EXHIBIT 10.11
PARENT SUBORDINATED INTERCOMPANY NOTE
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New York, New York
November 7, 1996
FOR VALUE RECEIVED, MOTORS AND GEARS INDUSTRIES, INC., a Delaware
corporation (the "Payor"), hereby promises to pay to the order of MOTORS AND
GEARS, INC. (the "Payee"), in lawful money of the United States of America in
immediately available funds, at such location in the United States of America
as the Payee shall from time to time designate, the unpaid principal sum of
ONE HUNDRED SEVENTY MILLION DOLLARS, which amount shall be payable on
November 15, 2006. Unless otherwise defined herein, all capitalized terms
used herein or in Annex A attached hereto and defined in the Credit Agreement
referred to below shall have the meaning assigned to such term in the Credit
Agreement.
The Payor promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
a rate of 10-3/4% per annum, such interest to be paid semi-annually on each
May 15 and November 15 of each year, commencing May 15, 1997, and at maturity
hereof. In addition, the Payor promises to pay as additional interest in
like money at said office on each Damages Payment Date (as defined in the
Senior Unsecured Note Indenture) an amount equal to all accrued Liquidated
Damages (as defined in the Senior Unsecured Note Indenture) required to be
paid on such date pursuant to the terms of the Senior Unsecured Note
Documents.
This Note is subject to voluntary prepayment, in whole or in part,
at the option of the Payor, without premium or penalty, except that any
voluntary prepayment of this Note to be used by Payee to repay the
outstanding principal of its Senior Unsecured Notes shall be accompanied by
the amount of premium to be used by Payee in connection with such repayment
of principal of outstanding Senior Unsecured Notes. This Note is not subject
to mandatory repayment or acceleration.
This Note is the Parent Subordinated Intercompany Note referred to
in the Credit Agreement, dated as of November 7, 1996, among the Payor, the
lenders from time to time party thereto and Bankers Trust Company, as Agent
(as amended, modified or supplemented from time to time, the "Credit
Agreement") and shall be subject to the provisions thereof.
Notwithstanding anything to the contrary contained in this Note,
the Payee understands and agrees that the Payor shall not be required to
make, and shall not make, any payment of principal or interest on this Note
to the extent that such payment is prohibited by the terms of any Senior
Indebtedness (as defined in Section 1.07 of Annex A attached hereto),
including, but not limited to, Sections 9.03 and 9.10 of the Credit
Agreement.
This Note, and the Payor's obligations hereunder, shall be
subordinate and junior to all indebtedness of the Payor constituting Senior
Indebtedness on the terms and conditions set forth in Annex A attached
hereto, which Annex A is herein incorporated by reference and made a part
hereof as if set forth herein in its entirety.
The Payee is hereby authorized (but shall not be required) to
record repayments or prepayments made in respect of this Note, in its books
and records, such books and records constituting prima facie evidence of the
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accuracy of the information contained therein.
All payments under this Note shall be made without offset,
counterclaim or deduction of any kind. Neither this Note nor any right to
receive payments hereunder may be assigned by the Payee.
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THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
MOTORS AND GEARS INDUSTRIES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Title: Vice President
ANNEX A
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Section 1.01. Subordination of Liabilities. Motors and Gears
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Industries, Inc. (the "Payor"), for itself, its successors and assigns,
covenants and agrees, and each holder of the promissory note to which this
Annex A is attached (the "Note") by its acceptance thereof likewise covenants
and agrees, that the payment of the principal of, interest on, and all other
amounts owing in respect of, the Note (the "Subordinated Indebtedness") is
hereby expressly subordinated, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness
(as defined in Section 1.07 of this Annex A). The provisions of this Annex A
shall constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Indebtedness, and
such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees hereunder the same as
if their names were written herein as such, and they and/or each of them may
proceed to enforce such provisions.
Section 1.02. Payor Not to Make Payments with Respect to
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Subordinated Indebtedness in Certain Circumstances. (a) Upon the maturity
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of any Senior Indebtedness (including interest thereon or fees or any other
amounts owing in respect thereof), whether at stated maturity, by
acceleration or otherwise, all Obligations (as defined in Section 1.07 of
this Annex A) owing in respect thereof, in each case to the extent due and
owing, shall first be paid in full in cash, before any payment, whether in
cash, property, securities or otherwise, is made on account of the
Subordinated Indebtedness.
