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EXHIBIT 10.5.1
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EASYRIDERS, INC.
EASYRIDERS SUB II, INC.
(to be merged with and into PAISANO PUBLICATIONS, INC.)
NOTE AND WARRANT PURCHASE AGREEMENT
with
NOMURA HOLDING AMERICA INC.
Up to $5,000,000 Senior Secured Guaranteed Revolving Notes Due 2001
$17,000,000 Senior Secured Guaranteed Term Notes Due 2001
Warrants to Purchase Shares of Common Stock
Dated as of September __, 1998
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NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") dated as of
September __, 1998, by and among EASYRIDERS, INC., a Delaware corporation of
which the Company is a wholly-owned Subsidiary (together with its successors,
the "Parent"), EASYRIDERS SUB II, INC. (to be merged with and into PAISANO
PUBLICATIONS, INC.), a California corporation ("Easyriders Sub II") and NOMURA
HOLDING AMERICA INC., a Delaware corporation (together with its successors,
assigns and transferees, the "Purchaser").
RECITALS
WHEREAS, the Parent and Paisano Publications (capitalized terms used
herein without definition have the meanings provided in Section 1 hereof) have
agreed to consummate the Reorganization, which will include (i) the acquisition
(the "Paisano Acquisition") by the Parent of all the outstanding Capital Stock
of Paisano Publications and the other Paisano Companies, pursuant to the Paisano
Stock Contribution Agreement, (ii) the acquisition (the "El Paso Acquisition")
by the Parent of all of the membership interests of El Paso pursuant to the El
Paso Contribution Agreement and (iii) the merger (the "Newriders Merger") of
Easyriders Sub, Inc., a Nevada corporation and Wholly-owned Subsidiary of the
Parent ("Easyriders Sub I") with and into Newriders Inc., a Nevada corporation
("Newriders") pursuant to the Newriders Merger Agreement. As a result of the
Newriders Merger, Newriders, the Paisano Companies and El Paso will become
Wholly-owned Subsidiaries of the Parent. Immediately following the
Reorganization, Easyriders will transfer the El Paso membership interests to
Newriders.
WHEREAS, in the Paisano Acquisition, the Parent and Easyriders Sub II will
receive all of the issued and outstanding stock (the "Paisano Companies Stock")
of each of the corporations that comprise the Paisano Companies. ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ("▇▇▇▇▇▇"), the sole stockholder of each of the Paisano Companies, will
receive in exchange for the Paisano Companies Stock, 6,493,507 shares of
Easyriders Common Stock, a promissory note of Easyriders Sub II in the principal
amount of $15,000,000 (the "Easyriders Sub II Note") which is payable in cash
immediately after the Newriders Merger has occurred, and the Subordinated Seller
Notes.
WHEREAS, immediately following the Newsriders Merger, Easyriders Sub II
will merge with and into Paisano Publications, with Paisano Publications as the
surviving corporation (the "Paisano Merger").
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WHEREAS, in order to provide financing to repay a portion of the
Easyriders Sub II Note simultaneously with the consummation of the Paisano
Merger, to refinance certain existing Indebtedness of Paisano Publications and
to provide working capital and funds for other general corporate purposes, the
Company has proposed to issue and sell to the Purchaser (i) its Senior Secured
Guaranteed Revolving Notes Due 2001 in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding and (ii) its Senior Secured Guaranteed
Term Notes Due 2001 in an aggregate principal amount of $17,000,000, all for the
consideration and upon the terms and conditions hereinafter provided.
WHEREAS, in consideration of the purchase of such notes by the Purchaser,
the Parent has agreed to issue to the Purchaser its warrants to purchase under
certain circumstances up to an aggregate of 348,157 shares of Common Stock then
outstanding at an initial exercise price of $3.00 per share (subject to
adjustment as therein provided).
NOW, THEREFORE, the Parent, the Company and the Purchaser agree as
follows:
Section 1. Definitions.
Section 1.1. Defined Terms. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"ABC" has the meaning specified in Section 4.37.
"Accountants" has the meaning specified in Section 7.
"Accounts" means, as at any date of determination, with respect to any
Person, all "accounts" (as such term is defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof), customer accounts,
claims, rights of action, book debts and ancillary rights, of such Person,
including, without limitation, the unpaid portion of the obligation of a
customer of such Person in respect of Inventory purchased by and shipped to such
customer, or in respect of services rendered to such customer, as stated on the
respective invoice of such Person, net of any credits, rebates or offsets owed
to such customer.
"Affiliate" means, as to any Person, any Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person. For purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (a) to vote or direct the voting of 5% or more of the
outstanding shares of Voting Stock of such Person, or (b) to direct or cause the
direction of the management and policies of such Person whether by ownership of
Capital Stock, by contract or otherwise; provided, however, that the Purchaser
shall not be deemed to be an Affiliate of any Credit Party by reason of its
ownership of any Capital Stock of the Parent or Warrants.
"After Acquired Real Property" has the meaning specified in Section 9.5.
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"Assignee" has the meaning specified in Section 14.4(b).
"Assignment of Representations, Warranties, Covenants and Indemnitees" has
the meaning specified in Section 5.11.
"Authorized Officer" means, for any corporation, the President, the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of such
corporation.
"Bankruptcy Code" means 11 U.S.C. Sec. 101 et seq., as from time to time
hereafter amended, and any successor or similar statute.
