1
Exhibit 4.1
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS SECURITY, INCLUDING PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IS SUBJECT TO THE TERMS AND CONDITIONS OF A
SUBORDINATION AGREEMENT DATED OF EVEN DATE HEREWITH AMONG THE INITIAL HOLDER OF
THIS SECURITY, SUNTRUST BANK, AS AGENT FOR THE SENIOR LENDERS, AND OTHERS. A
COPY OF THE SUBORDINATION AGREEMENT MAY BE OBTAINED FROM THE ISSUER UPON
REQUEST.
PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS SECURITY, INCLUDING PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IS SUBJECT TO THE TERMS AND CONDITIONS OF A
SUBORDINATION AGREEMENT DATED OF EVEN DATE HEREWITH AMONG THE INITIAL HOLDER OF
THIS SECURITY, SUNTRUST BANKS, INC., AND OTHERS. A COPY OF THE SUBORDINATION
AGREEMENT MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
SECURED JUNIOR SUBORDINATED NOTE DUE 2006
$4,500,000.00 July 23, 2001
FOR VALUE RECEIVED, Catalina Lighting, Inc., a Florida corporation (the
"Issuer"), hereby promises to pay to the order of Sun Catalina Holdings, LLC, a
Delaware limited liability company (the "Purchaser"), or any registered assigns
(including the Purchaser, the "Holder"), the sum of $4,500,000.00, plus such
additional amounts of principal as are added to this Note pursuant to Section
1(b) below, in immediately available funds and in lawful money of the United
States of America, together with interest thereon, all as provided in this
Secured Junior Subordinated Note Due 2006 (this "Note"). This Note is being
issued in connection with the consummation of the transactions contemplated by
the Amended and Restated Note Purchase Agreement dated July 23, 2001 between the
Issuer and the Purchaser (as it may be amended, supplemented or otherwise
modified and in effect from time to time, the "Note Purchase Agreement"). All
capitalized terms used and not otherwise defined in this Note shall have the
meanings set forth in the Note Purchase Agreement. This Note and any Notes
issued upon transfer or exchange of this Note are collectively referred to
herein as the "Notes".
2
1. Payment of Interest; Default Rate.
(a) So long as no Event of Default shall have occurred and be
continuing, interest will accrue on the unpaid principal amount of the Note at a
rate per annum equal to 12.0%.
(b) Accrued and unpaid interest shall compound quarterly,
commencing on September 30, 2001 and continuing on the last day of each December
31, March 31, June 30 and September 30 thereafter through and including December
31, 2002, by adding the accrued and unpaid interest to the principal amount of
this Note and accruing interest on the increased principal amount thereafter.
(c) Issuer will pay interest in cash (i) quarterly in arrears,
commencing on March 31, 2003 and continuing on each June 30, September 30,
December 31 and March 31 thereafter, (ii) on the Maturity Date, and (iii)
thereafter on demand. Subject to paragraph (b) above, Issuer will pay the
principal of, and interest on, the Note in cash.
(d) In the event that any Event of Default shall occur and be
continuing, then, in addition to the rights and remedies available to the Holder
under the Note Purchase Agreement, this Note, the other Investment Documents and
Applicable Laws, the Issuer shall pay interest in cash on the unpaid principal
balance of, and accrued and unpaid interest on, this Note at a rate per annum
equal to the lesser of 15.0% and the maximum rate of interest permissible under
Applicable Law from the date of an Event of Default until such Event of Default
has been cured.
(e) Notwithstanding anything set forth above, in the event
that shares of Common Stock of the Issuer are not duly authorized and reserved
for the issuance of all Warrant Shares by December 31, 2001, interest will not
compound and will be due and payable in cash, the interest rate shall increase
to 15% per annum, retroactively to the date this Note was issued, and the
interest payment that compounded on September 30, 2001 shall be due and payable
immediately in cash, with accrued interest. When the Issuer has duly authorized
and reserved sufficient shares of its Common Stock for the aggregate number of
Warrant Shares that could be issued upon the exercise of the Warrant, the
interest rate will reduce back to 12% per annum, payable quarterly, and
compounding until March 31, 2003.
2. Payment of Principal; Maturity Date. The Issuer agrees to pay in full
the entire outstanding principal balance of this Note, outstanding prepayment
premium, if any, accrued and unpaid interest and all other unpaid amounts owing
under this Note on July 23, 2006 (the "Maturity Date").
3. Optional Prepayments.
(a) This Note shall be non-redeemable, and is not subject to
prepayment, prior to July 23, 2003 (the "Prepayment Date").
2
3
(b) The Issuer may voluntarily prepay the principal balance of
and accrued but unpaid interest on this Note, at any time following the
prepayment date, in part (in minimum increments of $500,000) or in whole, at
105% of the principal balance and accrued but unpaid interest being prepaid.
Partial prepayments shall be applied first to the 5% prepayment premium provided
in this Section 3(b), next to accrued but unpaid interest, and last to
principal. If the Issuer elects to prepay all or any portion of this Note, the
Issuer shall furnish written notice to the Holder with respect to each voluntary
prepayment not less than thirty (30) days prior to the date of prepayment. Such
notice shall specify the principal balance of this Note to be prepaid on such
date and shall be irrevocable.
(c) To the extent permitted by the Senior Credit Documents if
the Senior Debt is outstanding, if the Issuer receives net cash proceeds from
the issuance of equity securities in one or more public offerings occurring
after the Closing Date, the Issuer shall prepay the outstanding principal of the
Note and the note issued in connection with the Senior Subordinated Documents,
pro rata based on the outstanding principal amount thereof, by an amount equal
to fifty percent (50%) of such net cash proceeds up to but not exceeding the
principal and accrued interest outstanding. Any such prepayment shall be
accompanied by the payment of accrued and unpaid interest on the principal
amount prepaid and no Prepayment Premium shall be due with respect to such
payment.
