Exhibit 10.65
▇▇▇▇▇▇ BOATS & MOTORS, INC.
================================================================================
SUBORDINATED
NOTE PURCHASE AGREEMENT
Dated as of December 14, 2001
================================================================================
TABLE OF CONTENTS
Page
Article I DEFINITIONS; INTERPRETATION............................................................................1
1.1 Definitions...............................................................................................1
1.2 Interpretation............................................................................................1
1.3 Accounting Terms..........................................................................................2
Article II ISSUANCE AND SALE OF SECURITIES.......................................................................2
2.1 Commitment to Purchase....................................................................................2
Article III CLOSING; CLOSING DELIVERIES..........................................................................2
3.1 Closing...................................................................................................2
3.2 Delivery of Securities....................................................................................2
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................3
4.1 Corporate Existence and Power.............................................................................3
4.2 Corporate and Governmental Authorization; No Contravention................................................3
4.3 Binding Effect............................................................................................3
4.4 Financial Information.....................................................................................3
4.5 Litigation................................................................................................4
4.6 Compliance with ERISA.....................................................................................4
4.7 Environmental Matters.....................................................................................4
4.8 Taxes.....................................................................................................5
4.9 Compliance with Laws......................................................................................5
4.10 Title to and Condition of Properties.....................................................................5
4.11 Not an Investment Company................................................................................5
4.12 Full Disclosure..........................................................................................5
4.13 Capitalization...........................................................................................6
4.14 Non-Existence of Defaults................................................................................6
4.15 Capital..................................................................................................6
4.16 Solvency.................................................................................................6
4.17 Accuracy of Statements...................................................................................6
Article V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................7
5.1 Authorization and Enforceability..........................................................................7
5.2 Government Approvals......................................................................................7
5.3 Brokers...................................................................................................7
i
Article VI COMPLIANCE WITH SECURITIES LAWS.......................................................................7
6.1 Investment Intent of the Initial Purchaser................................................................7
6.2 Status of Notes...........................................................................................7
6.3 Status of the Initial Purchaser...........................................................................7
6.4 Transfer..................................................................................................7
Article VII CONDITIONS PRECEDENT.................................................................................8
7.1 Conditions Precedent to the Initial Purchaser's Obligations...............................................8
Article VIII COVENANTS OF THE COMPANY............................................................................9
8.1 Information...............................................................................................9
8.2 Maintenance of Property; Insurance.......................................................................11
8.3 Compliance with Laws.....................................................................................11
8.4 Inspection of Property, Books and Records................................................................12
8.5 Ownership of Stock of Wholly-Owned Subsidiaries..........................................................12
8.6 Investments..............................................................................................12
8.7 Restricted Payments on Stock.............................................................................13
8.8 Maximum Debt to Tangible Net Worth.......................................................................13
8.9 Senior Indebtedness Outstanding..........................................................................13
8.10 Consolidations, Mergers and Sales of Assets.............................................................13
8.11 Changes to the Company's Business.......................................................................13
8.12 Lease Conversions.......................................................................................13
8.13 Transactions with Affiliates............................................................................14
8.14 Senior Indebtedness Consent.............................................................................14
8.15 Taxes...................................................................................................14
8.16 No Additional Stores....................................................................................15
Article IX SUBORDINATION........................................................................................15
9.1 Extent of Subordination..................................................................................15
Article X EVENTS OF DEFAULT.....................................................................................15
10.1 Events of Default.......................................................................................15
10.2 Consequences of Events of Default.......................................................................17
Article XI REGISTRATION RIGHTS..................................................................................18
11.1 Piggyback Registrations.................................................................................18
11.2 Demand Registration.....................................................................................20
11.3 Registration Procedures.................................................................................21
11.4 Expenses of Registration................................................................................22
ii
11.5 Registration Indemnification............................................................................22
11.6 Information to be Furnished by Registered Holders.......................................................24
11.7 Rule 144 Sales..........................................................................................24
11.8 Survival of Registration Rights.........................................................................24
Article XII SURVIVAL AND INDEMNIFICATION........................................................................24
12.1 Survival................................................................................................24
12.2 Indemnification.........................................................................................25
Article XIII GENERAL PROVISIONS.................................................................................25
13.1 Successors and Assigns..................................................................................25
13.2 Entire Agreement........................................................................................25
13.3 Notices.................................................................................................26
13.4 Amendment and Waiver....................................................................................26
13.5 Counterparts............................................................................................27
13.6 Headings................................................................................................27
13.7 Remedies Cumulative.....................................................................................27
13.8 Governing Law...........................................................................................27
13.9 No Third Party Beneficiaries............................................................................27
13.10 Severability...........................................................................................27
13.11 Confidentiality........................................................................................27
13.12 Limitation of Liability................................................................................27
13.13 Arbitration............................................................................................27
13.14 Release of Claims......................................................................................28
13.14 AGREEMENT, THE NOTES OR ANY SALES CONTRACT AND THE NEGOTIATION AND EXECUTION THEREOF...................29
Article XIV PURCHASER COVENANTS.................................................................................29
14.1 Tender Offer Covenant...................................................................................29
14.2 Dilution Protection Covenant............................................................................29
LIST OF ANNEXES, EXHIBITS AND SCHEDULES
Annex 1- Definitions
Exhibit A-........Form of Note
Exhibit B-........Form of Opinion(s) of Counsel to the Company
iii
Schedule 4.4(c) - Material Adverse Changes
Schedule 4.14 - Material Defaults on Senior Indebtedness
iv
SUBORDINATED
NOTE PURCHASE AGREEMENT
This SUBORDINATED NOTE PURCHASE AGREEMENT (this "Agreement"), dated as
of December 14, 2001, is by and between ▇▇▇▇▇▇ BOATS & MOTORS, INC., a Texas
corporation (the "Company"), and BRUNSWICK CORPORATION, a Delaware corporation
(the "Initial Purchaser" and, together with such other Persons who may from time
to time hold any Notes, the "Purchasers").
Subject to the terms and conditions set forth herein, the Purchaser
desires to purchase from the Company, and the Company desires to issue and sell
to the Purchaser, promissory notes.
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto,
intending legally to be bound hereby, agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.1 Definitions. Unless a clear contrary intention appears, capitalized
terms that are defined in Annex 1 shall have the respective indicated meanings
when used in this Agreement or the Notes.
1.2 Interpretation. Unless a clear contrary intention appears or the
context otherwise requires, in this Agreement and the Notes:
(a) the singular number , word or phrase includes the plural number,
word or phrase and vice versa;
(b) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement and the Annex,
Schedules and Exhibits hereto), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor;
(e) reference to any applicable law means such applicable law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder;
1
(f) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or Schedule or
Exhibit hereto;
(g) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;
(h) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term; and
(i) relative to the determination of any period of time, "from" means
"from and including" and "to" and "through" means "to but excluding".
1.3 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, and all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a basis consistent (except
for changes concurred in by the Company's independent public accountants) with
the Base Financials.
ARTICLE II
ISSUANCE AND SALE OF SECURITIES
2.1 Commitment to Purchase. Subject to the terms and conditions set
forth herein and in reliance on the representations and warranties of the
Company contained herein, the Initial Purchaser agrees to purchase $3,000,000
principal amount of the Company's convertible subordinated notes in the form set
forth as Exhibit A hereto (the "Notes"). The purchase price for the Notes shall
be 100% of the principal amount thereof. The obligation of the Initial Purchaser
to purchase any Notes hereunder at the Closing will expire at 5:00 P.M. (Chicago
time) on December 14, 2001.
ARTICLE III
CLOSING; CLOSING DELIVERIES
3.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall simultaneously take place at the offices of ▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and at the offices of Jenkens
& ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at such time and date (prior
to December 14, 2001) after all conditions to closing have been satisfied as
shall be agreed upon by the parties hereto. The date of the Closing is herein
sometimes called the "Closing Date."
3.2 Delivery of Securities. At the Closing, the Company will deliver to
the Initial Purchaser a Note in such Initial Purchaser's name, or if requested
by such Initial Purchaser, in the name of a Subsidiary or Affiliate of such
Initial Purchaser, duly executed and dated the Closing Date, in the aggregate
principal amount of $3,000,000 and the Initial Purchaser shall deliver to the
Company by wire transfer or certified check $3,000,000.
2
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Initial Purchaser as
follows:
4.1 Corporate Existence and Power. Each of the Company and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted except where the
failure to obtain such governmental licenses, authorizations, consents and
approvals would not materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Company and its
Consolidated Subsidiaries and would not in any manner draw into question the
validity of any Financing Document.
4.2 Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Company of each Financing Document
are within the Company's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Company, of any agreement
relating to Senior Indebtedness or of any other agreement, judgment, injunction,
order, decree or other instrument that is material, individually or in the
aggregate, and that is binding upon the Company or result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries.
The Board of Directors of the Company has taken the necessary action so that the
three year moratorium set forth in the Texas Business Combination Law does not
apply to the transactions contemplated by this Agreement, including without
limitation, the issuance or the conversion of the Notes, or to any subsequent
business combination between the Initial Purchaser and the Company.
4.3 Binding Effect. This Agreement constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, and the Notes, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding or action in equity or at law).
4.4 Financial Information.
(a) The Base Financials, copies of which have been delivered to the
Purchaser, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of September 30, 2000 and their consolidated
results of operations and cash flows for the fiscal year of the Company and its
Consolidated Subsidiaries then ended.
3
(b) The unaudited condensed consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of June 30, 2001 and the related unaudited
condensed consolidated statements of income and cash flows for the three and
nine months then ended, set forth in the Company's quarterly report for the
fiscal quarter ended June 30, 2001 as filed with the Commission on Form 10-Q, a
copy of which has been delivered to the Purchaser, fairly present, in conformity
with generally accepted accounting principles applied on a basis consistent with
the Base Financials, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such three and nine month periods (subject to
normal year-end adjustments, the absence of footnote disclosure and condensation
pursuant to GAAP and the rules of the Commission).
(c) Except as set forth in Schedule 4.4(c), since June 30, 2001, there
has been no material adverse change in the business, financial position, results
of operations or prospects of the Company and its Consolidated Subsidiaries,
considered as a whole.
4.5 Litigation. Except as disclosed in the Company's Form 10-K for the
year ended September 30, 2000 or the Company's quarterly report on Form 10-Q for
the fiscal quarter ended June 30, 2001 as filed with the Commission, there is no
action, suit or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Company and its Consolidated Subsidiaries or which
in any manner draws into question the validity of any Financing Document.