"Base Rate" means, in respect of interest accrued on the Notes during each
calendar month (or portion thereof) during the period in which the Notes shall
be outstanding, the Prime Rate per annum which normally is published in the
"Money Rates" section of The Wall Street Journal (or if such rate ceases to be
so published, as quoted from such other generally available and recognizable
source as the Purchaser may select). The Base Rate shall be determined (i) on
the first Business Day immediately prior to the Closing Date and (ii)
thereafter, on the last Business Day of each calendar month for calculation of
interest for the following month. It is understood and agreed that the Base Rate
as herein defined is not necessarily the lowest rate of interest charged by the
Purchaser in connection with promissory notes and other debt instruments
purchased by it.
"Benefit Plans" has the meaning provided in Section 4.19(a).
"Blocked Account Agreement" means an agreement substantially in the form
of Exhibit M hereto, with respect to one or more Depositary Accounts now or
hereafter maintained by any Credit Party, among the Credit Party maintaining
such Depositary Account, the bank, broker, dealer, other financial intermediary
or other institution at which such Depositary Account is maintained, and the
Purchaser.
"Business Day" means any day on which commercial banks are not authorized
or required to close in New York City.
"Capital Expenditures" means the expenditures of any Person which should
be capitalized on the balance sheet of such Person in accordance with GAAP
(including that portion of Capitalized Lease Obligations which should be
capitalized on a consolidated balance sheet of such Person in accordance with
GAAP) and which are made in connection with the purchase, construction or
improvement of items properly classified on such balance sheet as property,
plant, equipment or other fixed assets or intangibles.
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"Capital Stock" means and includes (a) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (b) all partnership interests (whether general or limited) in
any Person which is a partnership, (c) all membership interests or limited
liability company interests in any limited liability company, and (d) all equity
or ownership interests in any Person of any other type.
"Capitalized Lease" means, as to any Person, a lease of (or other
agreement conveying the right to use) real and/or personal Property to such
Person as lessee, with respect to which the obligations of such Person to pay
rent or other amounts are required to be classified and accounted for as a
capital lease on a balance sheet of such Person in accordance with GAAP
(including Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board).
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a Capitalized Lease and, for
purposes of this Agreement, the amount of such obligation shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Cash Equivalents" means (a) marketable obligations maturing within six
months after acquisition thereof issued or fully guaranteed by the United States
of America or an instrumentality or agency thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof), (b)
open market commercial paper, maturing within 180 days after acquisition
thereof, which has the highest credit rating of either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., (c) certificates of deposit or
bankers acceptances or other obligations maturing within six months after
acquisition thereof issued by a domestic commercial bank which is a member of
the Federal Reserve System and has capital and surplus and undivided profits in
excess of $500,000,000, and (d) other certificates of deposit maturing within
six months after acquisition thereof in respect of deposits fully insured by the
Federal Deposit Insurance Corporation. Notwithstanding the foregoing, (x) items
referred to in the foregoing clauses (a) and (b) shall constitute Cash
Equivalents only if held on behalf of a Credit Party in a Depositary Account
with a bank, securities broker or dealer or other financial intermediary
reasonably satisfactory to the Purchaser and with which such Credit Party shall
have entered into a Blocked Account Agreement covering such items; and (y) items
referred to in the foregoing clauses (c) and (d) shall constitute Cash
Equivalents only if pledged and delivered to the Purchaser in accordance with
the provisions of the Security Agreement.
"Casualty" means any actual or constructive loss of any Property of any
Credit Party by reason of fire, explosion, theft or other casualty occurrence.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, as amended.
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"Certified" when used with respect to any financial information of any
Person to be certified by any of its officers, indicates that such information
is to be accompanied by a certificate to the effect that such financial
information has been prepared in accordance with GAAP consistently applied,
subject in the case of interim financial information to normal year-end audit
adjustments and absence of the footnotes required by GAAP, and presents fairly,
in all material respects, the information contained therein as at the dates and
for the periods covered thereby.
"Change of Control" means any transaction or event as a direct or indirect
result of which (i) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of Parent
(together with any new directors (x) whose election by such Board of Directors
or whose nomination for election by the shareholders of Parent was approved by a
vote of 66-2/3% of the directors of Parent then still in office who were either
directors at the beginning of such period or whose election was previously so
approved or (y) who are appointed or elected by ▇▇▇▇▇▇ or ▇▇▇▇▇▇ pursuant to the
Shareholders' Agreement) cease for any reason to constitute a majority of the
Board of Directors of Parent then in office, (ii) any Person (other than the
Permitted Holders) is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of greater than 25%
of the outstanding shares of Voting Stock of the Parent, (iii) the Parent owns
less than 100% of the outstanding shares of Capital Stock of any Paisano Company
or (iv) ▇▇▇▇▇▇ shall no longer be the Company's Chairman and Publisher or no
longer have substantially the same duties and responsibilities as on the Closing
Date.
"Closing Date" has the meaning specified in Section 2.4(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, all Property of the Credit Parties in
which any of such Person is granting or may hereafter ▇▇▇▇▇ ▇ ▇▇▇▇ to the
Purchaser pursuant to the Security Documents.
"Commitment Letter" has the meaning specified in Section 2.6(a).
"Common Stock" means the Parent's common stock, no par value, and any
Capital Stock of any other class of the Parent 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 Parent.
"Company" means at any time prior to the Paisano Merger, Easyriders Sub
II, and, at any time from and after the Paisano Merger, Paisano Publications.
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"Consigned Inventory" shall mean Inventory of any Credit Party consisting
of magazines which are on consignment to distributors in the ordinary course of
business.
"Consolidated Current Assets" means, as of any date with respect to the
Paisano Group, all assets of the Paisano Group on a consolidated basis as of
such date which, in accordance with GAAP, are properly classified as current
assets, excluding cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as of any date with respect to
the Paisano Group, all liabilities of the Paisano Group on a consolidated basis
as of such date which, in accordance with GAAP, are properly classified as
current liabilities, excluding current maturities of long-term Indebtedness and
excluding Indebtedness under the Revolving Notes.