(d) Prepayment of the Notes shall not preclude the Purchaser
from continuing to own the Warrant or from exercising any of its rights pursuant
to the Warrant or the Registration Rights Agreement at a later date.
4. Holder Entitled to Certain Benefits. This Note is one of the "Notes"
referred to in the Note Purchase Agreement and the Holder is entitled to the
rights and benefits thereunder, as well as all rights and benefits hereunder,
including, without limitation, the right to accelerate the outstanding principal
balance of, premium, if any, accrued and unpaid interest on, and all other
amounts owing under this Note upon the occurrence of an Event of Default. In
addition, the payment and performance of this Note is guaranteed by certain of
the Subsidiaries (the "Guarantor Subsidiaries") of the Issuer and is secured by
a lien on the properties and assets of the Issuer and its Subsidiaries, all
pursuant to and in accordance with the terms of the Collateral Documents.
5. Manner of Payment. Payments of principal, interest and other amounts
due under this Note shall be made no later than 12:00 noon (prevailing local
time in New York, New York) on the date when due, in lawful money of the United
States of America, by wire transfer in funds immediately available at the place
of payment to such account as the Holder may designate in writing to the Issuer.
All such payments shall be made without any deduction whatsoever, including,
without limitation, any deduction for set-off, recoupment, counterclaim or
taxes. Any payments received after 12:00 noon (prevailing local time in New
York, New York) shall be deemed to have been received on the next succeeding
Business Day. Any payments due hereunder which are due on a day which is not a
Business Day shall be payable on the immediately preceding Business Day,
together with all accrued and unpaid interest through the actual due date of
payment.
3
4
6. Maximum Lawful Rate of Interest. The rate of interest payable under
this Note shall in no event exceed the maximum rate permissible under Applicable
Law. If the rate of interest payable on this Note is ever reduced as a result of
this Section 6 and at any time thereafter the maximum rate permitted under
Applicable Law exceeds the rate of interest then provided for in this Note, then
the rate provided for in this Note shall be increased to the maximum rate
provided for under Applicable Law for such period as is required so that the
total amount of interest received by the Holder is at least that which would
have been received by the Holder but for the operation of the first sentence of
this Section 6.
7. Affirmative Covenants. The Issuer covenants and agrees that, so long
as any Obligations under the Note remain outstanding, it shall perform, comply
with and observe each of the covenants set forth in this Section 7, as
applicable.
(a) Payment of Note and Other Obligations. The Issuer shall
fully and timely pay all Obligations owing pursuant to the terms of this Note
(including, without limitation, all principal thereof, premium, if any, and
interest thereon), the Warrant, the Subsidiary Guarantee and the other
Investment Documents (other than the Warrant and the Registration Rights
Agreement), in each case on the dates and in the manner provided for herein and
therein.
(b) Performance of Investment Documents. The Catalina Entities
party thereto shall perform, comply with and observe all obligations under this
Note and each other Investment Document.
(c) Information Reporting Requirements.
(i) So long as Issuer is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, Issuer shall deliver to
Holder, on the same day as filed with the SEC, all documents and reports as
required to be filed with the SEC. In the event Issuer is no longer subject to
any of the aforementioned reporting requirements, Issuer will provide to Holder
such information and at such time as otherwise would be required to be filed
with the SEC if the Issuer were subject to the reporting requirements of Section
15(d) of the Exchange Act; and
(ii) As soon as possible (and in any event within two
(2) Business Days) after Issuer obtains knowledge thereof, Issuer shall give
notice to the Holder of the occurrence of any event, act, development or
condition which constitutes a Default or Event of Default or any "default" or
"event of default" under the terms of any Other Debt Documents. Each such notice
shall specify in reasonable detail the nature of the event, act, development or
condition, Default, Event of Default, default, event of default, and what action
Issuer or any other Person is taking or proposes to take to cure the same;
(iii) to the extent not covered above, promptly after
the sending thereof, copies of all financial statements, reports or other
information sent to any lender under the Senior Credit Documents;
4
5
(iv) promptly upon request of Purchaser, such other
information that the Company has compiled respecting the condition or
operations, financial or otherwise, of the Issuer or any of its Subsidiaries as
the Purchaser may from time to time reasonably request, including, without
limitation financial projections, appraisals, bank presentations, information on
derivatives, hedging and interest rate exposure, and other indebtedness.
(d) Regulatory Reports. Issuer shall, and shall cause, Ring
Limited, a limited company organized under the laws of England and Wales,
Catalina International Limited (f/k/a Catalina International Plc), a limited
company organized under the laws of England and Wales, and Catalina Lighting
Canada (1992), Inc., corporation incorporated under the laws of Quebec, each of
its top-tier subsidiaries in each of Canada, the United Kingdom and China and
any other material top-tier direct or indirect subsidiary of Issuer created or
acquired at any time after the Closing (together, the "Top-Tier Subsidiaries")
shall timely file with any Governmental Authority all documents, reports or
informational filings required to be filed pursuant to any material permit,
license or other Authorization and where failure to comply could reasonably have
a Material Adverse Effect.