4.6 Compliance with ERISA. Each member of the ERISA Group has complied
with its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standards under Section 412 of
the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could reasonably be expected to result, prior
to the first anniversary of the maturity of the Notes, in the imposition of a
Lien or the posting of a bond or other security under Section 302(f) of ERISA or
Section 401(a)(29) or 412(n) of the Internal Revenue Code, (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA or (iv) within the preceding five plan
years, with respect to any Other Plan, engaged in any transaction described in
Section 4069 or Section 4212(c) of ERISA.
4.7 Environmental Matters. The Company has reasonably concluded that,
to its best knowledge, Environmental Laws are unlikely to have a material
adverse effect on the business, financial condition, results of operations or
prospects of the Company and its Consolidated Subsidiaries, considered as a
whole.
(a) As of the date hereof and the Closing Date, to the knowledge of the
Company and its Subsidiaries no material claim, investigation or written inquiry
has been made, and the Company is not aware of any circumstances which would
4
warrant or give rise to such a claim, investigation or inquiry, with regard to
the Company or any of its Subsidiaries, in respect of any facility owned, or to
the knowledge of the Company and its Subsidiaries, leased or operated, either
now or in the past, by the Company or any of its Subsidiaries, under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 or
pursuant to any other Environmental Law, or by the Environmental Protection
Agency or by any state, local, municipal or foreign enforcement agency having
jurisdiction over the protection of the environment, or by any other Person in
respect of or under any Environmental Law.
4.8 Taxes. United States federal income tax returns of the Company and
its Subsidiaries have been filed through the year ended December 31, 2000, and
are materially correct and are not subject to amendment that would have an
material adverse effect on the Company and its Consolidated Subsidiaries
considered as a whole. The Company and its Subsidiaries have filed all United
States federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries other than any such taxes the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with generally accepted accounting
principles have been established. The charges, accruals and reserves on the
books of the Company and its Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Company, adequate.
4.9 Compliance with Laws. The Company and each of its Subsidiaries
complies with all other applicable laws, ordinances, rules, regulations and
requirements of governmental authorities, except where the failure to so comply
would not materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Company and its
Subsidiaries and would not in any manner draw into question the validity of any
Financing Document.
4.10 Title to and Condition of Properties. As of the date hereof and
the Closing Date (a) the Company and its Subsidiaries have good and marketable
title to all of the properties and other assets (real or personal, tangible,
intangible, intangible or mixed) they own or purport to own and (b) all leases
to which the Company or any of its Subsidiaries is a party as lessee or
sublessee are in full force and effect, except for such defects in title and
such invalidity or unenforceability of leases as, in the aggregate, could not
materially adversely affect the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its Subsidiaries taken
as a whole.
4.11 Not an Investment Company. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
4.12 Full Disclosure. As of the date hereof and the Closing Date, all
information furnished in writing by the Company to the Initial Purchaser for
purposes of or in connection with this Agreement or any transaction contemplated
hereby was true and accurate in all material respects on the date as of which
such information was stated or certified. As of the date hereof and the Closing
Date, the Company has disclosed to the Initial Purchaser in writing, including
5
all disclosures set forth on the Company's annual report on Form 10-K for the
fiscal year ended September 30, 2000, and all quarterly reports filed by the
Company thereafter with the Commission on Form 10-Q and current reports filed by
the Company thereafter with the Commission on Form 8-K, and all filings under
Regulation 14(A) and 14(C) any and all facts (to the extent the Company can now
reasonably foresee), which materially and adversely affect, or may so affect the
business, operations or financial condition of the Company and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Company to perform its
obligations under the Financing Documents.
4.13 Capitalization. The Company's authorized capital stock consists of
50,000,000 shares of common stock, 4,393,009 of which are outstanding on the
date hereof, and 1,000,000 shares of preferred stock, none of which are
outstanding on the date hereof. Except for (i) the Notes, (ii) certain notes to
shareholder purchasers issued pursuant to a subordinated note purchase agreement
of the Company dated as of the date hereof and (iii) options to purchase 404,964
shares of common stock pursuant to employee benefit plans as in effect on the
Closing Date hereof, the Company does not have any commitments, agreements or
obligations to issue common stock on securities exercisable, convertible or
exchangeable for common stock. The Company has reserved a sufficient number of
shares of common stock for the issuance of common stock upon the conversion of
the Notes at the conversion price in effect on the Closing Date.
4.14 Non-Existence of Defaults. Except as set forth in Schedule 4.14,
neither the Company nor any of its Subsidiaries is in default with respect to
any material amount of its existing Debt.
4.15 Capital. All issued shares and all outstanding shares in the
Company's Subsidiaries as reflected in the Company's financial statements are
validly issued pursuant to proper authorization of the board of directors of
such Subsidiary and are fully paid, and non-assessable. All of the Company's and
its Subsidiaries' issued shares and outstanding capital stock are fully paid and
non-assessable. The shares of the Company's common stock issuable upon
conversion of the Notes will be fully paid and non-assessable when issued in
accordance with the terms of this Agreement and the Notes.
4.16 Solvency. The Company and its Subsidiaries collectively now have
capital sufficient to carry on their respective business and transactions and
all business and transactions in which they are about to engage and are now
solvent and able to pay their debts as they mature, and they now own property
having a value, greater than the amount required to pay all outstanding debts of
the Company and its Subsidiaries.
4.17 Accuracy of Statements. Neither this Agreement, nor any statement,
list, certificate or other information furnished or to be furnished by or on
behalf of the Company to the Initial Purchaser in connection with this Agreement
or any of the transactions contemplated hereby, nor any annual, quarterly or
current report or proxy statement filed by the Company with the Commission
contains or, if filed or delivered on or prior to the Closing Date, will contain
any untrue statement of a material fact regarding the Company, or omits or, if
filed or delivered on or prior to the Closing Date will omit to state a material
6
fact necessary to make the statements regarding the Company contained herein or
therein, in light of the circumstances in which they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Initial Purchaser represents and warrants to the Company as
follows:
5.1 Authorization and Enforceability. The Initial Purchaser has taken
all action necessary to permit it to execute and deliver this Agreement and to
carry out the terms hereof. This Agreement constitutes a legal, valid and
binding obligation of the Initial Purchaser, enforceable against the Initial
Purchaser in accordance with its terms.
5.2 Government Approvals. To the best of the Initial Purchaser's
knowledge, the Initial Purchaser is not required to obtain any order, consent,
approval or authorization of, or to make any declaration or filing with, any
governmental agency in connection with the execution and delivery of this
Agreement and the other documents and instruments to be executed by it pursuant
hereto or thereto or the consummation of the transactions contemplated hereby
and thereby.
5.3 Brokers. The Initial Purchaser is not obligated to any broker or
finder or other person, and the Initial Purchaser has not retained any broker or
finder or other person, who is entitled to any broker's or finder's fee or any
other commission or financial advisory fee in connection with the transactions
contemplated hereby.
ARTICLE VI
COMPLIANCE WITH SECURITIES LAWS
6.1 Investment Intent of the Initial Purchaser. The Initial Purchaser
represents and warrants to the Company that it is acquiring the Notes and, upon
issuance in accordance with this Agreement, the Underlying Shares for its own
account, with no present intention of selling or otherwise distributing the same
to the public.
6.2 Status of Notes. The Initial Purchaser has been informed by the
Company that neither the Notes nor the Underlying Shares have been (or will be)
registered under the Securities Act or under any state securities laws (except
pursuant to Article XI of this Agreement) and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering.
6.3 Status of the Initial Purchaser. The Initial Purchaser represents
and warrants to the Company that it is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
7
6.4 Transfer. Subject to the restrictions of Article IX:
(a) The Notes and the Underlying Shares may be transferred, without the
need for the Company's consent, pursuant to (i) public offerings registered
under the Securities Act, (ii) Rule 144 or 144A promulgated under the Securities
Act (or any similar rule then in force) or (iii) subject to the conditions set
forth in Sections 6.4(b) and (c), any other legally available means of transfer.
(b) In connection with any transfer of any Notes or Underlying Shares
described in Section 6.4(a)(iii), the holder of Notes or Underlying Shares shall
deliver written notice to the Company and the holders of Senior Indebtedness
describing in reasonable detail the proposed transfer, together with an opinion
of counsel to the effect that such transfer may be effected without registration
of such Notes or Underlying Shares under the Securities Act; provided that no
opinion of counsel shall be needed with respect to a transfer to a Subsidiary or
Affiliate of a holder of Notes or Underlying Shares. Promptly upon receipt of
such written notice and, if applicable, opinion, the Company shall prepare and
deliver new instruments for the Notes or Underlying Shares being transferred.
Promptly upon receipt of any opinion to the effect that no subsequent transfer
of Notes or Underlying Shares shall require registration under the Securities
Act, the Company shall prepare and deliver in connection with the consummation
of the proposed transfer, new instruments for the Notes or Underlying Shares
being transferred that do not bear the legend referred to in Section 6.4(c).
(c) Except as provided in Section 6.4(b), each Note shall be imprinted
with a legend substantially in the form set forth at the top of Exhibit A
hereto.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions Precedent to the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase Notes are subject to
satisfaction (or written waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of the Company contained herein
shall be true and correct when made and at the Closing Date;
(b) No action, suit, investigation or proceeding shall be pending or
threatened before any court or governmental agency to restrain, prohibit,
collect damages as a result of or otherwise challenge this Agreement or any Note
or any transaction contemplated hereby or thereby;
(c) Except as set forth in Schedule 4.14, no Event of Default or
Default shall have occurred and be continuing. In addition, the Company shall
have received and provided to the Initial Purchaser a written consent signed by
each of the lenders of the Senior Indebtedness, in form and substance
satisfactory to the Initial Purchaser, consenting to this Agreement, the Notes
and the transactions contemplated thereby and confirming that no event of
default or default shall occur under the agreements governing the Senior
Indebtedness as a result of the Company entering into the Agreement or the Notes
or performing its obligations thereunder. The Company shall have received and
provided to the Initial Purchaser a waiver signed by each of the lenders of the
8
Senior Indebtedness, in form and substance satisfactory to the Initial
Purchaser, waiving all then existing events of default or defaults under the
agreements governing the Senior Indebtedness.