(b) Until all Senior Indebtedness has been paid in full in cash and
all commitments in respect of such Senior Indebtedness have been terminated,
the sum of all payments in respect of the Note (including principal and
interest) shall not exceed at any time that amount permitted by the terms of
the respective issue of Senior Indebtedness (including without limitation
after giving effect to the limitations contained in Section 9.03 of the
Credit Agreement).
(c) The Payor may not, directly or indirectly, make any payment of
any Subordinated Indebtedness and may not acquire any Subordinated
Indebtedness for cash or property until all Senior Indebtedness has been paid
in full in cash if any Event of Default under Section 10.01, 10.03 (due to a
breach of Section 9.03, 9.08 or 9.09), 10.04, 10.05, 10.09 or 10.10 of the
Credit Agreement (as defined in Section 1.07 of this Annex A) or any
corresponding event of default under any other issue of Senior Indebtedness
would result therefrom. Each holder of the Note hereby agrees that, so long
as any such event of default in respect of any issue of Senior Indebtedness
exists, it will not demand, sue for, or otherwise take any action to enforce
the Payor's obligations
ANNEX A
Page 2
to pay, amounts owing in respect of the Note. Each holder of the Note
understands and agrees that to the extent that clause (b) or this clause (c)
of this Section 1.02 reduces the payment of interest and/or principal which
would otherwise be payable under the Note but for the limitations set forth
in such clause (b) or (c), such unpaid amount shall not constitute a payment
default under the Note and the holder of the Note may not sue for, or
otherwise take action to enforce the Payor's obligation to pay such amount,
provided that such unpaid principal or interest shall remain an obligation of
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the Payor to the holder of the Note pursuant to the terms of the Note.
(d) In the event that notwithstanding the provisions of the
preceding subsections (a), (b) and (c) of this Section 1.02, the Payor shall
make any payment on account of the Subordinated Indebtedness at a time when
payment is not permitted by said subsection (a), (b) or (c), such payment
shall be held by the holder of the Note, in trust for the benefit of, and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness or their representative or the trustee under the indenture or
other agreement pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear,
for application pro rata to the payment of all Senior Indebtedness remaining
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unpaid to the extent necessary to pay all Senior Indebtedness in full in cash
in accordance with the terms of such Senior Indebtedness, after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness. Without in any way modifying the provisions of this Annex A or
affecting the subordination effected hereby if the hereafter referenced
notice is not given, the Payor shall give the holder of the Note prompt
written notice of any event which would prevent payments under Section
1.02(a), (b) or (c) hereof.
(e) All amounts required to be delivered to the holders of Senior
indebtedness pursuant to clause (d) of this Section 1.02, Section 1.03 hereof
or elsewhere in this Annex A shall take into account the relative priorities
and subordination provisions of such Senior Indebtedness.
Section 1.03. Subordination to Prior Payment of All Senior
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Indebtedness on Dissolution, Liquidation or Reorganization of Payor. Upon
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any distribution of assets of the Payor upon any dissolution, winding up,
liquidation or reorganization of the Payor (whether in bankruptcy, insolvency
or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled
to receive payment in full in cash of all Senior Indebtedness
(including, without limitation, post-petition interest at the rate
provided in the documentation with respect to such Senior Indebtedness,
whether or not such post-petition interest is
ANNEX A
Page 3
an allowed claim against the debtor in any bankruptcy or similar
proceeding) before the holder of the Note is entitled to receive any
payment of any kind or character on account of the Subordinated
Indebtedness;
(b) any payment or distributions of assets of the Payor of any kind
or character, whether in cash, property or securities to which the
holder of the Note would be entitled except for the provisions of this
Annex A, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or other trustee or agent,
directly to the holders of Senior Indebtedness or their representative
or representatives, or to the trustee or trustees under any indenture
under which any instruments evidencing any such Senior Indebtedness may
have been issued, to the extent necessary to make payment in full in
cash of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 1.03, any payment or distribution of assets of the Payor of
any kind or character, whether in cash, property or securities, shall be
received by the holder of the Note on account of Subordinated
Indebtedness before all Senior Indebtedness is paid in full in cash,
such payment or distribution shall be received and held in trust for and
shall be paid over to the holders of the Senior Indebtedness remaining
unpaid or unprovided for or their representative or representatives, or
to the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness may have been
issued, for application to the payment of such Senior Indebtedness until
all such Senior Indebtedness shall have been paid in full in cash, after
giving effect to any concurrent payment or distribution to the holders
of such Senior Indebtedness.