"Consolidated EBITDA" means, for any period, with respect to the Paisano
Group, the sum of (a) Consolidated Net Income (Loss) plus (b) in each case to
the extent deducted in determining such Consolidated Net Income (Loss), the sum
of (i) Consolidated Interest Expense, plus (ii) Consolidated Income Tax Expense,
plus (iii) depreciation expense, plus (iv) amortization expense, plus (v) all
other non-cash charges, all as determined for the Paisano Group for such period
on a consolidated basis in accordance with GAAP.
"Consolidated Income Tax Expense" means, for any period, with respect to
the Paisano Group, the amount which, in conformity with GAAP, should be included
as provision for current and deferred income taxes on a consolidated income
statement of the Paisano Group for such period.
"Consolidated Interest Expense" means, for any period, with respect to the
Paisano Group, all amounts which, in conformity with GAAP, should be included as
interest expense on a consolidated income statement of the Paisano Group) for
such period.
"Consolidated Net Income (Loss)" means, for any period, with respect to
either (i) the Paisano Group or (ii) the Parent and its Subsidiaries (other than
the Restaurant Subsidiaries) (collectively, the "Applicable Person"), the net
income (or loss) of the Applicable Person on a consolidated basis for such
period taken as a single accounting period, determined in accordance with GAAP;
provided that in determining Consolidated Net Income (Loss) there shall be
excluded (a) the income (or loss) of any other Person which is not a Subsidiary
of the Applicable Person, except to the extent of the amount of dividends or
other distributions actually paid to the Applicable Person by such other Person
during such period, (b) the income (or loss) of any other Person accrued prior
to the date it becomes a Subsidiary of the Applicable Person or is merged into
or consolidated with the Applicable Person or that other Person's assets are
acquired by the Applicable Person, (c) the proceeds of any life insurance
policy, (d) gains (or losses) from the sale, exchange, transfer or other
disposition of Property not in the ordinary course of business of the Applicable
Person, (e)
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any other extraordinary or non-recurring gains (or losses) of the Applicable
Person, (f) the income of any Subsidiary of the Applicable Person to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or of any agreement, instrument, judgment, decree, Order or
Statute applicable to that Subsidiary, and (g) the Newriders Management Fees.
"Consolidated Net Worth" as of any date of determination with respect to
the Parent shall mean (a) stated capital, plus (b) the amount of surplus and
retained earnings (or, in the case of a deficit in the amount of surplus or
retained earnings, minus the amount of such deficit), minus (c) cost of treasury
shares, minus (d) minority interests in consolidated Subsidiaries of such Person
(other than the Restaurant Subsidiaries), if any, all as determined as of such
date for the Parent and its Subsidiaries (other than Restaurant Subsidiaries) on
a consolidated basis in accordance with GAAP.
"Consolidated Total Indebtedness" means, as of any date with respect to
the Paisano Group, the total amount of Indebtedness of the Paisano Group,
determined as of such date on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, at any time, Consolidated Current
Assets less Consolidated Current Liabilities.
"Contingent Obligations" means any guarantee, suretyship or other
contingent liability (other than any endorsement for collection or deposit in
the ordinary course of business), direct or indirect, with respect to any
obligations of another Person, through an agreement or otherwise, including,
without limitation, (a) any other endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect similar to a
guarantee in respect of any such obligations and (b) any agreement (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligations, (ii) to purchase, sell or lease Property, products, materials or
supplies, or transportation or services, in respect of enabling such other
Person to pay any such obligation or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the Property, products, materials
or supplies or transportation or services or (iii) to make any loan, advance or
capital contribution to or other investment in, or to otherwise provide funds to
or for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment or
expense) or to assure any financial ratio, minimum net worth, working capital or
other balance sheet condition in respect of any such obligation. The amount of
any Contingent Obligation shall be equal to the outstanding amount of the
obligations directly or indirectly guaranteed.
"Continuing Indebtedness" has the meaning specified in Section 4.10(a).
"Contributor Short-Term Subordinated Note" has the meaning specified in
the definition of Subordinated Seller Notes.
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"Copyrights" has the meaning provided in paragraph (c) of the definition
of Intellectual Property.
"Credit Parties" means the Parent and each of its Subsidiaries (other than
the Restaurant Subsidiaries).
"Default" means any event or condition which, with due notice or lapse of
time or both, would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.1(b).
"Depositary Account" means with respect to any Person any demand, time,
savings, passbook, money market or other depositary account maintained by such
Person with any bank, savings and loan association, credit union or other
depositary institution, other than an account evidenced by a certificate of
deposit, or any securities account maintained by such Person with any bank,
securities broker or dealer, or other financial intermediary, in which such
bank, broker, dealer or financial intermediary either directly or through a
nominee or depository holds investment securities for the account of such
Person.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Easyriders Common Stock" means the Easyriders' Common Stock, $.001 par
value.
"Easyriders of Columbus" means Easyriders of Columbus, Inc., an Ohio
corporation.
"Easyriders Sub I" has the meaning in the specified in the Recitals.
"Easyriders Sub II" has the meaning set forth in the introductory
paragraph of this Agreement.
"Easyriders Sub II Note" has the meaning specified in the Recitals.
"El Paso" means M&B Restaurants, L.C., a Texas limited liability company.
"El Paso Acquisition" has the meaning specified in the Recitals.