(d) The Initial Purchaser shall have received a legal opinion of
counsel to the Company, dated the Closing Date, as to the matters set forth on
Exhibit B hereto;
(e) All governmental and third party approvals necessary or advisable
in connection with the Note, this Agreement and the transactions contemplated
hereby and thereby shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Note, this Agreement or the
transactions contemplated hereby and thereby;
(f) There shall have been no disruption or adverse change after the
date hereof in the United States financial or capital markets generally, as
reasonably determined by the Initial Purchaser;
(g) The Company shall have delivered to the Initial Purchaser:
(i) certificates of a duly authorized officer of the Company
dated as of the Closing Date (A) stating that the conditions set forth
in clauses (a) through (c) and (e) of this Section 7.1 have been
satisfied, (B) setting forth the resolutions of the board of directors
of the Company authorizing the execution and delivery of this Agreement
and the Note and the consummation of the transactions contemplated
hereby and thereby and certifying that such resolutions were duly
adopted and have not been rescinded or amended and (C) certifying as to
the incumbency of the officers of the Company authorized to sign this
Agreement and the other Financing Documents along with a specimen
signature of each such officer;
(ii) copies of the Company's Certificate of Incorporation,
certified by the Secretary of State of the State of Texas, and the
Company's By-Laws, certified by the Secretary of the Company; and
(iii) such other documents relating to the transactions
contemplated hereby as the Initial Purchaser may reasonably request.
ARTICLE VIII
COVENANTS OF THE COMPANY
The Company agrees that, so long as the Initial Purchaser has any
obligation to purchase Notes or while any Notes remain outstanding:
8.1 Information. The Company will deliver to the Initial Purchaser and
each holder of Notes:
9
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, consolidated balance sheets of the Company
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations, stockholders' equity and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on in a manner acceptable to
the Commission by Ernst & Young LLP or other independent public accountants of
nationally recognized standing and certified as to fairness of presentation and
consistency by an Authorized Financial Officer of the Company;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company,
condensed consolidated balance sheets of the Company and its Consolidated
Subsidiaries as of the end of such quarter and the related condensed
consolidated statements of income and cash flows for such quarter and for the
portion of the Company's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the figures for the corresponding quarter
and the corresponding portion of the Company's previous fiscal year, all
certified (subject to normal year-end adjustments and condensation pursuant to
the rules of the Commission) as to the fairness of presentation and consistency
by an Authorized Financial Officer of the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of an
Authorized Financial Officer of the Company (i) setting forth in reasonable
detail and including the calculations required to establish whether the Company
was in compliance with the requirements of Sections 8.6, 8.7, 8.8, 8.9 and 8.12
hereof on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Company is taking or
proposes to take with respect thereto;
(d) promptly upon the occurrence of any Default, a certificate of an
Authorized Financial Officer of the Company setting forth the details thereof
and the action which the Company is taking or proposes to take with respect
thereto;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company shall have filed with the Commission;
(g) if and when any member of the ERISA Group (i) provides or is
required to provide notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has provided or is required to provide notice of any
such reportable event, a copy of the notice of such reportable event provided or
required to be provided to the PBGC, (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice, (iii) receives notice from the PBGC under Title IV of ERISA of an intent
10
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice, (iv) applies for a waiver of the minimum funding standards under
Section 412 of the Internal Revenue Code with respect to any Plan, a copy of
such application, (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and such other information as is filed
with the PBGC in connection therewith, (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice, (vii) receives
notice from the PBGC or any plan administrator of an intent to impose liability
on any member of the ERISA Group with respect to any Other Plan on account of a
transaction described in Section 4069 or 4212(c) of ERISA, a copy of such
notice, (viii) receives notice from the PBGC or any plan administrator of an
intent to impose liability on any member of the ERISA Group with respect to any
Other Plan on the basis that such member of the ERISA Group is a member of the
"controlled group" with respect to such Other Plan under Section 412(c)(11) of
the Internal Revenue Code or Section 4001(a)(14) of ERISA, a copy of such
notice, or (ix) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under Section 302(f) of ERISA or Section 401(a)(29) or 412(n) of the
Internal Revenue Code, a certificate of an Authorized Financial Officer of the
Company setting forth all material and relevant details as to such occurrence or
event and the action, if any, which the Company or the applicable member of the
ERISA Group proposes or, after consultation with counsel, believes that it is
required to take;
(h) as soon as available and in any event within 45 days prior to the
commencement of each fiscal year, budgets of the Company and its Subsidiaries
prepared in good faith detailing proposed expenditures and revenues for such
upcoming fiscal year; and
(i) from time to time such additional information regarding the
financial position or business of the Company or any of its Subsidiaries as any
holder of Notes may reasonably request.
8.2 Maintenance of Property; Insurance. The Company will keep, and will
cause each of its Subsidiaries to keep, all property necessary in its business
in good working order and condition, ordinary wear and tear excepted.
(a) The Company will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Company or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts and against at least such
risks (and with such risk retention and self insurance) as are usually insured
against in the same general area by companies of established repute engaged in
the same or a similar business. The Company will furnish to the holders of the
Notes, upon request, information presented in reasonable detail as to the
insurance so carried.
8.3 Compliance with Laws. The Company will comply, and will cause each
of its Subsidiaries to comply, with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including
Environmental Laws and ERISA and the rules and regulations thereunder) (except
(i) where the failure to so comply would not materially adversely affect the
11
business, consolidated financial position or consolidated results of operations
of the Company and its Subsidiaries and would not in any manner draw into
question the validity of any Financing Document or (ii) where the necessity of
compliance therewith is contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance with generally
accepted accounting principles) and will maintain and cause each of its
Subsidiaries to maintain all governmental licenses, approvals, authorizations
and consents necessary for the conduct of the business of the Company and its
Subsidiaries (except where the failure to maintain such governmental licenses,
approvals, authorizations and consents would not materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Company and its Subsidiaries and would not in any manner draw into
question the validity of any Financing Document).
8.4 Inspection of Property, Books and Records. The Company will keep,
and will cause each of its Subsidiaries to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities and will permit, and
will cause each such Subsidiary to permit, representatives of any holder of
Notes to visit and inspect any of its properties, to examine and make abstracts
from any of its books and records (excluding confidential manufacturer contracts
or other such similar data) and to discuss its affairs, finances and accounts
with its officers, employees and independent public accountants, all at such
reasonable times and upon reasonable notice to the Company and as often as may
reasonably be desired; provided that (i) unless an Event of Default shall have
occurred and be continuing, the Company shall not be obligated to pay the
expenses of the holders' respective representatives and (ii) the Company will
have an opportunity to participate in any discussions that take place between
representatives of any holder of Notes and the Company's independent public
accountants.
8.5 Ownership of Stock of Wholly-Owned Subsidiaries. The Company will
at all times maintain, or cause a Wholly-Owned Subsidiary of the Company to
maintain, ownership of 100% of each class of voting securities of, and all other
equity securities (except for directors' qualifying shares) in, each of its
Subsidiaries that shall be a Wholly-Owned Subsidiary of the Company on the date
hereof and each Person that shall become a Wholly-Owned Subsidiary of the
Company after the date hereof, except in each case any such Wholly-Owned
Subsidiary that shall hereafter be disposed of in its entirety, consolidated or
merged with or into the Company or another such Wholly-Owned Subsidiary or
liquidated.
8.6 Investments. Neither the Company nor any of its Subsidiaries will
make or acquire after the date hereof any Investment other than:
(a) Investments in the Company or in Persons that are Subsidiaries of
the Company on the date hereof;
(b) Temporary Cash Investments;
(c) negotiable instruments endorsed for deposit or collection or
similar instruments received or held by the Company or its Subsidiaries in the
ordinary course of business; and
12
(d) promissory notes and other Investments received as consideration
for facilities sold, provided that the aggregate net book value of all
outstanding Investments permitted by this clause (d) shall not, at any time,
exceed $2,500,000.
8.7 Restricted Payments on Stock. Neither the Company nor any of its
Subsidiaries shall (a) declare or make any dividend payment or other
distribution on any capital stock of the Company (other than dividends payable
solely in shares of the Company's capital stock) or (b) declare or make any
payment on account of the purchase, redemption, retirement or acquisition of the
Company's capital stock.
8.8 Maximum Debt to Tangible Net Worth. The Company will maintain as of
the last day of each fiscal quarter ending on or after September 30, 2001 a
ratio of (a) Debt (less the Notes contemplated herein) to (b) Tangible Net Worth
of not more than Four and One-Half to One (4.5:1.0). "Tangible Net Worth" means
the book value of the Company's assets less liabilities (including as
liabilities all reserves for contingencies and other potential liabilities),
excluding from liabilities all unearned income and excluding from such assets
all Intangibles. "Intangibles" means and includes general intangibles (as that
term is defined in the Uniform Commercial Code; accounts receivable and advances
due from officers, directors, member, owner, employees, stockholders and
affiliates; leasehold improvements net of depreciation; licenses; good will;
escrow deposits; covenants not to compete; the excess of cost over book value of
acquired assets; franchise fees; organizational costs; finance reserves held for
recourse obligations; capitalized research and development costs.
8.9 Senior Indebtedness Outstanding. The Company will not permit the
aggregate outstanding principal amount of Senior Indebtedness at any time to
exceed $110,000,000 plus seasonal or temporary increases.
8.10 Consolidations, Mergers and Sales of Assets. Neither the Company
nor any of its Subsidiaries will (i) consolidate or merge with or into any other
Person, unless the Company or, except in the case of a merger or consolidation
to which the Company is a party, a Wholly-Owned Subsidiary of the Company is the
surviving corporation or (ii) sell, lease or otherwise transfer all or any
substantial part of the assets of the Company and its Subsidiaries, taken as a
whole, to any other Person, provided that this Section 8.10 shall not apply to
mergers, dissolutions, reorganizations or liquidations of Subsidiaries of the
Company that have disposed of all or substantially all of their assets.
8.11 Changes to the Company's Business. The Company will not, and will
not permit any of its Subsidiaries to, engage in any business other than the
Retail Marine Business.
8.12 Lease Conversions. With the exception of the Company's operations
in Knoxville, Tennessee and in New Orleans, Louisiana, the Company will not, and
will not permit any of its Subsidiaries to, make any Lease Conversion in any
calendar year unless:
(i) the aggregate consideration paid or to be paid by the Company and
its Subsidiaries in connection with the termination of leases or the acquisition
of facilities and related property pursuant to such Lease Conversion and all
other Lease Conversions made during such calendar year would not exceed $250,000
net of any financing; and
13
(ii) to the extent such Lease Conversion is financed or will be
financed with Debt of the Company or any of its Subsidiaries, such Debt is
incurred within one year of such Lease Conversion.
