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EXHIBIT 10.4
This Senior Subordinated Secured Promissory Note (this "Note") and the
indebtedness evidenced hereby are subordinated in the manner and to the extent
set forth in the Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of March __, 1999, by the payee of this Note in favor of
Congress Financial Corporation (Central) (together with its successors and
assigns, the "Senior Lender") to all indebtedness (including interest) at any
time owed by the maker of this Note to Senior Lender, and each holder of this
Note, by its acceptance hereof, shall be bound by the Subordination Agreement.
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due March 26, 2002
$1,155,000 Dallas, Texas March 26, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of ONE
MILLION ONE HUNDRED FIFTY-FIVE THOUSAND AND NO/100 DOLLARS ($1,155,000),
together with interest on the unpaid principal balance of this Note from time
to time outstanding from the date hereof at the rate of eight percent (8%) per
annum, provided, however, that all past due principal of, and to the extent
permitted by and not usurious under applicable law, interest on, this Note,
shall bear interest from date due until paid (i) if paid on or before ninety
(90) days after due date, at the rate of eight percent (8%) per annum, (ii) if
paid more than ninety (90) days after due date, but on or before one hundred
eighty (180) days after due date, at the rate of twelve percent (12%) per
annum, and (iii) if paid more than one hundred and eighty (180) days after the
due date, at the rate of eighteen percent (18%) per annum. Interest accrued on
the unpaid principal balance of this Note from time to time outstanding shall
be calculated on the basis of the actual days elapsed (including the first day
but excluding the last) in a year consisting of 365 or 366 days, as
appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Cash Flow" means for any period Maker's net income from operations
after income taxes, increased for amortization and depreciation of intangible
assets and property and equipment and deferred income tax expense, decreased
for principal payments under all existing loan agreements and capital
expenditures, and adjusted for changes in working capital items not affecting
the use of cash in the period.
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five
percent (25%) of the issued and outstanding common stock of Maker (a
"Controlling Entity") with another entity and as a result of such merger or
consolidation of the outstanding voting securities of the surviving or
resulting entity less than fifty percent (50%) are owned in the aggregate by
the former shareholders of Maker or the Controlling Entity, or less than 30%
are owned by Art Xxxxxxx, (ii) the acquisition by any person other than Art
Xxxxxxx or group within the meaning of the Securities Exchange Act of 1934, as
amended, of more than fifty percent (50%) of any class of outstanding voting
securities of Maker or a Controlling Entity, whether directly, individually,
beneficially or of record, pursuant to any transaction or combination of
transactions, (iii) a change of control of Maker or a Controlling Entity of a
nature that would require a report in response to Item 6(e) of Schedule 14A of
Regulations 14A promulgated under the Securities Exchange Act of 1934, as
amended, whether or not Maker or a Controlling Entity is then subject to such
reporting requirements, or (iv) cessation, for any reason, of the individuals
who, at the beginning of any period of twelve (12) consecutive
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months, constituted the Board of Directors of Maker or any Controlling Entity
to constitute at least a majority thereof, unless the nomination for election
or election by Maker's or the Controlling Entity's shareholders was approved by
a vote of at least two-thirds of the respective boards then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved.
"Event of Default" has the meaning set forth in Section 5 hereof.
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real
property of Maker, more particularly described therein, as security for the
payment of the indebtedness evidenced by this Note and the other obligations of
Maker to Noteholder described therein.
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when
used with respect to the Senior Financing Debt, means payment (or due provision
for payment) in full in cash or cash equivalents of one hundred percent (100%)
of the principal, interest, fees, expenses, and other obligations due or to
become due under the documents governing or securing the Senior financing Debt
in accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date
herewith between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of
March 22, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
quarterly as it accrues, commencing on March 26, 1999, and
thereafter on the first day of each January, April, July, and
October of each calendar year during the term of this Note,
through and including March 26, 2002;
(b) The principal balance of this Note shall be due and payable
monthly in equal monthly installments of $80,000 or the
remaining balance thereof, commencing on April 30, 2000, and
thereafter on the last day of each calendar month during the
term of this Note until paid in full, provided, however, that
no monthly payment of principal shall be due and
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payable, and shall be deferred, if Cash Flow from the date
hereof through the end of the period immediately preceding
the month of a scheduled principal payment does not exceed
$2,000,000; and provided further that any deferred payment
shall be added to the next monthly payment due and payable so
long as the Cash Flow in that month recovers the cumulative
cash to the above $2,000,000; and
(c) the entire unpaid principal balance of this Note, together
with all accrued but unpaid interest thereon, shall be
finally due and payable in full on March 26, 2002(1).
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 0000 Xxxx Xxxxxxxxxxx Xxxx, Xxxxxx,
Xxxxx 00000 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon
shall be applied first to sums (other than the principal of and accrued
interest on this Note) payable by Maker pursuant to this Note or the Security
Agreement, then to accrued but unpaid interest on this Note, and thereafter to
the unpaid principal balance of this Note. Interest shall continue to accrue on
unpaid principal until receipt by Noteholder of good funds in payment thereof.