(e) Compliance with Laws; Consents. The Issuer and the
Top-Tier Subsidiaries shall comply at all times with all Applicable Laws and
governmental orders relating to the operation of their business and the
ownership of their properties in the states or other jurisdictions in which they
conduct their respective businesses, except where failure to comply does not
have a Material Adverse Effect. The Issuer and the Top-Tier Subsidiaries shall
obtain and maintain all Consents necessary in connection with the execution,
delivery and performance of the Investment Documents, the consummation of the
transactions therein contemplated and the conduct of their business and the
ownership of their properties, except where failure to comply does not have a
Material Adverse Effect.
(f) Legal Existence. Except where failure to comply does not
have a Material Adverse Effect, Issuer and each Top-Tier Subsidiary shall at all
times do or cause to be done all things necessary to (a) become or remain duly
qualified and in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary and (b) preserve, renew and keep in full
force and effect all of its Authorizations.
(g) Books and Records. Issuer shall maintain proper books of
record and account in which full, true and complete entries in conformity with
GAAP and all requirements of Applicable Laws shall be made of all material
dealings and transactions in relation to its business and activities.
(h) Maintenance of Properties. The Issuer and the Top-Tier
Subsidiaries shall maintain and preserve all of their properties that are
necessary or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all material personal property leases to which each of them is a
party as lessee or under which each of them occupies property, so as to prevent
any loss or forfeiture thereof or thereunder. The Issuer and the Top-Tier
Subsidiaries shall make all payments and otherwise perform all of their
obligations under all leases of material real property,
5
6
and all leases of material personal property, to which Issuer and any Top-Tier
Subsidiary is a party, keep such leases in full force and effect and not permit
such leases to expire, lapse or be terminated (or any rights to renew such
leases to be forfeited or canceled), notify the Holder of any default by any
party thereto and cooperate with the Holder in all respects to cure any such
default. The Issuer and the Top-Tier Subsidiaries shall pay and discharge each
lawful claim which, if unpaid, would by law become a Lien (other than a
Permitted Lien) upon its property.
(i) Insurance. The Issuer and the Top-Tier Subsidiaries shall
maintain (with financially sound and reputable insurers) policies of insurance,
coverage amounts and related terms and conditions normally maintained by
companies engaged in the same or similar business as the Issuer and the Top-Tier
Subsidiaries against loss or damage and such other policies of insurance and
coverage amount as may be reasonably requested by the Holder. Such insurance
shall include, without limitation, comprehensive general liability, fire and
extended coverage, property damage, workers' compensation, flood insurance (if
customarily maintained in locations in which Issuer or any Top-Tier Subsidiary
is located), earthquake loss insurance, environmental liability insurance,
business interruption insurance (either for loss of revenues or for additional
expenses) and directors and officers liability insurance. In addition, the
Issuer and each Top-Tier Subsidiary shall maintain such insurance as is
customary for similar businesses and maintain such other insurance as may be
reasonably requested by the Holder. All insurance covering liability of the
Catalina Entities (other than insurance against the health or welfare of the
employees of any such Catalina Entity) shall name the Holder as an additional
insured to the fullest extent (if any) permitted under the terms of such
policies. All insurance covering property subject to a Lien in favor of the
Holder shall name the Holder as a loss payee to the fullest extent (if any)
permitted under the terms of such policies and, with respect to any casualty or
loss, and to the fullest extent (if any) permitted under the terms of such
policies, provide that the full amount of insurance proceeds shall be payable to
the Holder.
(j) Taxes. The Issuer and each Top-Tier Subsidiary shall pay
and discharge promptly when due all Taxes imposed upon it or any of its or their
properties or in respect of any of its franchises, business, income or property
before any penalty shall be incurred with respect to such Taxes; provided,
however, that the Issuer and the Top-Tier Subsidiaries need not pay or discharge
any such Tax so long as (a) the validity or amount thereof is being contested in
good faith and by appropriate proceedings, (b) such Person's outside Tax counsel
shall have advised it in writing that it has a reasonable legal basis for
contesting the validity or amount of such Tax and (c) reserves as may be
required by GAAP shall have been made therefor.
(k) Post-Closing Lien Search. No later than 60 days after the
Closing Date, Issuer shall deliver to the Holder copies of UCC lien searches
that show the UCC-1 financing statements filed by or on behalf of the Holder in
connection with this financing and the other Investment Documents (other than
the Warrant and the Registration Rights Agreement).
(l) Additional Catalina Entities. The Issuer shall cause any
direct or indirect Subsidiary of any Catalina Entity formed, created or acquired
at any time after the Closing to execute and deliver to the Purchaser promptly
(and in any event within three (3) days after such formation, creation or
acquisition): (a) a joinder to the Subsidiary Guaranty, in form
6
7
and substance satisfactory to the Holder, pursuant to which such Subsidiary
would become a Guarantor; (b) a joinder to the Security Agreement in form and
substance satisfactory to the Holder, pursuant to which such Subsidiary would
xxxxx x Xxxx in all of its assets in favor of the Holder; (c) a joinder to the
Pledge Agreement, in form and substance satisfactory to the Holder, pursuant to
which the shareholder of such Subsidiary would pledge all of the shares of
capital stock of such Subsidiary in a form acceptable to the Purchaser, or such
lesser percentage that would not result in a material adverse tax consequence to
the Issuer and, subject to the rights, if any, of the Senior Lender, deliver to
the Purchaser, certificates representing all of the Capital Stock of such
Subsidiaries (and any Subsidiaries thereof) and undated stock powers executed in
blank; (d) such other agreements, instruments, approvals or other documents as
may be requested by the Holder in order to create, perfect, establish, and
maintain the second priority (behind and subject only to the Liens, if any, of
the Senior Lenders) of any Lien in favor of the Holder to effect the intent that
such Subsidiary shall become bound by all of the terms, covenants and agreements
contained in the Collateral Documents and that all property and assets of such
Subsidiary shall become Collateral for the Obligations; and (e) such additional
agreements, instruments, approvals and documents, and legal opinions, as the
Purchaser may request to effect the intent that such Subsidiary shall become
bound by all of the terms, covenants and agreements contained in this Agreement
and the other Investment Documents. In addition, within five (5) calendar days
after such formation, creation or acquisition of a Subsidiary of any Catalina
Entity, each Catalina Entity shall take whatever action (including, without
limitation, the recording of mortgages, the filing of Uniform Commercial Code
financing statements, the giving of notices and the endorsement of notices on
title documents) may be necessary or advisable in the opinion of the Holder to
vest in the Holder valid and subsisting Liens on and security interests in all
property and assets of such Subsidiary, enforceable against all third parties in
accordance with their terms (but subject to the Liens, if any, of the Senior
Lenders).