8.13 Transactions with Affiliates. Exclusive of management services,
financing activities and other business activities conducted pursuant to written
agreements with the Company or one of its Subsidiaries signed prior to September
1, 2001, the Company will not, and will not permit any of its Subsidiaries to,
enter into any transaction or arrangement with any Affiliate, other than the
Company or any of its Subsidiaries (including the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's (as the case may be) business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtained in a comparable arm's-length transaction with
a Person other than an Affiliate.
8.14 Senior Indebtedness Consent. Prior to the Closing Date, the
Company will obtain the consent of the requisite holders of the Senior
Indebtedness to allow the issuance and maturity of the Notes, without violating
the agreements governing the Senior Indebtedness.
8.15 Taxes. The Company agrees that any and all payments by the Company
hereunder or under the Notes shall be made, free and clear of and without
deduction for any and all present or future Taxes (other than Excluded Taxes)
now or hereafter imposed on each holder of a Note or its property. If the
Company shall be required by law to deduct any Taxes (other than Excluded Taxes)
from or in respect of any sum payable hereunder or under the Notes to any holder
of a Note, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.15) such holder receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Company shall make such deductions and (iii) the Company shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable law. For purposes hereof: (x) "Taxes" means, with
respect to any Person, any taxes, assessments or other governmental charges on
levies imposed upon such Person, such Person's income or any of such Person's
properties, franchises or assets; and (y) "Excluded Taxes" means, in the case of
payments made to any holder of a Note, net income taxes and franchise taxes in
lieu of net income taxes imposed on such Person by its jurisdiction of
organization, the jurisdiction in which its office for maintaining its loan is
located or any political subdivision of either such jurisdiction or the United
States or any state or political subdivision thereof.
(a) The Company shall pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies ("Other
Taxes") which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration, or otherwise with respect to, this
Agreement or the Notes.
(b) The Company shall indemnify each holder of a Note for the full
amount of Taxes (other than Excluded Taxes) and Other Taxes (including any Taxes
(other than Excluded Taxes) and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 8.15) paid by such holder of a Note or any
14
liability (including penalties and interest) arising therefrom or with respect
thereto, whether or not such Taxes (other than Excluded Taxes) or Other Taxes
were correctly or legally asserted. This indemnification shall be made within
thirty (30) days from the date a holder of a Note makes written demand therefor.
(c) Within thirty (30) days after the date of the payment of Taxes
(other than Excluded Taxes) or Other Taxes, the Company shall furnish to each
holder of a Note at its address specified in Section 13.3, the original or a
certified copy of a receipt evidencing payment thereof.
(d) Without prejudice to the survival of any other agreement of the
Company hereunder, the agreements and obligations of the Company contained in
this Section 8.15 shall survive the payment in full of all obligations with
respect to the Notes.
8.16 No Additional Stores. Prior to the Company or its Subsidiaries
opening any stores or facilities in addition to those in existence on the date
of this Agreement, the Company shall provide projected balance sheets and cash
flow projections to the Majority Noteholders for review and approval; if such
projections demonstrate to the Majority Noteholders' satisfaction that the new
store will be accretive to both net income and operating cash flow by the end of
the first 12 months following the opening of such new store, the Majority
Noteholders shall not unreasonably withhold such approval.
ARTICLE IX
SUBORDINATION
9.1 Extent of Subordination. The indebtedness evidenced by the Notes is
subject to the terms of two separate Subordination Agreements - ▇▇▇▇▇▇ Boats,
Inc. Indebtedness to Brunswick Corporation, each dated as of the date hereof,
one with respect to Transamerica Commercial Finance Corporation as senior lender
and one with respect to Deutsche Financial Services Corporation as senior
lender. No provision of this Section 9.1 shall be deemed to subordinate, to any
extent, any claim or right of any holder of the Notes to any claim against the
Company by any creditor or any other Person except to the extent expressly
provided in the above referenced Subordination Agreements.
ARTICLE X
EVENTS OF DEFAULT
10.1 Events of Default. For purposes of the Notes, an "Event of
Default" shall be deemed to have occurred if:
(a) the Company fails to pay when due the full amount of interest then
accrued and unpaid on any Note or the full amount of any principal payment on
any Note;
(b) the Company fails to perform or observe any other provision
contained in the Notes or in this Agreement and such failure to perform shall
continue for 30 days after notice thereof from the holders of the Note to the
Company;
15
(c) any representation, warranty or information contained in this
Agreement or required to be furnished to any holder of the Notes pursuant to
this Agreement, or any writing furnished by the Company to any holder of the
Notes, is false or misleading in any material respect on the date made or
furnished;
(d)
(i) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they
become due; or an order, judgment or decree is entered adjudicating the
Company bankrupt or insolvent; or any order for relief with respect to
the Company is entered under the Federal Bankruptcy Code; or the
Company petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company, or of any
substantial part of the assets of the Company, or commences any
proceeding relating to the Company under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the
Company and either the Company by any act indicates its approval
thereof, consent thereto or acquiescence therein or such petition,
application or proceeding is not dismissed within 60 days;
(ii) without notice to, and approval by, the Majority Noteholders, any
Subsidiary of the Company makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally
as they become due; or an order, judgment or decree is entered
adjudicating any Subsidiary of the Company bankrupt or insolvent; or
any order for relief with respect to any Subsidiary of the Company is
entered under the Federal Bankruptcy Code; or any Subsidiary of the
Company petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of any Subsidiary of the
Company, or of any substantial part of the assets of any Subsidiary of
the Company, or commences any proceeding (other than a proceeding for
the voluntary liquidation and dissolution of any Subsidiary of the
Company) relating to any Subsidiary of the Company under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against any Subsidiary of the Company and either (x) any such
Subsidiary of the Company by any act indicates its approval thereof,
consent thereto or acquiescence therein or (y) such petition,
application or proceeding is not dismissed within 60 days;
(e) a judgment in excess of $300,000 is rendered against the Company or
any Subsidiary and, within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged;
16
(f) the Company or any Subsidiary defaults in the performance of any
Senior Indebtedness, if the effect of such default is to cause the demand for
payment and any Senior Indebtedness to become due prior to its stated maturity
or to permit the holder or holders of any Senior Indebtedness to cause any
Senior Indebtedness to become due prior to its stated maturity;
(g) the financial ratio covenants under any agreement governing Senior
Indebtedness is breached and such breach is not cured (by amendment, waiver or
otherwise) within 90 days;
(h) the Company or any Subsidiary defaults in the performance of any
obligation other than Senior Indebtedness if the effect of such default is to
cause an amount exceeding $250,000 to become due prior to its stated maturity or
to permit the holder or holders of such obligation to cause an amount exceeding
$250,000 to become due prior to its stated maturity; or
(i) at any time any Person or group of Persons acting in concert
directly or indirectly owns, controls or has the power to vote more than 50% of
the shares of Common Stock then outstanding.
10.2 Consequences of Events of Default. Subject to the restrictions of
Article IX:
(a) If an Event of Default of the type described in Section 10.1(a) or
(b) has occurred and continued for 15 days or any other Event of Default has
occurred, the interest rate on the Notes shall increase immediately by an
increment of 5 percentage points to the extent permitted by law. Thereafter,
until such time as no Event of Default exists, the interest rate shall increase
automatically at the end of each succeeding 30-day period by an additional
increment of 1 percentage point to the extent permitted by law (but in no event
shall the interest rate exceed 18%). If any other Event of Default described in
Section 10.1(a) or (b) occurs; the interest rate on the Notes shall increase
immediately by an increment of 2 percentage points to the extent permitted by
law. Any increase of the interest rate resulting from the operation of this
subparagraph shall terminate as of the close of business on the date on which no
Event of Default exists (subject to subsequent increases pursuant to this
subparagraph).
(b) If an Event of Default of the type described in Section 10.1(d)(i)
has occurred, the aggregate principal amount of the Notes (together with all
accrued interest thereon and all other amounts payable in connection therewith)
shall become immediately due and payable without any action on the part of the
holders of the Notes, and the Company shall, subject to Article IX, pay to the
holders of the Notes all amounts due and payable with respect to the Notes.
(c) If any Event of Default (other than an Event of Default under
Section 10.1(d)(i)) has occurred, the Majority Noteholders may declare all or
any portion of the outstanding principal amount of the Notes (together with all
accrued interest thereon and all other amounts due in connection therewith) due
and payable and demand, subject to Article IX, payment of all or any portion of
the outstanding principal amount of the Notes owned by such holder or holders.
The Company shall give prompt written notice of any such demand to the other
holders of Notes, each of which may, subject to Article IX, demand payment of
all or any portion of such holder's Note and the Company shall also give a copy
of such demand to the holders of Senior Indebtedness concurrently with sending
such demand to the other holders of Notes. If any holder or holders of the Notes
17
demand immediate payment and all or any portion of such holder's Notes, the
Company shall, subject to Article IX, pay to such holder or holders all amounts
due and payable with respect to such Notes.
(d) Each holder of the Notes shall also have any other rights, subject
to Article IX, which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may have pursuant
to applicable law.
(e) The Company hereby waives diligence, presentment, protest and
demand and notice of protest and demand, dishonor and nonpayment of any Note,
and expressly agrees that any Note, or any payment hereunder, may be extended
from time to time and that the holder thereof may accept security for any Note
or release security for any Note, all without in any way affecting the liability
of the Company hereunder.
ARTICLE XI
REGISTRATION RIGHTS
11.1 Piggyback Registrations.
(a) If the Company proposes to register any shares of Common Stock or
any securities convertible into shares of Common Stock under the Securities Act
(other than pursuant to (i) a registration on Form S-4 or any successor form, or
(ii) an offering of securities in connection with an employee benefit, share
dividend, share ownership or dividend reinvestment plan) and the registration
form to be used may be used for the registration of Registrable Shares, the
Company will give prompt written notice to all holders of Registrable Shares of
its intention to effect such a registration (each, a "Piggyback Notice") and,
subject to Section 11.1(b) and (c) below, the Company will include in such
registration all Registrable Shares with respect to which the Company has
received written requests for inclusion therein within 15 business days after
the date of sending the Piggyback Notice (a "Piggyback Registration"), unless,
if the Piggyback Registration is not an underwritten offering, the Company in
its reasonable judgment determines that, or in the case of an underwritten
Piggyback Registration, the managing underwriters advise the Company in writing
that in their opinion, the inclusion of Registrable Shares would adversely
interfere with such offering, affect the Company's securities in the public
markets, or otherwise adversely affect the Company. Nothing herein shall affect
the right of the Company to withdraw any such registration in its sole
discretion.
