhibit A; minus (vii) any increases in Working Capital from the beginning
to the end of such period; minus (viii) Capital Expenditures during such
period Free Cash Flow will reflect selling, general and administrative
expense, management, consulting and service fees, general and overhead,
allocated to the Corporation by its Affiliates. Free Cash Flow will be
determined by the Corporation's Board of Directors from the Corporation's
financial statements, which will be prepared in accordance with generally
accepted accounting principles, consistently applied. Any calculation or
determination of Free Cash Flow in accordance with the preceding sentence
will be final, binding, conclusive and non-appealable.
"Guarantee" means any guarantee of any Indebtedness of the
Corporation (including any successor thereto by merger) or any Affiliate of
the Corporation, provided, and to the extent that, such Indebtedness is
used by the Corporation or such Affiliate to provide funds for: (i) the
acquisition of all the equity interests of Deflecto, (ii) to provide
Working Capital to or for Deflecto, (iii) to finance capital expenditures
by Deflecto or (iv) to finance acquisitions by the Corporation or Deflecto.
- 10 -
"Indebtedness" means any indebtedness (including, without
limitation, Senior Indebtedness), whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or representing the deferred and unpaid balance of the purchase
price of any property (including pursuant to capital leases), and any
financial hedging obligations, if and to the extent such indebtedness
(other than a financial hedging obligation) would appear as a liability
upon a balance sheet of such person prepared on a consolidated basis in
accordance with generally accepted accounting principles, other than a
trade payable or accrued expense, and also includes, to the extent not
otherwise included, any Guarantee Indebtedness owed to Affiliates will be
Indebtedness for purposes of this Note.
"Maturity Date"' means April 30, 2004, subject to extension to a
later date as provided by the terms of this Note, but in no event shall it
mean a date later than April 30, 2006.
"Note" means this Non-Negotiable Subordinated Note due April 30,
2004.
"Senior Indebtedness" shall mean the principal, interest
(including any interest accruing subsequent to an event specified in Sections
5.1(b) and 5.1(c)), premium, if any, fees (including, without limitation,
any commitment, agency, facility, structuring, restructuring or other fee),
costs, expenses, indemnities, and other amounts due on or in connection
with any Indebtedness of the Corporation (including, without limitation,
any intercompany Indebtedness), now or herewith incurred, or any documents
executed under or in connection therewith, and any amendments,
modifications, deferrals, renewals or extensions of such Indebtedness, and
any amounts owed in respect of any Indebtedness incurred in refinancing,
replacing or refunding the foregoing (including any refinancing, replacing
or refunding with new lenders), unless the terms of such Indebtedness
expressly provide that such Indebtedness is not Senior Indebtedness with
respect to this Note. Nothing in this Note shall restrict an Affiliate of
the Corporation from being a holder of Senior Indebtedness. Indebtedness
owed by the Corporation to Affiliates, to the extent permitted by the terms
of this Note, will be Senior Indebtedness for purposes of this Note. Senior
Indebtedness shall include any payables, accrued expenses, fees and other
amounts due to an Affiliate of the Corporation, to the extent permitted
under the terms of this Note. Senior Indebtedness shall not include any
prohibited loan or other amounts that would be excluded from the definition
of Guarantee if the Corporation was a secondary, rather than a primary,
obligor with respect to such indebtedness. Notwithstanding anything herein
to the contrary, none of the obligations or liabilities of the Corporation
to Holder or any other stockholder of Deflecto Corporation, an Indiana
corporation, shall be included in Senior Indebtedness.
"Subsidiary" of a person means any Corporation or other entity of
which securities or other ownership interests having ordinary voting power
to elect a majority of the Board of Directors or other persons performing
similar functions are at the time directly or indirectly owned by such
person.
"Working Capital" means the difference of (a) the sum of
Corporation's net account receivables, inventories (net of reserves), and
prepaid expenses, minus (b) the sum of accounts payable and accrued
expenses, determined in accordance with generally accepted accounting
principles, consistently applied.
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Section 8. Miscellaneous.
8.1. Notices. All notices, requests and other communications to any
party hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid, and shall be deemed given when so delivered personally, or
sent by facsimile transmission, or if mailed or sent by overnight courier,
upon receipt thereof, as follows:
If to the Corporation to:
Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxxx
c/o Deflecto Holdings, Inc.
Arbor Lake Centre,
Suite 000
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier- 000-000-0000
with a copy to:
X. Xxxxxx Xxxxxx, Esq.
Xxxxxxx X. Xxxx, Esq.