"El Paso Contribution Agreement" means the LLC Interest Contribution
Agreement, dated as of June 30, 1998, among Newriders, the Parent, El Paso,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
"Employment Agreements" has the meaning specified in Section 5.26.
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"Environmental Laws" means any and all Federal, state, local, and foreign
Statutes, Orders, permits, authorizations, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution, the
protection of the environment or the generation, treatment, storage, handling,
processing, use, maintenance, recycling, transportation, release, destruction or
disposal of Hazardous Materials, including, without limitation, CERCLA, the
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right to Know Act, the Safe Drinking Water Act, the Hazardous Materials
Transportation Act, the Clean Air Act, the Clean Water Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Noise Control Act, the
Occupational Safety and Health Act, the Toxic Substances Control Act, any
so-called "Superfund" or "Superlien" law, and any regulation promulgated under
any of the foregoing, all as now or at any time hereafter may be in effect.
"Environmental Matter" means any claim, investigation, litigation or
administrative proceeding, whether pending or threatened, or judgment or Order,
asserted, arising or entered under or pursuant to any Environmental Law, or
relating to any Hazardous Materials, in each case against or pertaining to any
Credit Party, the respective operations of such Persons, or any Properties
owned, leased or used by any of such Persons.
"ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time amended.
"ERISA Affiliate" means any corporation which is a member of the same
controlled group (within the meaning of Section 414(b) of the Code) of
corporations or other Persons as the Parent or which is under common control
(within the meaning of Section 414(c) of the Code) with the Parent or any
corporation or other Person which is a member of an affiliated service group
(within the meaning of Section 414(m) of the Code) with the Parent or any
corporation or other Person which is required to be aggregated with the Parent
pursuant to Section 414(o) of the Code or the regulations promulgated
thereunder.
"Estoppel Letter" means an estoppel letter, subordination and
nondisturbance agreement or other agreement, waiver or confirmation executed by
any bailee or lessor which owns or operates any location where any Credit Party
maintains any of the Collateral, each of which shall be in substantially the
form of Exhibit N hereto or such other form as shall be acceptable to the
Purchaser in its sole discretion.
"Event of Default" has the meaning specified in Section 11.1.
"Excess Cash Flow" means, for any period, the sum of (a) Consolidated Net
Income (Loss) plus (b) in each case to the extent deducted in determining such
Consolidated Net Income (Loss), the sum of (i) depreciation expense, plus (ii)
amortization expense, plus (iii) all other non-cash charges (net of credits),
minus (c) Capital Expenditures, minus (or plus) (d) any increase (any decrease)
in Consolidated Working Capital during such period, plus
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(or minus) (e) any net losses (or gains) on the sale of assets, all as
determined with respect to the Paisano Group in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar statute then in effect, and a reference to a particular section
thereof shall include a reference to the comparable section, if any, of any such
similar statute.
"Fair Market Value" means what a willing buyer would pay to a willing
seller in an arm's-length transaction.
"Financial Statements" has the meaning specified in Section 4.5(a).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America, applied on a consistent basis both
as to classification of items and amounts.
"Governmental Body" means any federal, state, provincial, county, city,
town, village, municipal or other government or governmental department,
commission, council, board, bureau, agency, authority or instrumentality, of or
within the United States of America or its territories or possessions, or of or
within any other country, or of any international community established by
treaty.
"Guarantee" means the Guarantee, in the form of Exhibit C, to be executed
and delivered by the Parent and each Subsidiary of the Parent (other than the
Company and the Restaurant Subsidiaries) on or prior to the Closing Date
pursuant to Section 5.8, and to be executed and delivered by any future
Subsidiary of the Parent (other than the Company and the Restaurant
Subsidiaries) pursuant to Section 9.6.
"Hazardous Material" and "Hazardous Materials" shall mean as follows:
(a) any "hazardous substance" as defined in, or for purposes of, the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.A. SectionSection 9601 & 9602, as may be amended from time to time,
or any other so-called "superfund" or "superlien" law and any judicial
interpretation of any of the foregoing;
(b) any "regulated substance" as defined pursuant to 40 C.F.R. Part
280;
(c) any "pollutant or contaminant" as defined in 42 U.S.C.A. Section
9601(33);
(d) any "hazardous waste" as defined in, or for purposes of, the
Resource Conservation and Recovery Act;
(e) any "hazardous chemical" as defined in 29 C.F.R. Part 1910;
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(f) any "hazardous material" as defined in, or for purposes of, the
Hazardous Materials Transportation Act; and
(g) any other substance, regardless of physical form, or form of
energy or pathogenic agent that is subject to any other past, present or
future law or requirement of any Governmental Body regulating, relating
to, or imposing obligations, liability, or standards of conduct concerning
the protection of human health, plant life, animal life, natural
resources, Property or the reasonable enjoyment of life or Property from
the presence in the environment of any solid, liquid, gas, odor, pathogen
or form of energy, from whatever source.
Without limiting the generality of the foregoing, the term "Hazardous
Material" thus includes, but is not limited to, any material, waste or substance
that contains petroleum or any fraction thereof, asbestos, or polychlorinated
biphenyls, or that is flammable, explosive or radioactive.
"Indebtedness" with respect to any Person means, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) any obligation incurred
for all or any part of the purchase price of Property or services, other than
(i) accounts payable and accrued expenses included in current liabilities in
accordance with GAAP and incurred in respect of Property or services purchased
in the ordinary course of business and (ii) deferred subscription and
advertising income incurred in the ordinary course of business, (c) indebtedness
or obligations evidenced by bonds, notes or similar written instruments, (d) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, (e) any obligation (whether or not such Person has assumed
or become liable for the payment of such obligation) secured by a Lien on any
Property of such Person, (f) Capitalized Lease Obligations of such Person, (g)
all obligations, contingent or otherwise, of such Person with respect to any
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest rate or expense risks either generally or under specific
contingencies, (h) all obligations, contingent or otherwise, of such Person
under any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations in
currency values, and (i) all Contingent Obligations of such Person of
obligations of any other Person of the types described in clauses (a) through
(h) of this definition, inclusive.