(b) If a Piggyback Registration is a primary registration on behalf of
the Company and, if the Piggyback Registration is not an underwritten offering,
the Company in its reasonable judgment determines that, or in the case of an
underwritten Piggyback Registration, the managing underwriters advise the
Company in writing that in their opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in an
orderly manner within a price range reasonably acceptable to the Company, the
Company will include in such registration (i) first, the securities the Company
proposes to sell and (ii) second, the Registrable Shares requested to be
included in such Registration and any other securities requested to be included
in such registration, pro rata among the holders of Registrable Shares
18
requesting such registration and the holders of such other securities on the
basis of the number of securities requested for inclusion in such registration
by each such holder.
(c) If a Piggyback Registration is a demand registration pursuant to
the Subordinated Note Purchase Agreement between the Company and the Shareholder
Purchasers named therein dated as of December 14, 2001 (the "Junior Subordinated
Purchase Agreement) , and if such Piggyback Registration is not an underwritten
offering, the Company determines that, or if such Piggyback Registration is an
underwritten offering, the managing underwriters advise the Company in writing
that in their opinion, the number of securities requested in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the holders requesting such registration, the
Company will include in such registration (i) first, the securities requested to
be included in such registration by the holders of "Registrable Shares" (as
defined in the Junior Subordinated Purchase Agreement), (ii) any securities the
Company proposes to sell and (iii) the Registrable Shares (as defined in this
Agreement) requested to be included in such registration and any other
securities requested to be included in such registration, pro rata among the
holders of Registrable Shares (as defined in this Agreement) requesting such
registration and the holders of such other securities on the basis of the number
of shares requested for inclusion in such registration by each such holder.
(d) If a Piggyback Registration is a secondary registration other than
as described in Section 11.1(c) on behalf of holders of the Company's securities
other than the holders of Registrable Shares, and, if the Piggyback Registration
is not an underwritten offering, the Company determines that, or in the case of
an underwritten Piggyback Registration, the managing underwriters advise the
Company in writing that in their opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to the holders
initially requesting such registration, the Company will include in such
registration the securities requested to be included therein by the holders
requesting such registration and the Registrable Shares requested to be included
in such registration, pro rata among the holders of securities requesting such
registration on the basis of the number of securities requested for inclusion in
such registration by each such holder.
(e) In the case of an underwritten Piggyback Registration, the Company
will have the right to select the investment banker(s) and manager(s) to
administer the offering. If requested by the underwriters for any underwritten
offerings by Registered Holders, under a registration requested pursuant to
Section 11.1(a), the Company will enter into a customary underwriting agreement
with such underwriters for such offering, which agreement shall contain such
representations and warranties by the Company and such other terms which are
customarily contained in agreements of this type. The Registered Holders
requesting registration shall be a party to such underwriting agreement and may,
at their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be
conditions precedent to the obligations of Registered Holders. The Registered
Holders shall not be required to make any representations or warranties to or
agreement with the Company or the underwriters other than representations,
warranties or agreements regarding the Registered Holders and the Registered
Holders' intended method of distribution and any other representation or
warranties required by law.
19
11.2 Demand Registration. The holders of the Registrable Shares, at any
time, may require the Company to effect the registration of Registrable Shares
pursuant to this Section 11.2; provided that no registration statement shall be
required to be initiated or declared effective prior to the date that the Notes
may be converted in accordance with the terms of paragraph 3 of the Notes. The
right to demand registration under this Section 11.2 may be exercised on two
separate occasions; provided, that if a request is withdrawn in accordance with
the terms hereof, it shall not be deemed to be a demand for registration. A
shelf registration may be demanded pursuant to this Section 11.2. These demand
registration rights may only be exercised if the Majority Registered Holders
give notice to the Company to the effect that holders of Registrable Shares
intend to (i) transfer all or any part of the Registrable Shares or (ii) convert
all or any part of the Notes and transfer all or any part of the Registrable
Shares issuable upon the conversion thereof under such circumstances that a
public distribution (within the meaning of the Securities Act) of the
Registrable Shares will be involved, then the Company (A) within 10 days after
receipt of such notice shall give written notice of the proposed registration
pursuant to this Section 11.2 to the other holders of Registrable Shares and (B)
within 45 days after receipt of such notice from the Majority Registered
Holders, shall file a registration statement pursuant to the Securities Act in
order that all Registrable Shares of the holders requesting registration thereof
either pursuant to the original notice from the Majority Registered Holders give
pursuant to this sentence or by written notice given to the Company during such
45-day period, may be sold under the Securities Act as promptly as is
practicable thereafter. The Company shall use its best efforts to cause any such
registration to become effective as promptly as is practicable and to keep the
prospectus included therein current for 135 days after the effective date
thereof or until the distribution shall be completed, whichever first occurs;
provided, however, that such holders shall furnish the Company with such
appropriate information as is required in connection with such registration as
the Company may reasonably request in writing. If, at the time the Company
receives notice pursuant to this Section 11.2, it would be impossible or
impracticable to include the Company's most recent fiscal year-end financial
statements as the most recent certified financial statements required to be
included in the registration statement, the Company's obligation to effect a
registration pursuant to this Section 11.2 shall be suspended until the
Company's next fiscal year-end financial statements are due in accordance with
applicable securities law regulations applicable to reporting companies, and at
which time the Company shall again be required to effect the registration
pursuant to this Section 11.2 unless the request for registration has been
withdrawn by the Majority Registered Holders. If the managing underwriter for
any offering made pursuant to this Section 11.2 (who shall be selected by the
Majority Registered Holders, subject to the consent of the Company, which
consent shall not be unreasonably withheld) advises the Company in writing that,
in its opinion, the inclusion of all of the Registrable Shares requested to be
included in such registration by the holders of Registrable Shares would
materially adversely affect the distribution of all such securities, then there
shall be included in such registration only the shares of the holders of
Registrable Shares pro rata based on the number of shares originally proposed to
be registered by each holder of Registrable Shares and no other securities of
the Company may be included in such registration. In lieu of having its number
of Registrable Shares included in the registration reduced pursuant to the
previous sentence, any holder of Registrable Shares thereof may, at its sole
option, delay its offering and sale for a period not to exceed 120 days after
the effective date of such registration as such managing underwriter shall
reasonably request. In the event of such delay, the Company shall use its best
efforts to effect any registration or qualification under the Securities Act and
20
the securities or blue sky laws of any jurisdiction as may be necessary to
permit such prospective seller to make its proposed offering and sale following
the end of such period of delay. A registration will not count as a demand
registration under this Section 11.2 until it has become effective and the
holders of the Registrable Shares participating in the demand registration are
able to register and sell at least 90% of the Registrable Shares originally
requested to be included in such registration.
11.3 Registration Procedures.
(a) The Company shall promptly notify the Registered Holders of the
occurrence of the following events:
(i) when any registration statement relating to the
Registrable Shares or post-effective amendment thereto filed
with the Commission has become effective;
(ii) the issuance by the Commission of any stop order
suspending the effectiveness of any registration statement
relating to the Registrable Shares;
(iii) the Company's receipt of any notification of the
suspension of the qualification of any Registrable Shares
covered by a registration statement for sale in any
jurisdiction; and
(iv) the existence of any event, fact or circumstance that
results in a registration statement or prospectus relating to
Registrable Shares or any document incorporated therein by
reference containing an untrue statement of material fact or
omitting to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading during the distribution of securities.
The Company agrees to use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any such registration statement or any
state qualification as promptly as possible. The Registered Holder agrees by
acquisition of the Registrable Shares that upon receipt of any notice from the
Company of the occurrence of any event of the type described in Section
11.3(a)(ii), (iii) or (iv) to immediately discontinue its disposition of
Registrable Shares pursuant to any registration statement relating to such
securities until the Registered Holder's receipt of written notice from the
Company that such disposition may be made.
(b) The Company shall provide to the Registered Holders, at no cost to
the Registered Holders, a copy of the registration statement and any amendment
thereto used to effect the registration of the Registrable Shares, each
prospectus contained in such registration statement or post-effective amendment
and any amendment or supplement thereto and such other documents as the
requesting Registered Holders may reasonably request in order to facilitate the
disposition of the Registrable Shares covered by such registration statement.
The Company consents to the use of each such prospectus and any supplement
thereto by the Registered Holders in connection with the offering and sale of
the Registrable Shares covered by such registration statement or any amendment
21
thereto. The Company shall also file a sufficient number of copies of the
prospectus and any post-effective amendment or supplement thereto with the
securities exchange or market on which shares of Common Stock are then listed so
as to enable the Registered Holders to have the benefits of the prospectus
delivery provisions of Rule 153 under the Securities Act, if applicable.
(c) The Company agrees to use its best efforts to cause the Registrable
Shares covered by a registration statement to be registered with or approved by
such state securities authorities as may be necessary to enable the Registered
Holders to consummate the disposition of such shares pursuant to the plan of
distribution set forth in the registration statement.
(d) If any event, fact or circumstance requiring an amendment to a
registration statement relating to the Registrable Shares or supplement to a
prospectus relating to the Registrable Shares shall exist, immediately upon
becoming aware thereof the Company agrees to notify the Registered Holders and
prepare and furnish to the Registered Holders a post-effective amendment to the
registration statement or supplement to the prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Shares, the
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(e) The Company agrees to use its best efforts (including the payment
of any listing fees) to obtain the listing of all Registrable Shares covered by
the registration statement on each securities exchange on which securities of
the same class or series are then listed.
(f) The Company agrees to use its best efforts to comply with the
Securities Act and the Exchange Act in connection with the offer and sale of
Registrable Shares pursuant to a registration statement, and, as soon as
reasonably practicable following the end of any fiscal year during which a
registration statement effecting a Registration of the Registrable Shares shall
have been effective, to make available to its security holders an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act.
(g) The Company agrees to cooperate with the selling Registered Holders
to facilitate the timely preparation and delivery of certificates representing
Registrable Shares to be sold pursuant to a Registration and not bearing any
Securities Act legend; and enable certificates for such Registrable Shares to be
issued for such numbers of shares and registered in such names as the Registered
Holders may reasonably request at least two business days prior to any sale of
Registrable Shares.