(m) Further Assurances. Promptly upon request by the Holder,
the Issuer shall, and shall cause each Subsidiary to, do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all
such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of
trust, trust deeds, notices of assignment, transfers, certificates, assurances
and other instruments as the Holder may reasonably require from time to time in
order to (A) carry out more effectively the purposes of the Investment
Documents, (B) to the fullest extent permitted by applicable law, subject each
Catalina Entity's properties, assets, rights or interest to the Liens now or
hereafter intended to be covered by any of the Collateral Documents, (C) perfect
and maintain the validity, effectiveness and priority of any of the Collateral
Documents and any of the Liens intended to be created thereunder and (D) assure,
convey, grant, assign, transfer, preserve, protect and confirm more effectively
unto the rights granted or now or hereafter intended to be granted to the Holder
under any Investment Document or under any other instrument executed in
connection with any Investment Document to which any Catalina Entity is to be a
party including, without limitation, the following:
(i) (A) Prior to the Hong Kong Reorganization, the
Issuer shall, at the request of the Purchaser, pledge 66% of the voting stock of
Trade World Industrial and Catalina Industrial and 100% of the non-voting stock
of Trade World Industrial Ltd., a Hong Kong company, and Catalina Industrial
Ltd., a Hong Kong company, of to secure the Subordinated Debt, and (B) after the
Hong Kong Reorganization, the Issuer shall amend those
7
8
share pledges referred to in clause (A) above such that the Issuer shall pledge
66% of the voting stock and 100% of the non-voting stock of Go-Gro Industries
Limited, a Hong Kong company, to secure the Obligations under the Investment
Documents (other than the Warrant and the Registration Rights Agreement);
(ii) Ring Limited shall, at the request of the
Purchaser, and provided that such pledge does not result in a material tax
liability to the Catalina Entities, pledge 66% of the voting stock and 100% of
the non-voting stock of each of Lancer Products Limited, a corporation organized
under the laws of England and Wales (Registered in England No. 1358125), Grove
Products (Caravan Accessories) Limited, a corporation organized under the laws
of England and Wales (Registered in England No. 1148888), P H Products Limited,
a corporation organized under the laws of England and Wales (Registered in
England No. 3344286), Arctic Products Limited, a corporation organized under the
laws of England and Wales (Registered in England No. 1582704), Van Line Limited,
a corporation organized under the laws of England and Wales (Registered in
England No. 1601077), Lighten Point Corporation Europe Limited, a corporation
organized under the laws of England and Wales (Registered in England No.
1457632), BMAC Limited, a corporation organized under the laws of England and
Wales (Registered in England No. 226513) to secure the Obligations under the
Investment Documents (other than the Warrant and the Registration Rights
Agreement); or
(iii) Subject to the provisions of the Senior Credit
Documents and the Senior Subordinated Documents, the Issuer shall, at the
request of the Purchaser, effect a recapitalization of any of the Subsidiaries
to better perfect and maintain the validity, effectiveness and priority of any
of the Collateral Documents and any of the Liens intended to be created
thereunder.
(n) Attendance at Board Meetings. The Issuer agrees to give
Purchaser at least seven (7) days prior written notice or such shorter period of
time equal to the days of notice as is given to the directors of the Issuer, of
any meeting of its Board of Directors, and agrees to permit Purchaser to attend
all such meetings as an observer.
(o) Mortgage on Tupelo Warehouse. The Issuer shall, as soon as
practicable but in any event on or before the forty-fifth (45) day after the
Closing Date, execute and deliver all Tupelo Warehouse Mortgage Documents (as
defined below) required by the Purchaser in respect of the Tupelo Warehouse (as
defined below), together with a mortgage policy in form and substance and in an
amount satisfactory to the Purchaser. "Tupelo Warehouse" shall mean the
warehouse and related real and personal property of the Issuer located at One
Catalina Way, Tupelo, Mississippi. "Tupelo Warehouse Mortgage Documents" means,
collectively, the following in respect of the Tupelo Warehouse: (i) each deed of
trust, mortgage, deed to secure debt or similar instrument conveying to the
Purchaser, or to a trustee for its benefit, a lien on the Tupelo Warehouse, (ii)
each assignment of leases and rents or similar instrument conveying to the
Purchaser, or to a trustee for its benefit, an assignment of all rents and
leases derived from the Tupelo Warehouse; and (iii) all other documents,
instruments and agreements as required to be executed and/or delivered pursuant
to the terms hereof or thereof, in order to give effect to, or supplement, the
foregoing.