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and those certain Senior Subordinated Secured Promissory Notes of
even date herewith from Maker to Noteholder in the original principal amount of
$2,000,000 ("Note A") and $3,825,000 ("Note C"), Maker has agreed to, and has,
as of the date hereof, executed and delivered to Noteholder the Security
Agreement and the Mortgages, pursuant to which Maker has granted to Noteholder
second priority (subject only to the liens and security interests securing the
Senior Financing Debt) liens and security interests in all of Maker's now owned
and hereafter acquired inventory (as that term is defined in the Texas Uniform
Commercial Code), real estate, and other assets. Reference is hereby made to
the Security Agreement and the Mortgages for the descriptions of the property
covered thereby, the nature and extent of the liens and security interests
created and granted thereby, and the rights and powers of the holder of this
Note in respect of such liens and security interests. The liens and security
interest created under the Security Agreement and the Mortgage in Maker's now
owned and hereafter acquired inventory (as that term is defined in the Texas
Uniform Commercial Code), real estate, other assets shall be junior and
subordinate only to the liens and security interest securing payment and
performance of the Senior Financing Debt. The indebtedness and obligations
evidenced by, or arising under or in respect of, this Note shall rank pari
passu, with respect to payment and security, with the indebtedness and
obligations evidenced by, or arising under or in respect of, Notes A and C.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment
hereof, or in any indulgences, or by any release or change in any security for
the payment of this Note, and hereby consent to any and all renewals,
extensions, indulgences, releases or changes, regardless of the number of such
renewals, extensions, indulgences, releases or changes. No waiver by Noteholder
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(1)Three years from the date hereof.
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of any of its rights or remedies hereunder, or under any other document
evidencing or securing this Note or otherwise, shall be considered a waiver of
any other subsequent right or remedy of Noteholder; no delay or omission in the
exercise of enforcement by Noteholder of any rights or remedies shall ever be
construed as a waiver of any right or remedy of Noteholder; and no exercise or
enforcement of any such rights or remedies shall ever by held to exhaust any
right or remedy of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent or
file a voluntary petition for bankruptcy or admit in writing that it is unable
to pay its debts as they become due, (3) make a general assignment for the
benefit of creditors, (4) file a petition or answer seeking reorganization or
an arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, or (5) file an answer admitting the material allegations of,
or consent to, or default in answering, a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or take corporate action
for the purpose of effecting any of the foregoing; (c) an order, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition seeking reorganization of maker or
appointing a receiver, trustee, intervenor or liquidator of Maker, or of all or
substantially all of its assets, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days; (d) the
dissolution or liquidation of Maker; (e) Maker shall breach any covenant under
this Note, (f) any "Event of Default," as defined in the Security Agreement or
the Mortgage, shall occur, (g) any failure to pay, when due, any obligations,
whether as to principal, interest or otherwise, including non-payment following
acceleration or maturity, shall occur with respect to the Senior Financing Debt
and continue past the expiration of any period of grace, if any, with respect
thereto provided in the document governing the same, (h) any default or event
of default, other than a default or event of default occasioned by a failure to
pay as described in the preceding clause (g), shall occur with respect to
Senior Financing Debt and, by reason thereof, the holder of the Senior Debt
accelerates the maturity of all or any part of the Senior Financing Debt and
declares the same to be due and payable prior to the stated maturity date
thereof, (i) the payment of dividends by Maker on or with respect to its common
stock in any fiscal year in excess of 50% of Maker's net income after taxes ,
(j) Maker shall make a loan to any party (other than advances to employees for
reasonable travel expenses in the ordinary course of business), and/or (k) a
Change of Control shall occur. Upon the occurrence of any Event of Default
hereunder, the Noteholder may, at its option, at any time thereafter, (i)
declare the entire unpaid principal balance and accrued interest upon this Note
to be, and the same shall thereupon become, immediately due and payable without
the presentment or notice of any kind, which Maker hereby waives pursuant to
Section 4 hereof, and/or (ii) pursue and enforce any of Noteholder's rights and
remedies available pursuant to any applicable law or agreement; provided,
however, upon the occurrence of any Event of Default specified in clause (b),
(c) or (d) of this Section 5,with respect to Maker, without any notice to Maker
or any other act by Noteholder, the principal balance and interest accrued on
this Note shall automatically and without necessity of any act by Noteholder
become immediately due and payable without presentment, demand, protest or
notice of protest, notice of acceleration, notice of intent to accelerate or
other notice of any kind, all of which are hereby waived by Maker. Noteholder
agrees to advise Maker promptly if Noteholder is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall
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be deemed to have been given when personally served or when deposited in the
United States mails, registered or certified, return receipt requested,
addressed to the party to be notified at the following address (or at such
other address as may have been designated by written notice):
Noteholder: Tyler Corporation
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Xxx Xxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to (which shall not constitute notice) to:
H. Xxxx Xxxxx, Xx., Esq.
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Maker: Forest City Auto Parts Company
c/o Art Xxxxxxx
0000 Xxxxxxx Xxxx, 0xx Xxxxx
Xxxxx, Xxxx 00000
with copies (which shall not constitute notice) to:
Art Xxxxxxx
HalArt, L.L.C.