11.4 Expenses of Registration. The Company shall pay all Registration
Expenses incurred in connection with the registration, qualification or
compliance pursuant to Article XI. All Selling Expenses incurred in connection
with the sale of Registrable Shares by any of the Registered Holders shall be
borne by the Registered Holder selling such Registrable Shares. Each Registered
Holder shall pay the expenses of its own counsel.
22
11.5 Registration Indemnification.
(a) The Company will indemnify each Registered Holder, each Registered
Holder's officers and directors, and each person controlling such Registered
Holder within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (including reasonable legal
expenses), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement or
prospectus relating to the Registrable Shares, or any amendment or supplement
thereto, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided, however, that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
information furnished in writing to the Company by such Registered Holder for
inclusion therein.
(b) Each Registered Holder, if Registrable Shares held by such holder
are included in the securities for which such registration, qualification or
compliance is being effected, will indemnify the Company, each of its directors
and each of its officers who signs the registration statement, each underwriter,
if any, of the Company's securities covered by such registration statement, and
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (including reasonable legal fees and expenses) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any amendment or
supplement thereto, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement or prospectus, in
reliance upon and in conformity with information furnished in writing to the
Company by such Registered Holder for inclusion therein.
(c) Each party entitled to indemnification under this Section 11.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 11.5 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party, such counsel to be reasonably satisfactory to the Indemnified Party, and
the obligation of payment of all expenses. The Indemnified Party shall have the
right to employ its own counsel in any such case, but the legal fees and
expenses of such counsel shall be at the expense of the Indemnified Party,
unless the employment of such counsel shall have been authorized in writing by
the Indemnifying Party in connection with the defense of such action, or the
Indemnifying Party shall not have employed counsel to take charge of the defense
of such action or the Indemnified Party shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to direct the defense of such action
on behalf of the Indemnified Party), in any of which events such fees and
expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
23
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) In no event shall any Registered Holder be liable for any expenses,
claims, losses, damages or liabilities pursuant to this Section 11.5 in excess
of the net proceeds to such Registered Holder of any Registrable Shares sold by
such Registered Holder.
11.6 Information to be Furnished by Registered Holders. Each Registered
Holder shall furnish to the Company such information as the Company may
reasonably request and as shall be required in connection with the Registration
and related proceedings referred to in Section 11.5. If any Registered Holder
fails to provide the Company with such information within 20 days of receipt of
the Company's request, the Company's obligations under Section 11.1 and 11.2, as
applicable, with respect to such Registered Holder or the Registrable Shares
owned by such Registered Holder shall be suspended until such Registered Holder
provides such information.
11.7 Rule 144 Sales.
(a) The Company covenants that it will file the reports required to be
filed by the Company under the Exchange Act so as to enable any Registered
Holder to sell Registrable Shares pursuant to Rule 144 under the Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Registered Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Registered Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Shares to be sold, and enable certificates for such Registrable
Shares to be for such number of shares and registered in such names as the
selling Registered Holder may reasonably request at least two business days
prior to any sale of Registrable Shares.
11.8 Survival of Registration Rights. The provisions of this Article XI
shall survive any conversion of the Notes and any termination of any other
provision of this Agreement or of any of the other Financing Documents.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1 Survival. Notwithstanding any examination made by or on behalf of
any party hereto, the knowledge of any party or the acceptance by any party of
any certificate or opinion, each representation and warranty contained herein in
Sections 4.1, 4.2, 4.3 and 4.13 (other than as to such matters, if any, as the
Initial Purchaser shall have waived in writing) shall survive the Closing for
the applicable statute of limitations. All other representations and warranties
contained herein shall survive the Closing until the first to occur of (i)
payment in full of all interest and premium on the Notes or (ii) December 14,
2004.
24
12.2 Indemnification. In consideration of the execution and delivery of
this Agreement by the Initial Purchaser, the Company agrees to indemnify,
exonerate and hold the Purchaser and each holder of a Note and each of the
officers, directors, employees and agents of the Purchaser and each such holder
(collectively the "Purchaser Parties" and individually each a "Purchaser Party")
free and harmless from and against any and all actions, causes of action, suits,
losses, liabilities, damages and expenses, including reasonable attorneys' fees
and charges (collectively therein called the "Indemnified Liabilities"),
incurred by the Purchaser Parties or any of them as a result of, or arising out
of, or relating to (i) any transaction financed or proposed to be financed in
whole or in part, directly or indirectly, with the proceeds of any of the Notes
or (ii) the execution, delivery, performance or enforcement of this Agreement or
any other Financing Document by any of the Purchaser Parties, except for any
such Indemnified Liabilities as to any Purchaser Party arising on account of
such Purchaser Party's gross negligence or willful misconduct. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Nothing set forth above shall be construed to relieve any
Purchaser Party from any obligation it may have under this Agreement.
(a) Without limiting the provisions of clause (a) above, the Company
hereby agrees to reimburse each Purchaser Party for, and indemnify each
Purchaser Party against, any and all losses, claims, damages, penalties,
judgments, liabilities and expenses (including reasonable attorneys' and
consultant's fees) which any Purchaser Party may pay, incur or become subject to
arising out of or relating to the use, handling, release, emission, discharge,
transportation, storage, treatment or disposal of any Hazardous Substance by the
Company or any Subsidiary at any real property owned or leased by the Company or
any Subsidiary or used by the Company or any Subsidiary in its business or
operations.
(b) All obligations provided for in this Section 12.2 and in any other
indemnity provided any Purchaser Party in any other Financing Document shall
survive repayment of the Notes and any termination of this Agreement or any of
the other Financing Documents; provided that a notice of the claim must be given
to the Company prior to the date the applicable representation or warranty upon
which such claim is based expires pursuant to Section 12.1. Nothing in this
Article XII in any way limits the provisions of Article XI, including the
registration indemnification provisions contained therein, which shall survive
and operate in accordance with the terms of that Article.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of any Note.
13.2 Entire Agreement. This Agreement and the other writings referred
to herein or delivered pursuant hereto constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
25
arrangements or understandings, other than agreements of the Company in respect
of certain fee arrangements.
13.3 Notices. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be (i) delivered in person,
(ii) transmitted by telecopy, (iii) sent by reputable overnight courier or (iv)
sent by first class registered or certified mail, postage prepaid, to the
recipient at the address or telecopy number set forth below, or such other
address or telecopy number as may hereafter be designated in writing by such
recipient. Notices shall be deemed given upon personal delivery, three (3) days
following deposit in the mail as set forth above, upon acknowledgment by the
receiving telecopier or upon receipt from overnight courier.
(a) If to the Company:
President,
▇▇▇▇▇▇ Boats & Motors, Inc.
5000 Plaza on the Lake, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Initial Purchaser:
President, Mercury Marine
W ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to General Counsel, Mercury Marine at the same address.
(c) If to subsequent holders of Notes, to such address as such holders
shall provide in written notice to the Company.
13.4 Amendment and Waiver. No amendment to any provision of this
Agreement or the Notes shall be effective unless the same shall be approved in
writing by all holders of the Senior Indebtedness and shall be in writing and
signed by the Company and the Majority Noteholders. Notwithstanding the
foregoing, if: (a) any amendment would treat any holder of any Note differently
than any other holder of any Note, such amendment shall require the consent of
the holder differently treated; and (b) any amendment to this Agreement or the
Notes shall postpone or delay any date fixed for any payment of principal,
interest or other amounts due on the Notes or under this Agreement, reduce the
principal of, or the rate of interest on, or fees or other amounts payable in
connection with the Notes, or amend this sentence, such amendment must be signed
by the Company and all of the holders of Notes. No such waiver shall operate as
a waiver of, or estoppel with respect to, any subsequent or other failure. No
failure by any party to take any action against any breach of this Agreement or
default by any other party shall constitute a waiver of such party's right to
enforce any provision hereof or to take any such action.
26
13.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
13.6 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement and shall not affect the interpretation hereof.
13.7 Remedies Cumulative. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
13.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware for contracts made
and to be performed in Delaware.
13.9 No Third Party Beneficiaries. Except as specifically set forth in
Article IX hereof or otherwise referred to herein, nothing herein is intended or
shall be construed to confer upon any person or entity other than the parties
hereto, the holders of Senior Indebtedness and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
13.10 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
13.11 Confidentiality. The Initial Purchaser and each holder of a Note
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Company in accordance
with their customary procedures for handling confidential information of this
nature and, in any event, may make disclosure on the same confidential basis as
provided for herein that is reasonably required by any actual or bona fide
potential transferee in connection with the contemplated transfer of any Note or
as required or requested by any governmental agency or representative thereof or
pursuant to legal process; provided that, unless prohibited by applicable law or
court order, each holder of a Note shall promptly notify the Company of any
request by any governmental agency or representative thereof for disclosure of
any such non-public information prior to disclosure of such information.
13.12 Limitation of Liability. Under no circumstances and under no
legal theory, whether in tort, contract or otherwise, shall any party to this
Agreement be liable to any other party to this Agreement for any indirect,
special, incidental, exemplary, punitive or consequential damages of any
character including, without limitation, damages for lost profits, or any and
all other commercial damages or losses arising from or related to this
Agreement. Nothing in this Section 13.12 limits (i) the Company's obligations to
pay the principal, premium and interest on the Notes, including the default rate
of interest, (ii) the express indemnification obligations set forth herein, or
(iii) any other express obligation set forth hereunder.
13.13 Arbitration. Any dispute, claim or action arising under or
relating to this Agreement shall be settled by binding arbitration according to
the rules of the American Arbitration Association before a panel of three
27
arbitrators. The location of such arbitration shall be in the city of Chicago,
Illinois. Such arbitration shall be conducted under the guidance of the United
States Federal Rules of Civil Procedure and the United States Federal Rules of
Evidence but the arbitrators (at their discretion) shall not be required to
comply strictly with such rules. The arbitrators shall conduct evidentiary and
other hearings as they deem necessary or appropriate and thereafter shall make
their determination as soon as practicable. A full and complete record and
transcript of the arbitration proceeding shall be maintained and the judgment of
the arbitrators shall be accompanied by the detailed written findings of fact
and the conclusions reached by the arbitrators (which findings and conclusions
the arbitrators shall be required to make) as well as the arbitrators' reasons
for reaching such conclusions. The arbitrators shall give the parties written
notice of the decision, with the reasons therefor set out, and shall have thirty
(30) days thereafter to reconsider and modify such decisions if any party so
requests within ten (10) days after the decision. Thereafter, the decision of
the arbitrators shall be final, binding and non-appealable with respect to all
persons, including persons who have failed or refused to participate in the
arbitration process, and shall be reviewable only to the extent provided by the
American Arbitration Association Rules. The arbitrators shall have the authority
to award relief under legal or equitable principles and to allocate
responsibility for the costs of such arbitration and to award recovery of
attorney's fees and expenses in such manner as is determined to be appropriate
by the arbitrators. The arbitration shall be governed by the choice of law
provisions set forth in Section 13.8 above. The award of the arbitration panel
shall be binding on both parties and judgment upon any award may be entered by a
court having competent jurisdiction. The parties will be responsible for their
own attorneys' fees, witness fees and their own out-of-pocket expenses. The
parties will each pay one-half of the arbitrator's fees and the arbitrator's
out-of-pocket expenses.