8
9
(p) Mortgage on Miami Property. The Issuer shall, as soon as
practicable but in any event on or before the forty fifth (45) day after the
Closing Date, execute and deliver all Miami Property Mortgage Documents (as
defined below) required by the Purchaser in respect of the Miami Property (as
defined below), together with a mortgage policy in form and substance and in an
amount satisfactory to the Purchaser. "Miami Property" shall mean the building
and related real and personal property of the Issuer located at 00000 X.X. 00xx
Xxxxxx, Xxxxx, Xxxxxxx. "Miami Property Mortgage Documents" means, collectively,
the following in respect of the Miami Property: (i) each deed of trust,
mortgage, deed to secure debt or similar instrument conveying to the Purchaser,
or to a trustee for its benefit, a lien on the Miami Property, (ii) each
assignment of leases and rents or similar instrument conveying to the Purchaser,
or to a trustee for its benefit, an assignment of all rents and leases derived
from the Miami Property; and (iii) all other documents, instruments and
agreements as required to be executed and/or delivered pursuant to the terms
hereof or thereof, in order to give effect to, or supplement, the foregoing.
8. Negative and Financial Covenants.
(a) Transactions with Affiliates. The Issuer will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Issuer or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties, (b) transactions
between or among the Borrower and its wholly-owned Subsidiaries not involving
any other Affiliates, and (c) pursuant to any agreements delivered on the
Closing Date in connection with the consummation of the transactions
contemplated by the Note Purchase Agreement between SunTrust and the Issuer.
(b) Maximum Leverage Ratio. The Issuer shall maintain at all
times, calculated as of the last day of each fiscal quarter commencing with
the fiscal quarter ending December 31, 2002, and thereafter a Leverage Ratio
(as such term is defined in the Senior Credit Agreement) of no greater than
6.325 : 1.00.
(c) Minimum Fixed Charge Coverage Ratio. The Issuer shall
maintain at all times, calculated as of the last day of each fiscal quarter
commencing with the fiscal quarter ending December 31, 2002 and thereafter a
Fixed Charge Coverage Ratio (as such term is defined in the Senior Credit
Agreement) of no less than 0.85 : 1.00.
(d) Minimum Consolidated Adjusted EBITDA. The Issuer shall
maintain at all times, calculated as of the last day of each fiscal quarter,
commencing with the fiscal quarter beginning on July 1, 2001, the Minimum
Consolidated Adjusted EBITDA (as such term is defined in the Senior Credit
Agreement) (prior to any audit adjustments) of not less than (i) $637,500 for
the fiscal quarter ending September 30, 2001 (excluding cash charges for
restructuring the Catalina Entities in an amount not to exceed $1,000,000),(ii)
$1,703,400 for the fiscal quarter ending December 31, 2001, (iii) $1,332,600 for
the fiscal quarter ending Xxxxx 00,
0
00
0000, (xx) $2,536,400 for the fiscal quarter ending June 30, 2002, and (iv)
$2,929,100 for the fiscal quarter ending on September 30, 2002.
(e) Restricted Payments. The Issuer will not, and will not
permit any of its Subsidiaries to (a) declare or pay any dividend or
distribution on any class of its stock, or (b) make any payment to purchase,
redeem, retire or acquire any capital stock or any option, warrant, or other
right to acquire such capital stock or such Indebtedness (each, a "Restricted
Payment"), other than (i) dividends payable solely in shares of any class of its
stock, (ii) cash dividends payable by any Consolidated Company to any other
Catalina Entity and any Consolidated Company that is a member of the Hong Kong
Group, (iii) other Restricted Payments made by any wholly owned Subsidiaries to
the Issuer, (iv) so long as no Event of Default shall have occurred and be
continuing, the Sterling Borrower (as such term is defined in the Senior Credit
Agreement) may pay Ring Preferred Dividends (as such term is defined in the
Senior Credit Agreement), and (v) payments by the Issuer to an employee to
repurchase any capital stock or options purchased by such employee from the
Issuer pursuant to an employee stock option plan, provided, that the amount used
by the Issuer to repurchase such capital stock or options shall not exceed the
original purchase price of such capital stock or options paid by such employee
pursuant to the employee stock option plan; provided, however, if SunTrust Bank
is a lender under the Senior Credit Agreement and consents to any Restricted
Payment which would otherwise violate this Section 8(e), the Purchaser shall
automatically be deemed to have consented to such Restricted Payment hereunder.
(f) Additional Negative Pledges. The Issuer will not, and will
not permit any of its Subsidiaries to create or otherwise cause or suffer to
exist or become effective, directly or indirectly, any prohibition or
restriction on the creation or existence of any Lien upon any asset of the
Issuer or any Subsidiary, other than pursuant to (i) this Agreement, the Senior
Credit Documents or the Junior Credit Documents, (ii) the terms of any
agreement, instrument or other document pursuant to which any Indebtedness
permitted by Section 9.01(d) of the Senior Credit Agreement is incurred by any
Consolidated Company, so long as such prohibition or restriction applies only to
the property or asset being financed by such Indebtedness, and (iii) any
requirement of applicable law or any regulatory authority having jurisdiction
over any of the Issuer or any Subsidiary; provided, however, if SunTrust Bank is
a lender under the Senior Credit Agreement and consents to any negative pledge
which would otherwise violate this Section 8(f), the Purchaser shall
automatically be deemed to have consented to such negative pledge hereunder.
(g) Change in Business. The Issuer will not, and will not
permit its Subsidiaries to, enter into, or permit any of their respective
Subsidiaries to enter into, any business other than the business presently
conducted by the Issuer and its Subsidiaries taken as a whole or any business
reasonably related or complementary thereto.