"Intangible Personal Property" has the meaning specified in Section 4.24.
"Intellectual Property" of any Person means:
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(a) all trademarks, trade names, trade styles, service marks, logos,
emblems, prints and labels, all elements of package or trade dress of
goods, and all general intangibles of like nature, of such Person,
together with the goodwill of such Person's business connected with the
use thereof and symbolized thereby, and all applications, registrations
and recordings thereof, including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark
Office or in any similar office or agency of the United States of America
or in any office of the Secretary of State (or equivalent) of any state
thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, together with all extensions,
renewals and corrections thereof and all licenses thereof or pertaining
thereto, including, without limitation, all License Agreements with
respect thereto (collectively the "Marks"),
(b) all letters patent of such Person and applications therefor, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States
of America or any state thereof, or in any similar office or agency of any
country or political subdivision thereof throughout the world, together
with all re-examinations, reissues, continuations, continuations-in-part,
divisions, improvements and extensions thereof and all licenses and claims
for infringement thereof or pertaining thereto including, without
limitation, all License Agreements with respect thereto, and the rights to
make, use and sell, and all other rights with respect to, the inventions
disclosed or claimed therein, all inventions, designs, proprietary or
technical information, know-how, other data or information, software,
databases, all embodiments or fixations thereof and the Reorganization
Documents, and all other trade secret rights not described above,
(c) all copyrights of such Person in works of authorship of any
kind, and all applications, registrations and recordings thereof in the
Office of the United States Register of Copyrights, Library of Congress,
or in any similar office or agency of any country or political subdivision
thereof throughout the world, together with all extensions, renewals and
corrections thereof and all licenses and claims for infringement thereof
or pertaining thereto, including, without limitation, all License
Agreements with respect thereto (collectively, "Copyrights"), and
(d) all customer lists and other records of such Person relating to
the distribution of products bearing any of the items described in
subparagraphs (a), (b) or (c) of this definition.
"Intellectual Property Security Agreement" means the Intellectual Property
Security Agreement, in the form of Exhibit E, to be executed and delivered by
the Parent and each Subsidiary of the Parent (other than the Company and the
Restaurant Subsidiaries) on or
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prior to the Closing Date pursuant to Section 5.9, and to be executed and
delivered by any future Subsidiary of the Parent (other than the Company and the
Restaurant Subsidiaries) pursuant to Section 9.6.
"Intercreditor Agreement" means the intercreditor and subordination
agreement executed and delivered by ▇▇▇▇▇▇ pursuant to Section 5.14(b) with
respect to the Subordinated Seller Notes.
"Internal Revenue Service" means the United States Internal Revenue
Service and any successor or similar agency performing similar functions.
"Inventory" means with respect to any Person all of the "inventory" (as
such term is defined in the Uniform Commercial Code in effect in the State of
New York on the date hereof) of such Person, including, but not limited to, all
merchandise, raw materials, parts, supplies, work-in-process, property in stock
and finished goods intended for sale, together with all the containers, packing,
packaging, shipping and similar materials related thereto, and including such
inventory as is temporarily out of such Person's custody or possession,
including inventory on the premises of others and items in transit.
"Investment" when used with reference to any Person means any investment
of such Person so classified under GAAP, and, whether or not so classified,
includes (a) any Indebtedness owed by any other Person to such Person, (b) any
Contingent Obligation or other contingent obligation of such Person of
Indebtedness or other obligations of any other Person, and (c) any Capital Stock
held by such Person in any other Person; and the amount of any Investment shall
be the original principal or capital amount thereof less all cash returns of
principal or equity thereof (and without adjustment by reason of the financial
condition of such other Person).
"Leases" has the meaning specified in Section 5.26.
"License Agreement" with respect to any Person means any agreement entered
into by such Person, whether as licensor or licensee, providing for the license
or use of any Intellectual Property and related or similar rights, and all
rights of such Person in connection with any of the foregoing and in connection
with any agreement related thereto.
"Lien" means any security interest, mortgage, pledge, hypothec, lien,
claim, charge, prior claim, encumbrance, assignment, resolutory right, trust,
conditional sale or title retention agreement, lessor's interest under a
Capitalized Lease or analogous instrument, in, of or on any of a Person's
Property (whether held on the date hereof or hereafter acquired), or any signed
or filed financing statement which names such Person as the debtor, or the
execution of any security agreement or the like authorizing any other Person as
the secured party thereunder to file such a financing statement.
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"Marks" has the meaning provided in paragraph (a) of the definition of
Intellectual Property.
"▇▇▇▇▇▇" means ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇.
"▇▇▇▇▇▇ Equity Investment" has the meaning specified in Section 5.13(b).
"▇▇▇▇▇▇ Notes" has the meaning specified in Section 5.13(b).
"Material Adverse Effect" means any change or changes or effect or effects
that individually or in the aggregate are materially adverse to (a) the assets,
business, operations, income, prospects or condition (financial or otherwise) of
the Company, individually, or the Credit Parties, taken as a whole, (b) the
legality, validity or enforceability of this Agreement, the Notes, the Warrants
or any other Note Documents, or (c) the ability of any Credit Party to fulfill
its obligations under this Agreement, the Notes, the Warrants or any other Note
Documents.