0000 Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Telecopy No.: (000) 000-0000
Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxx, P.C.
00 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx, Xxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10
of this Note, Maker reserves the right, upon thirty (30)
days' prior written notice to Noteholder, to prepay the
outstanding principal balance of this Note, in whole or in
part, at any time and from time to time, without premium or
penalty. Any such prepayment shall be made together with
payment of interest accrued on the amount of principal being
prepaid through the date of such prepayment.
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(b) Mandatory Prepayment. Subject to the provisions of Section 10
of this Note, Maker shall prepay the outstanding principal
balance of this Note in whole upon (i) the sale of securities
of Maker or a Controlling Entity pursuant to a registration
statement that has been declared effective by the Securities
and Exchange Commission, (ii) Maker or a Controlling Entity
otherwise becoming a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, (iii) Maker
selling or otherwise transferring all or any material part of
its assets, (iv) a Change of Control, (v) Maker incurring any
senior indebtedness for the purpose of a material expansion
of Maker's business and operations of more than $2,500,000,
plus senior financing for acquisitions of operating
businesses.
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in
excess of the maximum amount of interest permitted by applicable law (the
"Maximum Amount"), and, in the event that Noteholder ever receives, collects or
applies as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of this Note is paid in full,
any remaining excess shall forthwith be paid to Maker. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
Maximum Amount, Maker and Noteholder shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest; (ii) exclude voluntary prepayments and
the effects thereof; and (iii) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
this Note so that the interest rate is uniform throughout the entire term;
provided, however, that, if this Note is paid in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence thereof exceeds the relevant Maximum Amount, Noteholder
shall refund to Maker the amount of such excess or credit the amount of such
excess against the principal amount of this Note and, in such event, Noteholder
shall not be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving or receiving interest in excess of the relevant
Maximum Amount.
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL LAWS
OF THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION,
MAKER AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS,
AND THE FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER
ANY PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself
and for each subsequent owner and holder of this Note, agrees that the
obligation represented by this Note is and shall be subordinated in right of
payment to the prior payment in full of the Senior Financing Debt, whether
outstanding on the date hereof or hereafter incurred. Upon any distribution of
assets of Maker upon or by reason of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to
substantially all of its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any
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assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company, then and in any such event specified in clause (a),
(b) or (c) preceding (each such event, if any, herein sometimes referred to as
a "Proceeding"), (i) the holders of the Senior Financing Debt will first be
entitled to receive payment in full of the Senior Financing Debt before
Noteholder is entitled to receive any payment, whether of principal, premium,
if any, or interest, on account of this Note (other than Junior Securities) and
(ii) any payment or distribution of assets of Maker of any kind or character
from any source, whether in cash, property or securities (other than Junior
Securities) to which Noteholder would be entitled but for the provisions of
this Section 10 will be paid by the liquidating trustee or agent or other
person making such a payment or distribution directly to the holders of the
Senior Financing Debt or their representative to the extent necessary to make
payment in full of the Senior Financing Debt remaining unpaid, after giving
effect to any concurrent payment or distribution made directly to the holders
of such Senior Financing Debt. For purposes of this Section 10, "Junior
Securities" shall mean capital stock and/or securities of Maker provided for by
a plan of reorganization or readjustment, or of any other corporation provided
for by such plan of reorganization or readjustment authorized by an order or
decree of a court of competent jurisdiction in a reorganization Proceeding
under any applicable bankruptcy law which stock or securities are subordinated
in right of payment to all then outstanding Senior Financing Debt to
substantially the same extent as this Note is so subordinated as provided in
this Section 10. After all Senior Financing Debt is paid in full and until this
Note is paid in full, Noteholder shall be subrogated (equally and ratably with
all other indebtedness pari passu with this Note) to the rights of holders of
Senior Financing Debt to receive distributions applicable to Senior Financing
Debt to the extent that distributions otherwise payable to Noteholder have been
applied to the payment of Senior Debt. A distribution made under this Section
10 to holders of Senior Financing Debt that otherwise would have been made to
Noteholder is not, as between Maker and Noteholder, a payment by Maker on this
Note. Nothing in this Note shall (1) impair, as between Maker and Noteholder,
the obligations of Maker to pay the principal of and interest on this Note in
accordance with its terms; (2) affect the relative rights of Noteholder and
creditors of Maker other than its rights in relation to holders of Senior
Financing Debt; or (3) prevent Noteholder from exercising its available
remedies upon an Event of Default, subject to the rights of holders and owners
of Senior Financing Debt to receive distributions and payments otherwise
payable to Noteholder to the extent provided in this Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By: /s/ XXXX X. XXXXXXXX
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Name: Xxxx X. Xxxxxxxx
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Title: CFO
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