(h) Modification of Corporate Name, Charter, Etc. The Issuer
will not, and will not permit its Subsidiaries to, make any change in any of
their (i) corporate names, articles of incorporation, or similar documents or
capital structure that would materially adversely affect the Issuer's ability to
perform under any Investment Document, or (ii)
10
11
accounting practices, business objectives, purposes of operations, fiscal month,
fiscal quarter or fiscal year.
9. Defaults and Remedies.
(a) Events of Default. The occurrence of any one or more of
the following events, acts or occurrences shall constitute an event of default
(each an "Event of Default"):
(i) Issuer shall fail to pay as and when due (whether
at stated maturity, upon acceleration, demand, required prepayment or otherwise)
any principal of, premium, if any, interest on or other amount under the Note or
shall fail to pay as and when due (whether at stated maturity, upon
acceleration, demand, required prepayment or otherwise) any premium or interest
on any other amount under the Note and such amount remains unpaid for five (5)
days;
(ii) Issuer or any Top-Tier Subsidiary shall breach
or fail to perform, comply with or observe any agreement, covenant or obligation
required to be performed by it under Section 7(e) (Compliance with Laws;
Consents), Section 7(f) (Legal Existence), Section 7(g) (Books and Records),
Section 7(h) (Maintenance of Properties), Section 7(l) (Additional Catalina
Entities) or Section 7(m) (Further Assurances) and, if such breach or failure
may be cured, such breach or failure shall not have been remedied within thirty
(30) calendar days after the Chief Executive Officer, President, Chief Operating
Officer, Chief Financial Officer or General Counsel of Issuer becomes aware of
such failure or breach;
(iii) Issuer or any Top-Tier Subsidiary shall breach
or fail to perform, comply with or observe any agreement, covenant or obligation
required to be performed by it under this Note, the Pledge Agreement, Security
Agreement, Subsidiary Guarantee or the Note Purchase Agreement (other than the
agreements covenants or obligations expressly covered by Section 7(a) and
Section 7(b) of this Note) and, if such breach or failure may be cured, such
breach or failure shall not have been remedied within thirty (30) calendar days
after the Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer or General Counsel of Issuer becomes aware of such failure or
breach;
(iv) Any representation or warranty made by the
Issuer that could reasonably be expected to have a Material Adverse Effect,
under, relating to or in connection with this Note, the Pledge Agreement,
Security Agreement, Subsidiary Guarantee or the Note Purchase Agreement, shall
be false or misleading or incorrect in any respect when made (or deemed made)
and, if such breach or failure may be cured, such breach or failure shall not
have been remedied within thirty (30) calendar days after the Chief Executive
Officer, President, Chief Operating Officer, Chief Financial Officer or General
Counsel of Issuer becomes aware of such failure or breach;
(v) The principal, accrued interest or premium under
the Senior Credit Agreement, any other Senior Credit Document, any Senior
Subordinated Document or
11
12
any Other Debt Document is declared to be due and/or payable prior to the time
at which it would otherwise become or have become due and/or payable thereunder;
(vi) There shall be commenced against Issuer or any
Top-Tier Subsidiary an involuntary case seeking the liquidation or
reorganization of such Person under the Bankruptcy Laws or any similar
proceeding under any other Applicable Laws or an involuntary case or proceeding
seeking the appointment of a receiver, custodian, trustee or similar official
for it, or to take possession of all or a substantial portion of its property or
to operate all or a substantial portion of its business, and any of the
following events occur: (i) any such Person Consents to such involuntary case or
proceeding or fails to diligently contest it in good faith; (ii) the petition
commencing the involuntary case or proceeding is not timely controverted; (iii)
the petition commencing the involuntary case or proceeding remains undismissed
and unstayed for a period of sixty (60) days; or (iv) an order for relief shall
have been issued or entered therein or a receiver, custodian, trustee or similar
official appointed;
(vii) Issuer or any Top-Tier Subsidiary shall
institute a voluntary case seeking liquidation or reorganization under the
Bankruptcy Laws or any similar proceeding under any other Applicable Laws, or
shall Consent thereto; or shall Consent to the conversion of an involuntary case
to a voluntary case; or shall file a petition, answer a complaint or otherwise
institute any proceeding seeking, or shall Consent or acquiesce to the
appointment of, a receiver, custodian, trustee or similar official for it, or to
take possession of all or a substantial portion of its property or to operate
all or a substantial portion of its business; or shall make a general assignment
for the benefit of creditors; or shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts generally;
or the Board of Directors of any such Person (or any committee thereof) adopts
any resolution or otherwise authorizes action to approve any of the foregoing;
or
(viii) Any Change of Control shall occur.
(b) The foregoing Events of Default shall be deemed to have
occurred, respectively, and any adjustments in the interest rate under any Note
or other remedies available to the Holder hereunder or thereunder shall begin to
apply, at the following times:
(i) In the case of the clause (a)(i) above, as of
12:00 noon (prevailing local time in New York, New York) on the day on which
such payment is due but has not been paid, subject to any applicable cure
periods;
(ii) In the case of the clause (a)(ii) above, on the
occurrence of such breach or failure, subject to any applicable cure periods;
(iii) In the case of clause (a)(iii) above,
immediately upon the occurrence of any such breach or failure, subject to any
applicable cure periods;
(iv) In the case of clause (a)(iv) above, as of the
close of business on the day on which the Issuer first became aware, or should
have become aware, that
12
13
such representation or warranty was false or misleading or incorrect in any
material respect when made, subject to any applicable cure periods;
(v) In the case of clause (a)(v) above, immediately
upon the occurrence of any such declaration; or
(vi) In the case of clauses (a)(vi) and (a)(vii)
above, immediately prior to the occurrence of any of the events enumerated
therein.