Without in any way modifying the provisions of this Annex A or
affecting the subordination effected hereby if the hereafter referenced
notice is not given, the Payor shall give prompt written notice to the holder
of the Note of any dissolution, winding up, liquidation or reorganization of
the Payor (whether in bankruptcy, insolvency or receivership proceedings or
upon assignment for the benefit of creditors or otherwise).
Section 1.04. Subrogation. Subject to the prior payment in full
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in cash of all Senior Indebtedness, the holder of the Note shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Payor applicable to the Senior
Indebtedness until all amounts owing on the Note shall be
ANNEX A
Page 4
paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of the Senior Indebtedness by or on behalf of
the Payor or by or on behalf of the holder of the Note by virtue of this
Annex A which otherwise would have been made to the holder of the Note shall,
as between the Payor, its creditors other than the holders of Senior
Indebtedness, and the holder of the Note, be deemed to be payment by the
Payor to or on account of the Senior Indebtedness, it being understood that
the provisions of this Annex A are and are intended solely or the purpose of
defining the relative rights of the holder of the Note, on the one hand, and
the holders of the Senior Indebtedness, on the other hand.
Section 1.05. Obligation of Payor Unconditional. Nothing
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contained in this Annex A or in the Note is intended to or shall impair, as
between the Payor and the holder of the Note, the obligation of the Payor,
which is absolute and unconditional, to pay to the holder of the Note the
principal of and interest on the Note as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the holder of the Note and creditors of the Payor
other than the holders of the Senior Indebtedness, nor shall anything herein
or therein prevent the holder of the Note from exercising all remedies
otherwise permitted by applicable law upon an event of default under the
Note, subject to the rights under this Annex A of the holders of Senior
Indebtedness. Upon any distribution of assets of the Payor referred to in
this Annex A, the holder of the Note shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other person
making any distribution to the holder of the Note, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Payor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Annex A.
Section 1.06. Subordination Rights Not Impaired by Acts or
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Omissions of Payor or Holders of Senior Indebtedness. No right of any
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present or future holders of any Senior Indebtedness to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Payor or by any act or failure
to act in good faith by any such holder, or by any noncompliance by the Payor
with the terms and provisions of the Note, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The
holders of the Senior Indebtedness may, without in any way affecting the
obligations of the holder of the Note with respect hereto, at any time or
from time to time and in their absolute discretion, change the manner, place
or terms of payment of, change or extend the time of payment of, or renew or
alter, any Senior Indebtedness or
ANNEX A
Page 5
amend, modify or supplement any agreement or instrument governing or
evidencing such Senior Indebtedness or any other document referred to
therein, or exercise or refrain from exercising any other of their rights
under the Senior Indebtedness including, without limitation, the waiver of
default thereunder and the release of any collateral securing such Senior
Indebtedness, all without notice to or assent from the holder of the Note.
Section 1.07. Senior Indebtedness. The term "Senior Indebtedness"
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shall mean all Obligations (as defined below) (i) of the Payor under the
Credit Agreement (as amended, modified, supplemented, extended, restated,
refinanced, replaced or refunded from time to time, the "Credit Agreement"),
dated as of November 7, 1996, by and among the Payor, the lenders from time
to time party thereto (the "Banks") and Bankers Trust Company, as Agent, and
any renewal, extension, restatement, refinancing or refunding thereof and
(ii) of the Payor in respect of any Interest Rate Protection Agreement or
Other Hedging Agreement. As used herein, the term "Obligation" shall mean
any principal, interest, premium, penalties, fees, expenses, indemnities and
other liabilities and obligations payable under the documentation governing
any Senior Indebtedness (including interest after the commencement of any
bankruptcy, insolvency, receivership or similar proceeding, whether or not
such interest is an allowed claim against the debtor in any such proceeding).
Section 1.08. Miscellaneous. If, at any time, all or part of any
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payment with respect to Senior Indebtedness theretofore made by the Payor or
any other person is rescinded or must otherwise be returned by the holders of
Senior Indebtedness for any reason whatsoever including, without limitation,
the insolvency, bankruptcy or reorganization of the Payor or such other
person), the subordination provisions set forth herein shall continue to be
effective or be reinstated, as the case may be, all as though such payment
had not been made.