"Material Contract" means any contract or agreement (including, without
limitation any supply agreement, requirements contract, customer agreement,
services agreement, lease, License Agreement, franchise agreement, royalty
agreement, distribution agreement, marketing agreement, advertising agreement,
joint venture agreement, partnership agreement, stockholders agreement, asset
purchase agreement, stock purchase agreement, merger agreement, escrow
agreement, tax sharing agreement, agency agreement, investment banking
agreement, fidelity or surety contract, power of attorney, non-competition
agreement) to which any Credit Party is a party and which either (a) has a face
amount or otherwise involves aggregate payments or obligations in excess of
$50,000, (b) if terminated is reasonably likely to cause a Material Adverse
Effect , (c) is otherwise material to the business of the Credit Parties taken
as a whole or (d) is a "Material Contract" as defined in the Paisano Stock
Contribution Agreement.
"Material Loss Amount" means an amount equal to $150,000.
"Maturity Date" means September , 2001.
"Maximum Revolving Commitment" means as of any time of determination (a)
$5,000,000, minus, (b) the aggregate amount of all reductions therein (if any)
pursuant to Section 3.4, and shall be $0 upon any termination of the obligations
of the Purchaser to purchase Revolving Notes hereunder pursuant to Section
3.1(a), 3.4, 11.1 or otherwise.
"Mortgage" means any mortgage, trust deed or deed of trust executed (i) on
or prior to the Closing Date pursuant to Section 5.9(g) and (ii) after the
Closing Date pursuant to Section 9.5 in respect of After Acquired Real Property.
"Mortgage Policies" has the meaning specified in Section 5.9(g)(ii).
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"Multiemployer Plan" means a multiemployer plan as defined in Section
3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code contributed
to by any Credit Party or any ERISA Affiliate.
"Net Cash Proceeds" means, with respect to any Credit Party (a) an
incurrence by any such Person of any Indebtedness or (b) the issuance and sale
by such Person of any of its Capital Stock, the aggregate amount of cash
consideration received by such Person in connection with such transaction after
deduction of all reasonable and customary fees, costs and expenses directly
incurred by such Credit Party in connection therewith, including, without
limitation, reasonable and customary underwriting discount, brokerage or selling
commissions, if any, taxes paid or reasonably anticipated to be payable as a
result of such transaction, and the reasonable fees and disbursements of counsel
paid by such Credit Party in connection therewith.
"Newriders" has the meaning specified in the Recitals.
"Newriders Merger" has the meaning set forth in the Recitals.
"Newriders Merger Agreement" means the Agreement and Plan of Merger and
Reorganization, dated as of June 30, 1998, by and among Newriders, the Parent
and Easyriders Sub I.
"Newriders' Executive Compensation Plan" means the Newriders' 1997
Executive Incentive Compensation Plan.
"Newriders Management Agreement" means a management security agreement
between Newriders and the Company in form and substance satisfactory to the
Purchaser.
"Newriders Management Fees" means fees payable by the Company to Newriders
under the Newriders Management Agreement; provided such fee shall be paid only
by advances made by Newriders to the Company under the Newriders Subordinated
Note.
"Newriders Subordinated Note" means a subordinated promissory note in form
and substance satisfactory to the Purchaser which evidences advances made by
Newriders to the Company used to pay the Newriders Management Fees, which note
shall be unsecured and subordinated in subject of payment to the Obligations,
have a maturity date no earlier than September 30, 2003 and provide that no
principle or interest payments are payable until the Obligations have been paid
in full and the Termination Date has occurred.
"Non-Continuing Indebtedness" has the meaning specified in Section
4.10(a).
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"Note Documents" means this Agreement, the Notes, the Warrants, the
Registration Rights Agreement, the Guarantee, the Security Documents, the
Intercreditor Agreement, the Assignment of Representations, Warranties,
Covenants and Indemnities and all other agreements, instruments and documents
now or hereafter executed and delivered pursuant to or in connection therewith,
as each of such agreements, instruments and documents may from time to time be
amended, modified or supplemented in accordance with its terms.
"Notes" means collectively the Revolving Notes and the Term Notes and
"Note" means any one of such Notes. The Revolving Notes and Term Notes are each
sometimes referred to herein as a "class" of Notes.
"NRS" has the meaning specified in Section 5.18.
"Obligations" mean, collectively, (a) the obligations of the Company to
pay any and all of the unpaid principal of, and interest on (including, without
limitation, interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for postfiling or post-petition interest
is allowed in such proceeding) the Notes, (b) the obligations of the Credit
Parties to pay any and all fees, expenses, costs, indemnities and other amounts,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the Notes or any other Note Document, and (c) the
obligations of the Credit Parties to pay, perform, discharge, observe and comply
with any and all covenants, agreements and other obligations required to be
performed, discharged, observed or complied with by such Credit Party pursuant
to this Agreement, the Notes and the other Note Documents.
"Officer's Certificate" means with respect to any corporation, a
certificate signed by an Authorized Officer of the specified corporation.
"Operating Lease" means any lease of real or personal Property (other than
any Capitalized Lease) having an original term greater than one year (including
any option to renew or extend such lease, whether or not exercised).
"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
Governmental Body.
"Paisano Acquisition" has the meaning set forth in the Recitals.
"Paisano Companies" means Paisano Publications, Easyriders of Columbus,
Inc. Easyriders Franchising, Inc., a California corporation, ▇▇▇▇▇▇, Inc., a
California corporation, Bros Club, Inc., a California corporation, Associated
Rodeo Riders on Wheels, a California corporation, and any Subsidiary now or
hereafter existing of any such Person.