(c) Acceleration. If any Event of Default (other than an Event
of Default specified in clause (a)(vi) or (a)(vii) of this Section) occurs and
is continuing, the holders of more than fifty percent (50%) in aggregate
outstanding principal amount of all notes issued by the Issuer pursuant to the
Note Purchase Agreement may, by written notice to Issuer, declare all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Note, to be due and payable. Upon any such
declaration of acceleration, such principal, premium, if any, and interest and
other amounts shall become immediately due and payable. If an Event of Default
specified in clause (a)(vi) or (a)(vii) of this Section 9 occurs, all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Note, shall become immediately due and payable
without any declaration or other act on the part of the Holder. Issuer hereby
waives all presentment for payment, demand, protest, notice of protest and
notice of dishonor, and all other notices of any kind to which it may be
entitled under Applicable Laws or otherwise.
(d) Other Remedies. If any Default or Event of Default shall
occur and be continuing, the Holder may proceed to protect and enforce its
rights and remedies under this Note and any other Investment Document (other
than the Warrant and Registration Rights Agreement) by exercising all rights and
remedies available under this Note, any other Investment Document (other than
the Warrant and Registration Rights Agreement) or Applicable Laws (including,
without limitation, the UCC), either by suit in equity or by action at law, or
both, whether for the collection of principal of or interest on the Note, to
enforce the specific performance of any covenant or other term contained in this
Note or any other Investment Document (other than the Warrant and the
Registration Rights Agreement). No remedy conferred in this Note upon the Holder
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise.
(e) Appointment of Receiver. In addition to all other rights,
powers and remedies that the Holder has under this Note, any other Investment
Document or Applicable Laws, the Holder shall, upon the occurrence and during
the continuation of an Event of Default and acceleration of this Note in
accordance with Section 9(c), be entitled (to the extent permitted by Applicable
Laws) to, and the Issuer and the Guarantors hereby Consent in advance to, the
appointment of a receiver by any court of competent jurisdiction to take control
of Issuer and the Guarantors for the purpose of operating and thereafter selling
such entity to satisfy obligations to creditors, including the Holder.
13
14
10. Waiver of Past Defaults. The Holder may, by written notice to
Issuer, waive any specified Default or Event of Default and its consequences
with respect to this Note or any other Investment Document; provided, however,
that no such waiver will extend to any subsequent or other Default or Event of
Default or impair any rights of the Holder which may arise as a result of such
other Default or Event of Default.
11. Waivers. Issuer hereby waives presentment for payment, demand,
protest, notice of protest and notice of dishonor, and all other notices of any
kind whatsoever to which it may be entitled under Applicable Law or otherwise,
except for any notice to which Issuer is expressly entitled under this Note.
12. Registration of Note. Issuer shall maintain at its principal
executive office a register in which it shall register this Note, any
Assignments of this Note or any other notes issued hereunder and any other notes
issued upon surrender hereof and thereof. At the option of the Holder, this Note
may be exchanged for one or more new notes of like tenor in the principal
denominations requested by the Holder, and the Issuer shall, within five
Business Days after the surrender of this Note at the Issuer's principal
executive offices, deliver to the Holder such new note or notes. In addition,
each permitted Assignment of this Note, in whole or in part, shall be registered
on the register immediately following the surrender of this Note at the Issuer's
principal executive offices. The Issuer may require the Holder, as a condition
to any Assignment hereunder, to represent and warrant to the Issuer, and deliver
an opinion of counsel reasonably acceptable to the Issuer, that an Assignment
complies with applicable federal or state securities laws. All Assignments of
this Note or any right or interest herein shall be subject to the requirements
of Section 14.
13. Persons Deemed Owners; Participations. Prior to due presentment for
registration of any Assignment, the Issuer may treat the Person in whose name
this Note is registered as the owner and Holder thereof for all purposes
whatsoever, and the Issuer shall not be affected by notice to the contrary.
Subject to the preceding sentence, the Holder may grant to other Persons without
the Issuer's Consent participations from time to time in all or any part of this
Note on such terms and conditions as may be determined by the Holder in its sole
and absolute discretion, subject to applicable federal and state securities
laws; provided, however, that the Holder may not grant participations to any
Person who is engaged in any business which competes with the business of any of
the Catalina Entities. Notwithstanding anything to the contrary contained herein
or otherwise, nothing in this Note, the Note Purchase Agreement or any other
Investment Document or otherwise shall confer upon the participant any rights in
the Note Purchase Agreement or any other Investment Document, and the Holder
shall retain all rights and obligations with respect to the administration,
waiver, amendment, collection and enforcement of, compliance with and Consent to
the terms and provisions of, this Note, the Note Purchase Agreement and any
other Investment Document.
In addition, the Holder may, without the Consent of the participant,
give or withhold its Consent or agreement to any amendments to or modifications
of this Note, the Note Purchase Agreement or any other Investment Document,
waive any of the provisions hereof or thereof or exercise or refrain from
exercising any other rights or remedies which the Holder may have under this
Note, the Note Purchase Agreement, any other Investment Document or
14
15
otherwise. Notwithstanding the foregoing, the Holder will not agree with the
Issuer, without the prior written Consent of the participant (which Consent
shall be given or affirmatively withheld not later than three Business Days
after the Holder's written request therefor): (a) to reduce the principal of or
rate of interest on this Note; or (b) to postpone the date fixed for payment of
principal of or interest on the Indebtedness evidenced by this Note. If the
participant does not reply within three days to the Holder's request for such
Consent, the participant shall be deemed to have Consented to such agreement and
the Holder may take such action in such manner as the Holder determines in the
exercise of its independent business judgment.