Xxxxx Xxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
If to the Holder, to:
Xxxxxxx X. Xxxxx
000 Xxxx xx Xxxxxx, Xxxx 000
Xxxxxxxx Xxx, Xxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
Xxxx X. Xxxx III
Xxxxxxxxx Xxxx & Xxxxxx
1020 Market Tower
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Telephone: 000-000-0000
Telecopier: 000-000-0000
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Each party may, by notice given in accordance with this Section to the
other party, designate another address or person for receipt of notices
hereunder.
8.2. No Waivers. No failure or delay by the Holder in exercising any
right, power or privilege hereunder or under this Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law. No
notice to or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in related or similar
circumstances requiring such notice.
8.3. Amendments and Waivers. Any provision of this Note may be amended
or waived if, but only if, such amendment or waiver is in writing, signed
by the Corporation and the Holder.
8.4. Successors and Assigns. The provisions of this Note shall be
binding upon and inure to the benefit of the Holder and his heirs,
successors and permitted assigns. Without the prior written consent of the
Corporation and the holders of Senior Indebtedness, the Holder of this Note
agrees that he will not (a) sell, assign, pledge or otherwise transfer, in
whole or in part, directly or indirectly, by operation of law or otherwise,
this Note or any interest therein or (b) create, incur or suffer to exist
any security interest, lien, charge or other encumbrance whatsoever upon
this Note. If requested by a holder of Senior Indebtedness as part of any
consent, the assignee or transferee of the Holder shall agree in writing to
be bound by all of the terms of this Note. The holder hereof hereby waives
proof of reliance hereon by the holders of Senior Indebtedness.
8.5. Replacement Note. Upon receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction or
mutilation of this Note and of a letter of indemnity reasonably
satisfactory to the Corporation from the Holder and upon reimbursement to
the Corporation of all reasonable expenses incident thereto, and upon
surrender or cancellation of this Note, if mutilated, the Corporation will
make and deliver a new Note of like tenor in lieu of such lost, stolen,
destroyed or mutilated Note.
8.6. Corporation's Obligations. The Holder agrees and acknowledges
that this Note and the Corporation's obligations hereunder and for all
Amounts Payable are solely obligations and liabilities of the Corporation.
None of the Corporation's directors, officers, employees, stockholders,
advisors, consultants and affiliates or any other persons shall be
obligated or liable in respect of this Note or any Amounts Payable, and
Holder hereby releases them from any such obligation of liability.
8.7. LITIGATION. THIS NOTE SHALL BE GOVERNED BY, CONSTRUED, APPLIED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
AND NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN
THAT OF ILLINOIS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR
ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF
THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR
DECREE OF ANY FOREIGN JURISDICTION, SHALL BE INTERPOSED IN ANY ACTION
HEREON. SUBJECT TO SECTION 8.8, THE PARTIES AGREE THAT ANY ACTION OR
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PROCEEDING TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE COMMENCED IN THE
STATE COURTS, OR IN THE UNITED STATES DISTRICT COURTS IN CHICAGO, ILLINOIS.
THE PARTIES CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER
IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.7 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY ACTION UNDER THIS AGREEMENT IN ANY OTHER
JURISDICTION.
8.8. ARBITRATION. THE HOLDER HEREBY WAIVES AND SHALL NOT SEEK JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, CLAIM, COUNTERCLAIM, DEFENSE OR OTHER
LITIGATION OR DISPUTE UNDER OR IN RESPECT OF THIS NOTE. THE HOLDER AGREES
THAT ANY SUCH DISPUTE RELATING TO OR IN RESPECT OF THIS NOTE, ITS
NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF
CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS NOTE, SHALL BE
SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO,
ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE
AND BINDING ON THE PARTIES. UPON THE CONCLUSION OF ARBITRATION, THE PARTIES
MAY APPLY TO ANY APPROPRIATE COURT OF THE TYPE DESCRIBED IN SECTION 8.7 TO
ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION.
DEFLECTO HOLDINGS, INC.
By
-----------------------------
Xxxxxx Xxxxxx, Vice President
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EXHIBIT A
SENIOR DEBT REPAYMENT SCHEDULE
------------------------------
YEAR AMOUNT
---- ------
1 $300,000
2 $800,000
3 $1,400,000
4 $2,200,000
5 $2,500,000
6 $2,500,000
7 $5,800,000
8 $7,000,000
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