13.14 Release of Claims. THE COMPANY HEREBY ACKNOWLEDGES AND AGREES
THAT IT DOES NOT HAVE ANY DEFENSES, COUNTERCLAIMS, OFFSETS, CROSS-COMPLAINTS,
CLAIMS OR DEMANDS OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO
REDUCE OR ELIMINATE ALL OR ANY PART OF LIABILITY OF THE COMPANY TO REPAY THE
HOLDERS OF THE NOTES OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR
NATURE FROM ANY HOLDER OF THE NOTES OR ANY OF THEIR RESPECTIVE SUBSIDIARIES OR
AFFILIATES. THE COMPANY HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER
DISCHARGES INITIAL PURCHASER AND ITS SUBSIDIARIES AND AFFILIATES AND ALL OF
THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, OR EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AGREEMENT IS
EXECUTED, WHICH THE COMPANY MAY NOW OR HEREAFTER HAVE AGAINST SUCH PERSON, IF
ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT,
VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,
28
THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THIS AGREEMENT, THE NOTES OR ANY
SALES CONTRACT AND THE NEGOTIATION AND EXECUTION THEREOF.
ARTICLE XIV
PURCHASER COVENANTS
14.1 Tender Offer Covenant. The Initial Purchaser agrees that it will
not initiate a tender offer to purchase the Company's common stock for 60 days
following the date it provides the Company with notice of intention to convert
the Notes if the conversion referenced in such notice (a) represents a
conversion of 20% or more of the principal amount of the Notes issued on the
Closing Date or (b) taken together with all other conversions that did not
previously (individually or with other conversions) trigger such 60 day period
pursuant to the terms of this section, in the aggregate represents a conversion
of 20% or more of the principal amount of the Notes issued on the Closing Date.
14.2 Dilution Protection Covenant. The adjustments to Conversion Price
set forth in paragraph 3(b) of the Notes shall not apply after the date that is
24 months after the Closing Date if, but only if, the Company is able to
demonstrate, to the satisfaction of the Majority Noteholders, in their sole but
reasonable discretion, that the Company is in need of additional working capital
for general business purposes from equity financing at a per share price less
than the Conversion Price and that such financing is not available unless the
Majority Noteholders waive the dilution adjustments set forth in paragraph 3(b)
of the Notes. Any such waiver of dilution adjustments must be in writing signed
by the Majority Noteholders. Any such waiver shall apply only to the equity
financing specified in such waiver. The Majority Noteholders have no obligation
to waive the dilution adjustments set forth in paragraph 3(b) of the Notes and
reserve all rights to enforce such dilution adjustments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
COMPANY:
▇▇▇▇▇▇ BOATS & MOTORS, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
INITIAL PURCHASER:
BRUNSWICK CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
29
ANNEX
DEFINITIONS
"Affiliate" means any Person (other than the Company, any Subsidiary of the
Company or any Purchaser or other holder of Notes) (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, the Company or (b) which is the "beneficial owner"
(pursuant to Rule 13d-3 or 13d-5 of the Securities Exchange Act of 1934, as in
effect on the date hereof) of 10% or more of any class of Voting Stock of the
Company. As used herein, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting stock, by contract
or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Authorized Financial Officer" of any Person means the Chief Financial Officer,
Treasurer or Controller of such Person.
"Base Financials" means the consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 2000 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended, together with the notes thereto, included in the Company's Form 10-K for
the year ended September 30, 2000 and reported on without qualification by Ernst
& Young LLP.
"Business Day" means a day on which commercial banking institutions are required
to be open for business in Chicago, Illinois and New York, New York.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock and any capital stock of any
class of the Company hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Company" has the meaning set forth in the preamble.
"Consolidated Net Income" means, for any period, the net income (loss)
(calculated (a) before preferred and common stock dividends and (b) exclusive of
the effect of any extraordinary or other material non-recurring gain or loss
outside the ordinary course of business) of the Company and its Consolidated
Subsidiaries, determined on a consolidated basis for such period.
"Consolidated Subsidiary" means, with respect to any Person and at any date, any
of its Subsidiaries or any other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.
A-1
"Debt" of any Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of business, (iv)
all obligations of such Person as lessee which are capitalized in accordance
with generally accepted accounting principles, (v) all obligations of such
Person with respect to letters of credit and similar instruments, including
obligations under reimbursement agreements, (vi) all mandatorily redeemable
preferred stock of such Person, (vii) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person and
(viii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of Default or
which with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such Person in
respect of any rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including ambient air, surface water, groundwater
or land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Group" means the Company and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Internal Revenue Code.
"Event of Default" has the meaning set forth in Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as it may be amended
from time-to-time.
"Excluded Taxes" has the meaning set forth in Section 8.15(a).
"Financing Documents" means this Agreement and the Notes.
A-2
"Guarantee" by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without ▇▇▇▇▇▇ the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substance" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hyrdrocarbons, or any substance having any constituent elements displaying any
of the foregoing characteristics.
"Indemnified Liabilities" has the meaning provided in Section 12.2(a).
"Initial Purchaser" has the meaning provided in the preamble.
"Intangibles" has the meaning provided in Section 8.8.
"Internal Revenue Code" means the Internal Revenue Code of 1986.
"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, Guarantee, time deposit or otherwise.
"Lease Conversion" means any acquisition by the Company or any of its
Subsidiaries of a facility and related property that had theretofore been leased
by the Company or any such Subsidiary and that the Company or any of its
Subsidiaries continues to operate.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset. For the purposes of this Agreement, the Company or any of
its Subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Majority Noteholders" means holders of more than 50% of the aggregate
outstanding principal amount of the Notes.
"Majority Registered Holders" means the holders of a majority of the total
Registrable Shares.
"Multiemployer Plan" means at any time an employee pension benefit plan within
the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
A-3
"Notes" has the meaning set forth in Section 2.1(a).
"Other Plan" means an employee pension benefit plan (other than a Plan or a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code.
"Other Taxes" has the meaning set forth in Section 8.15(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
"Person" means an individual, a corporation, limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser Parties" has the meaning set forth in Section 12.2(a).
"Register," "Registered" and "Registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act providing for the sale by the Registered Holders of Registrable Shares and
the declaration or ordering of the effectiveness of such registration statement
by the Commission.
"Registered Holders" means the holders of Underlying Shares.
"Registrable Shares" shall mean the Underlying Shares, except that as to any
particular Underlying Shares, once issued such securities shall cease to be
Registrable Shares when (a) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, or (b) such securities shall have been sold in accordance with Rule
144 (or any successor provision) under the Securities Act.
"Registration Expenses" shall mean all out-of-pocket expenses (excluding Selling
Expenses) incurred by the Company in complying with Sections 11.1 and 11.2
hereof, including, without limitation, the following: (a) all registration,
filing and listing fees; (b) fees and expenses relating to compliance with
federal and state securities laws (including, without limitation, reasonable
fees and disbursements of the Company's counsel in connection with state
securities qualifications of the Registrable Shares under the laws of such
jurisdictions as the Registered Holders may reasonably designate); (c) printing
costs (including, without limitation, expenses of printing or engraving
certificates for the Registrable Shares in a form eligible for deposit with The
Depository Trust Company and otherwise meeting the requirements of any
securities exchange on which they are listed and of printing registration
statements and prospectuses), messenger, telephone, shipping and delivery
A-4
expenses; (d) fees and disbursements of counsel for the Company; (e) fees and
disbursements of all independent public accountants of the Company (including
without limitation the expenses of any annual or special audit and "cold
comfort" letters required by the managing underwriter); (f) Securities Act
liability insurance if the Company so desires; (g) fees and expenses of other
Persons reasonably necessary in connection with the registration, including any
experts, retained by the Company; (h) fees and expenses incurred in connection
with the listing of the Registrable Shares on each securities exchange on which
securities of the same class or series are then listed; and (i) fees and
expenses associated with any filing with the National Association of Securities
Dealers, Inc. required to be made in connection with the registration statement.
"Retail Marine Business" means the sales and service of recreational boats,
motors, trailers and related marine parts and accessories business, and such
items or services reasonably incidental thereto, including financing, insurance
and credit life as are being offered in the ordinary course of business on the
date hereof.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as it may be amended from
time to time.
"Selling Expenses" shall mean all underwriting discounts, selling commissions
and stock transfer taxes applicable to any sale of Registrable Shares.
"Senior Indebtedness" shall mean obligations of the Company identified as Senior
Liabilities in the two separate Subordination Agreements - ▇▇▇▇▇▇ Boats &
Motors, Inc. Indebtedness of Brunswick Corporation signed by the Initial
Purchaser as of the date hereof, one with respect to Transamerica Commercial
Finance Corporation as senior lender and one with respect to Deutsche Financial
Services Corporation, and any duly executed amendment, supplement or
modification thereto.
"Subsidiary" means, with respect to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tangible Net Worth" has the meaning provided in Section 8.8.
"Taxes" has the meaning provided in Section 8.15(a).
"Temporary Cash Investment" means any Investment in (i) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof, (ii) commercial paper with maturities of not more
than 180 days rated at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc. or A-1 by
Standard & Poor's Ratings Group, (iii) deposit accounts in, and certificates of
deposit, repurchase agreements and bankers' acceptances of, United States
branches of commercial banks whose unsecured senior long-term debt is rated A or
better by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Ratings Group, in
each case maturing within one year from the date of acquisition thereof or (iv)
in addition to the accounts and instruments referred to in clause (iii), deposit
accounts and certificates of deposit in United States branches of banks insured
A-5
by the Federal Deposit Insurance Corporation which do not aggregate more than
$100,000 in any one bank, except for demand deposits.