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"Paisano Companies Stock" has the meaning set forth in the Recitals.
"Paisano Group" means the Paisano Companies other than Easyriders of
Columbus.
"Paisano Merger" has the meaning set forth in the Recitals.
"Paisano Merger Agreement" means .
"Paisano Publications" means Paisano Publications, Inc., a California
corporation.
"Paisano Stock Contribution Agreement" means the Stock Contribution and
Sale Agreement, dated as of June 30, 1998, among, Newriders, the Parent,
Easyriders Sub II, the Paisano Companies and ▇▇▇▇▇▇.
"Parent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Parent 1998 Executive Compensation Plan" shall mean the Parent's 1998
Executive Incentive Compensation Plan as in effect on the Closing Date pursuant
to which up to 2,800,000 shares of Common Stock may be issued.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
agency or Governmental Body performing similar functions.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, excluding any Multiemployer Plans, established,
maintained by or contributed to by any Credit Party or any ERISA Affiliate.
"Permitted Business" means the business of publishing special interest
magazines and other publications relating to hot rods, motorcycles, tattooing
and airbrushing, marketing motorcycle apparel and accessories, promoting tattoo
and motorcycle related events, mail order sales of various products, licensing
the use of various trademarks, the production and distribution of motorcycle
related videos, sales of road side assistance plans for motorcycles, sales of
videos to pay-per-view television, the development, production and distribution
of other forms of media related to hot rods, motorcycles and tattooing and
franchising retail stores which market motorcycles and motorcycle apparel and
accessories and any businesses which are reasonably related thereto.
"Permitted Holders" means ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇.
"Permitted Lien" means any of the Liens permitted by Section 10.2.
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"Person" means and includes an individual, a partnership, an association,
a joint venture, a corporation, a limited liability company, a trust, a
syndicate, an unincorporated organization and any Governmental Body.
"Plan" and "Plans" means any employee benefit plan as defined in Section
3(3) of ERISA, established, maintained or contributed to for the benefit of
employees of any Credit Party or any ERISA Affiliate.
"▇▇▇▇▇▇▇" means ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Principal Office" means the principal office of the Purchaser, located at
the address of the Purchaser set forth in Section 14.5 hereof, or at such other
location as the Purchaser may from time to time hereafter specify by written
notice to the Company.
"Property" with respect to any Person, means any interest in any kind of
property or asset, whether real, personal or mixed, movable or immovable,
tangible or intangible, corporeal or incorporeal, of such Person.
"Protected Countries" has the meaning specified in Section 4.24.
"Publications" has the meaning specified in Section 4.36.
"Purchaser" has the meaning specified in the first paragraph hereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, to be dated as of and entered into on the Closing Date, between the
Parent and the Purchaser, in the form of Exhibit E-2.
"Registration Statement" means the Registration Statement on Form S-4 of
the Parent, Registration No.333-58501, as filed with the SEC under the
Securities Act on July 6, 1998, as amended by Amendment No. 1, as filed with the
SEC under the Securities Act on , 1998.
"Reorganization" shall mean the Paisano Acquisition, the El Paso
Acquisition, the Newriders Merger, the Paisano Merger, the ▇▇▇▇▇▇ Equity
Investment and the other transactions contemplated by the Reorganization
Documents.
"Reorganization Documents" means the Registration Statement, Paisano Stock
Contribution Agreement, the El Paso Contribution Agreement, the Newriders Merger
Agreement, the Paisano Merger Agreement, the Subordinated Seller Notes, and all
other agreements, instruments and documents executed pursuant thereto or in
connection therewith.
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"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder for which the 30-day notice requirement is
not waived.
"Restaurant Subsidiaries" means El Paso and Newriders and each of their
Subsidiaries.
"Restricted Investment" means any Investment other than
(a) any Investment in Cash Equivalents,
(b) any Investment existing on the Closing Date after giving
effect to the Transactions contemplated to occur on the Closing Date, and
described in Schedule 4.10B,
(c) the Guarantee,
(d) Indebtedness permitted under Sections 10.1(c), (f) and (g)
hereof,
(e) any Investment in or capital contribution by the Parent to
any member of the Paisano Group, and
(f) Investments received by the Credit Parties in connection with
barter arrangements for excess advertising space entered into in the
ordinary course of business consistent with part practices so long as in
any fiscal year the fair market value of such advertising space does not
exceed $[ ] in the aggregate.