14. Assignment and Transfer. The Holder shall not sell, assign,
transfer, pledge, hypothecate, mortgage or otherwise encumber this Note;
provided, however, that Holder may assign or transfer all or any portion of this
Note or any portion thereof (but not less than $500,000 in principal amount in
any single assignment, unless such lesser amount represents the entire
outstanding principal balance hereof) to (i) any Affiliate of the Purchaser,
(ii) any party that has been approved by a majority of the members of the Board
of Directors not designated for election or appointment by the initial Holder or
(iii) any party if an Event of Default has occurred and is continuing. Upon
surrender of this Note at the Issuer's principal executive office for
registration of any such assignment or transfer, accompanied by a duly executed
instrument of transfer, the Issuer shall, at its expense and within three
Business Days of such surrender, execute and deliver one or more new notes of
like tenor in the requested principal denominations and in the name of the
assignee or assignees and bearing the legend set forth on the face of this Note,
and this Note shall promptly be canceled. If the entire outstanding principal
balance of this Note is not being assigned, the Issuer shall issue to the Holder
hereof, within five Business Days of the date of surrender hereof, a new note
which evidences the portion of such outstanding principal balance not being
assigned. If this Note is divided into one or more notes and is held at any time
by more than one Holder, any payments of principal of, premium, if any, and
interest or other amounts on this Note which are not sufficient to pay all
interest or other amounts due thereunder, shall be made pro rata with respect to
all such notes in accordance with the outstanding principal amounts thereof,
respectively. Any purported Assignment in violation of any provision of this
Section 14, shall be void and ineffective.
15. Loss, Theft, Destruction or Mutilation of this Note. Upon receipt
of evidence reasonably satisfactory to the Issuer of the loss, theft,
destruction or mutilation of this Note and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity agreement or other indemnity
reasonably satisfactory to the Issuer or, in the case of any such mutilation,
upon surrender and cancellation of such mutilated Note, the Issuer shall issue
and deliver within five Business Days a new Note, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note.
16. Costs of Collection. The Issuer agrees to pay to any Holder on
demand all reasonable costs and expenses of every type and nature (including,
without limitation, all fees and expenses of attorneys, accountants and other
experts and all due diligence, collateral review, appraisal, search, filing and
recording fees and expenses) which are expended or incurred by or on behalf of
the Holder in connection with: (a) the collection and enforcement of the
Obligations, whether or not any action, suit or other proceeding is commenced;
(b) any actions for declaratory relief in any way related to the Obligations;
(c) the protection or preservation of
15
16
any rights, powers or remedies of the Holder under this Note; (d) any amendment,
waiver, refinancing, restructuring (whether in the nature of a "work out" or
otherwise), bankruptcy or insolvency proceeding involving the Issuer or
Affiliate thereof, including, without limitation, any refinancing or
restructuring of this Note or any other Investment Documents; (e) any actions
taken to verify, maintain, perfect and protect any Lien granted to the Holder by
the Issuer or any Guarantor Subsidiary or any other Person under the Security
Agreement or Subsidiary Guarantee; (f) any effort by the Holder to protect,
assemble, complete, collect, sell, liquidate or otherwise dispose of any
collateral for which holder has a security interest under the Security
Agreement, including in connection with any case under Bankruptcy Laws. The
Issuer hereby Consents to the taking of the foregoing actions by any Holder
without conditions or restrictions.
17. Extension of Time. The Holder may, at its sole option, extend the
time for payment of this Note, postpone the enforcement hereof, or grant any
other indulgence without affecting or diminishing the Holder's right to full
recourse against the Issuer hereunder, which right is expressly reserved.
18. Notations. Before disposing of this Note or any portion thereof,
the Holder may make a notation thereon (or on a schedule attached thereto) of
the amount of all principal payments previously made by the Issuer with respect
thereto.
19. Governing Law. This Note shall be governed by, interpreted under,
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed within the State of New York,
without giving effect to any choice-of-law provisions thereof that would compel
the application of the substantive laws of any other jurisdiction. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court sitting in the Southern District of New York, and of the
Supreme Court of the State of New York sitting in New York county and any
appellate court from any thereof, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.
20. Waiver of Trial by Jury. Each of the Issuer and the Holder hereby
irrevocably and unconditionally waives the right to a trial by jury in any
action, suit, counterclaim or other proceeding (whether based on contract, tort
or otherwise) arising out of, connected with or relating to this Note or the
transactions contemplated hereby, or the actions of the Holder in the
negotiation, administration, performance or enforcement hereof.
21. Captions; Construction and Interpretation. The captions contained
in this Note are for convenience of reference only, do not constitute a part of
this Note and are not to be considered in construing or interpreting this Note.
The Issuer and the Holder have each been represented by counsel in the
negotiation and drafting of this Note, and neither the Issuer nor the Holder nor
their respective counsel shall be deemed the drafter of this Note for purposes
of construing the provisions of this Note. All provisions of this Note shall be
construed in accordance with their fair meaning, and not strictly for or against
the Issuer or the Holder.
16
17
IN WITNESS WHEREOF, the Issuer has caused this Note to be executed and
delivered by its duly authorized representatives on the date first above
written.
CATALINA LIGHTING, INC.
By: /s/ Xxxxxx Xxxxx
-------------------------
Name: Xxxxxx Xxxxx
Title: President
17