"Underlying Shares" means (i) the Common Shares issued or issuable upon exercise
of the Notes and (ii) any securities issued or issuable with respect to such
shares by way of any stock split, stock dividend, recapitalization or otherwise.
"Voting Stock" means capital stock of any class or classes (however designated)
having ordinary voting power for the election of directors of the Company, other
than stock having such power only by reason of the happening of a contingency.
"Wholly-Owned Subsidiary" means, with respect to any Person, any Subsidiary of
such Person all of the shares of Voting Stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by such Person.
A-6
EXHIBIT A
FORM OF NOTE
A-1
EXHIBIT B
ITEMS TO BE COVERED BY OPINIONS OF COUNSEL TO THE COMPANY
[Closing Date]
Counsel shall state they have acted as counsel for ▇▇▇▇▇▇ Boats & Motors, Inc.,
a Texas corporation (the "Company"), in connection with the negotiation,
preparation, execution and delivery of the following (the "Documents"):
(a) The Subordinated Note Purchase Agreement, dated as of
December 14, 2001 (the "Note Purchase Agreement"), by and between the
Company and the Initial Purchaser named therein (the "Purchaser"); and
(b) The convertible subordinated note of the Company issued
pursuant to the Note Purchase Agreement (the "Note"), dated December
14, 2001, in favor of the Purchaser.
(c) The two separate Subordination Agreements - ▇▇▇▇▇▇ Boats,
Inc. Indebtedness to Brunswick Corporation, each dated December 14,
2001, one with respect to Transamerica Commercial Finance Corporation
as senior lender and one with respect to Deutsche Financial Services
Corporation as senior lender.
(d) The Subordination Agreement - ▇▇▇▇▇▇ Boats, Inc.
Indebtedness to Shareholder Purchasers dated December 14, 2001.
Capitalized terms used but not otherwise defined in the opinions shall have the
respective meanings assigned thereto in the Note Purchase Agreement.
Counsel shall render opinions that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Texas and is duly qualified and
in good standing in each jurisdiction where it holds property and where the
nature of its business makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
2. The execution, delivery and performance by the Company of the
Documents and the consummation of the transactions contemplated thereby are
within the Company's corporate powers, have been duly authorized by all
necessary corporate action and do not and will not (a) conflict with or result
in a breach of any of the provisions of the Company's articles of incorporation
or bylaws, (b) contravene any applicable requirement of law (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System), (c) result in a breach or violation of, or constitute a default
under, any agreement, undertaking, contract, indenture or mortgage to which the
Company or any Subsidiary of the Company is a party or by which the Company or
any of its Subsidiaries or any of their property is bound, including without
limitation any contract relating to Senior Indebtedness, except as any such
breach, violation or default as shall have been waived in writing, or (d) result
B-1
in the creation or imposition of (or the obligation to create or impose) any
Lien upon any of the properties of the Company or any of its Subsidiaries
pursuant to any agreement, undertaking, contract, indenture or mortgage.
3. The Company has duly executed and delivered the Documents. The
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
4. No authorization, consent or approval or other action by, and no
notice to or filing with, any governmental authority or other person or entity
(including, without limitation, the shareholders of any person or entity) is
required to be obtained or made by the Company for the due execution, delivery
and performance by the Company of any of the Documents, except such as have been
duly obtained or made and are in full force and effect.
5. To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company which seek to enjoin or relate to the
Documents or the transactions contemplated thereby.
6. Assuming the accuracy of the representations and warranties of the
Purchaser in Sections 6.1, 6.2 and 6.3 of the Note Purchase Agreement, the
issuance, sale and delivery of the Note to be delivered to the Purchaser on the
Closing Date under the circumstances contemplated by the Agreement is an exempt
transaction from the registration requirement of Section 5 of the Securities Act
of 1933, as amended, and does not, under existing law, require the registration
of the Notes or the Underlying Shares issued upon conversion of the Notes under
the Securities Act of 1933, as amended, or the qualification of an indenture in
respect of the Notes under the Trust Indenture Act of 1939.
7. The Company's authorized capital stock consists of 50,000,000 shares
of common stock, 4,393,009 of which are outstanding on the date hereof, and
1,000,000 shares of preferred stock, none of which are outstanding on the date
hereof. Except for the Notes and options to purchase 404,964 shares of common
stock, pursuant to employee benefit plans as in effect on the Closing Date
hereof, to our knowledge, the Company does not have any commitments, agreements
or obligations to issue common stock on securities exercisable, convertible or
exchangeable for common stock.
8. The Company has reserved 1,219,810 shares of common stock for
issuance upon conversion of the Notes.
9. Upon issuance of shares of common stock in connection with the
conversion of the Notes, such shares will be legally and validly issued, fully
paid and non-assessable.
10. The Board of Directors of the Company has taken the necessary
action so that the three year moratorium set forth in the Texas Business
Combination Law does not apply to the transactions contemplated by the
Agreement, including without limitation, the issuance or the conversion of the
Notes, or to any subsequent business combination between the Initial Purchaser
and the Company.
B-2
The opinion as to the enforceability of the Documents in accordance with their
terms may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application affecting the rights of
creditors and the availability of equitable remedies.
B-3
Schedule 4.4(c) - Material Adverse Changes
Statistical data from various industry sources indicates that the overall
recreational marine industry has suffered during the 2001 calendar year from a
broad slowdown and softness in sales volumes. This has impacted both
manufacturers, such as Brunswick Corporation, and retailers such as ▇▇▇▇▇▇ Boats
& Motors, Inc. ("▇▇▇▇▇▇ Boats"). ▇▇▇▇▇▇ Boats has indicated that it expects
overall sales volumes during its 2001 fiscal year ending September 30, 2001 to
decline in the approximate range of 10-15% from the sales levels posted in its
prior fiscal year. Exclusive of the aforementioned industry issues and the
impact thereof on the sales and financial operations filed with the Securities
and Exchange Commission (the "SEC") subsequent to September 30, 2001 and as
reasonably projected in ProForma financial data submitted herewith by ▇▇▇▇▇▇
Boats, there has been no material adverse change in the business, financial
position, results of operations or prospects of the Company since September 30,
2000.
The Company has historically been, and is expected to be highly influenced by
seasonality and the fluctuations in sales and operating performance resultant
therefrom. The impact of such seasonality may be negatively impacted by the
terror events impacting the United States on September 11, 2001 or any future
terroristic events that may target the United States or its citizens. This may
include not only the impact on sales and operating performance but also the
possibility of damage or interruptions to operations occurring that is not
covered under the insurance coverages historically obtained and available to the
Company.
The Company's master agreement to purchase outboard engines and related products
from Brunswick Corporation has expired. Current purchases are made under a
temporary renewal of the master agreement which expires on October 29, 2001. In
the event that the agreement is not renewed or the prices charged thereunder are
modified it could have a material adverse impact on the Company.
The Company has listed other Risk Factors which may impact sales and financial
operations in its Report on Form 10-K form the fiscal year ended September 30,
2000 and in subsequent quarterly Reports on Form 10-Q filed with the SEC.
S-1
Schedule 4.14 - Material Defaults on Senior Indebtedness
Effective, January 16, 2001, the Company amended and restated its borrowing
agreements with TDF and DFS to provide for the waiver and modification of
certain ratio levels for each quarterly period through and including September
30, 2001. The amended borrowing agreements, which mature in January 2003,
continue to provide for a total of $110 million in inventory floor plan
financing and working capital borrowings. Interest on the borrowing agreements
is at variable rates ranging from the lender's daily prime rate minus 0.25% to
LIBOR plus 3.0%, fixed for each 30 day period.
Effective with the company's financial results for the period ended March 31,
2001, the Company was in violation of several financial ratio covenants with TDF
and DFS. The Company has remained out of compliance with the ratio levels
required as of the period ended March 31, 2001 and the period ended June 30,
2001 and is currently out of compliance with the ratio levels required as of
September 30, 2001. The Company has notified DFS and TDF of non-compliance and
has requested the waiver and re-establishment of ratio's with consideration
towards the current Company performance and the overall weak industry and
economic environments.
Effective as of its March 31, 2001 and June 30, 2001, the Company's operating
results were out of compliance with two (2) ratio covenants and a miscellaneous
covenant of its Borrowing Agreements with Transamerica Distribution Finance
("TDF") and Deutsche Financial Services ("DFS"):
Interest Coverage Ratio. With respect to the TDF and DFS Borrowing Agreements,
the Interest Coverage Ratio requires ▇▇▇▇▇▇ Boats to maintain, as of the 12
months ended March 31, 2001, an Interest Coverage Ratio of not less than 1.00 to
1.00. ▇▇▇▇▇▇ Boats' Interest Coverage Ratio for the 12 months ended March 31,
2001 was 0.90 to 1.00 and as such ▇▇▇▇▇▇ Boats was not in compliance with the
Agreement. With respect to the TDF and DFS Borrowing Agreements, ▇▇▇▇▇▇ Boats
was also requires to maintain, as of the 12 months ended June 30, 2001, an
Interest Coverage Ratio of not less than 1.15 to 1.00. ▇▇▇▇▇▇ Boats' Interest
Coverage Ratio for the 12 months ended June 31, 2001 was 0.60 to 1.00 and as
such ▇▇▇▇▇▇ Boats was not in compliance with the Agreement.
Fixed Charge Coverage Ratio. With respect to the TDF and DFS Borrowing
Agreements, the Fixed Charge Coverage Ratio requires ▇▇▇▇▇▇ Boats' to maintain,
as of the 12 months ended March 31, 2001, a Fixed Charge Coverage Ratio of not
less than 1.20 to 1.00. ▇▇▇▇▇▇ Boats' Fixed Charge Coverage Ratio for the 12
months ended March 31, 2001 was 1.10 to 1.00 and as such ▇▇▇▇▇▇ Boats was not in
compliance with the Agreement. With respect to the TDF and DFS Borrowing
Agreements, ▇▇▇▇▇▇ Boats was also required to maintain, as of the 12 months
ended June 30, 2001, a Fixed Charge Coverage Ratio of not less than 1.35 to
1.00. ▇▇▇▇▇▇ Boats' Fixed Charge Coverage Ratio for the 12 months ended June 30,
2001 was 0.90 to 1.00 and as such ▇▇▇▇▇▇ Boats was not in compliance with the
Agreement.
Default Under Other Agreements. The Borrowing Agreements are cross- defaulted,
thus lack of compliance under one agreement constitutes lack of compliance under
the other agreement.
S-2