"Restricted Payment" means, with respect to any Person,
(a) the declaration or payment of any dividend or other
distribution on, or the incurrence of any liability to make any other
payment in respect of, Capital Stock of such Person, other than (i)
Restricted Payments payable solely in the same class of Capital Stock of
such Person and (ii) so long as no Event of Default has occurred and is
continuing, dividends by the Company to the Parent in an amount per fiscal
month which, when added to the principal of intercompany loans made by the
Company to the Parent during such fiscal month pursuant to Section
10.1(f), is not in excess of the lesser of (x) 35% of Excess Cash Flow for
the preceding fiscal month and (y) $100,000,
(b) any payment or distribution on account of the purchase,
redemption, defeasance (including in-substance or legal defeasance) or
other retirement by any Person of any Capital Stock of such Person, or of
any warrant, option or other right to acquire such Capital Stock (whether
directly or indirectly, and including, without limitation, any purchase or
other acquisition of such Capital
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Stock, or of any warrant, option or other right to acquire such Capital
Stock, by any Subsidiary of such Person),
(c) any other payment or distribution by such Person in respect
of its Capital Stock, whether directly or indirectly or through any
Subsidiary of such Person, excluding the declaration and payment of cash
dividends by a Wholly-owned Subsidiary of the Company on its Capital Stock
to the Company,
(d) any payment or distribution by such Person on account of the
principal of or prepayment charge, if any, or, interest or other amounts,
with respect to any Indebtedness of any Credit Party which is subordinated
in right of payment to the prior payment of any of the Notes (including,
without limitation, any such payment or distribution on account of the
Indebtedness represented by the Subordinated Seller Notes), other than
regularly scheduled interest payments on the Subordinated Seller Notes to
the extent permitted under the Subordinated Seller Notes (including
without limitation the subordination provisions thereof) as in effect on
the Closing Date and the Intercreditor Agreement, and
(e) any management fee, consulting fee, advisory fee, investment
banking or transaction fee or commission, bonus, salary, or similar
remuneration paid or payable to any holder of Capital Stock of such Person
or to any Affiliate of any such holder, excluding (i) directors' fees
payable in the ordinary course of business, (ii) amounts payable under the
Employment Agreements, (iii) amounts payable under the Parent 1998
Executive Compensation Plan and any other employee compensation and
benefits payable in the ordinary course of business, in each case, to any
officer or employee of the Credit Parties (other than ▇▇▇▇▇▇, ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇), (iv) so long as no Default or Event of Default has occurred and
is continuing, awards payable to ▇▇▇▇▇▇ under Exhibit A to the Parent 1998
Executive Compensation Plan, (v) so long as no Default or Event of Default
has occurred and is continuing and the payment of such fees are
subordinated (on terms and conditions satisfactory to the Purchaser) in
right of payment to the prior payment of the Notes pursuant to a written
agreement between the Purchaser and ▇▇▇▇▇▇ satisfactory to the Purchaser,
consulting fees to ▇▇▇▇▇▇ in an amount not to exceed $25,000 per month,
(vi) fees payable to Imperial Capital LLC to the extent described in
Section 4.15, and (vii) payments made by any Credit Party to the Parent
pursuant to a tax sharing agreement in form and substance satisfactory to
the Purchaser so long as such tax sharing agreement complies with the
treasury regulations under Section 1502 of the Code.
The amount of any Restricted Payment made in the form of Property shall be
deemed to be the greater of the Fair Market Value or the net book value of such
Property.
"Revolving Note" and "Revolving Notes" have the meanings specified in
Section 2.1(a)(i).
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"Revolving Note Purchase Request" has the meaning specified in Section
2.2(b).
"SEC" means the Securities and Exchange Commission and any successor
agency, authority, commission or Governmental Body.
"Securities Act" means as of any date the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute.
"Security Agreement" means the Security Agreement, in the form of Exhibit
D, to be executed and delivered by the Parent and each Subsidiary of the Parent
(other than the Company and the Restaurant Subsidiaries) on or prior to the
Closing Date pursuant to Section 5.9, and to be executed and delivered by any
future Subsidiary of the Parent (other than the Company and the Restaurant
Subsidiaries) pursuant to Section 9.6.
"Security Documents" means the Security Agreement, the Intellectual
Property Security Agreement, the Mortgages, the Blocked Account Agreements,
trust deeds, short form mortgages, financing statements, fixture filings,
assignments and other agreements, instruments and documents in respect of the
Collateral and the Liens of the Purchaser therein that may now or hereafter be
executed, delivered, filed or recorded pursuant thereto or in connection
therewith, or pursuant to Section 5.9, 9.5, 9.6, 9.7 or 9.9 of this Agreement.
"Shareholders' Agreement" has the meaning specified in Section 5.26.
"Solvent" means, when used with respect to any Person, that (a) the fair
value of the property of such Person is greater than the total amount of
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liabilities of
such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's assets
would constitute unreasonably small capital. For such purposes, any contingent
liability (including, without limitation, pending litigation, Contingent
Obligations, pension plan liabilities and claims for federal, state, local and
foreign taxes, if any) is valued at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Statute" means any statute, ordinance, code, treaty, directive, law, rule
or regulation of any Governmental Body.
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"Subordinated Seller Notes" means (i) the subordinated promissory note in
the original aggregate principal amount of $5,000,000, (ii) the limited recourse
subordinated promissory note in the original aggregate principal amount of
$5,000,000 and (iii) the subordinated promissory note (the "Contributor
Short-Term Subordinated Note") in the original aggregate principal amount
$3,000,000, in each case issued to ▇▇▇▇▇▇ by the Parent in connection with
Reorganization.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which at least a majority of the outstanding Voting Stock is at the
time directly or indirectly owned or controlled by such Person or by one or more
of any entities directly or indirectly owned or controlled by such Person. For
the purposes of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Taking" shall mean a taking of the ownership or use of any Property of
any Credit Party, or any part thereof, pursuant to eminent domain or
condemnation proceedings, or by any settlement or compromise of such
proceedings.
"Taxes" has the meaning specified in Section 3.6(a).
"▇▇▇▇▇▇" has the meaning set forth in the Recitals.
"Term Note" and "Term Notes" have the meanings specified in Section
2.1(a)(ii).
"Termination Date" means the earlier of (i) the Maturity Date or (ii) any
date on which the Maximum Revolving Commitment of the Purchaser shall be or
shall have been reduced to $0, whether pursuant to the provisions of Section
3.2, or pursuant to an acceleration of the maturity of the Notes pursuant to
Section 11.1, or by reason of the passage of time, or otherwise.
"Transaction Documents" means the Note Documents and the Reorganization
Documents.
"Transactions" means the Reorganization, the purchase of the Notes by, and
issuance of the Warrants to, the Purchaser on the Closing Date as provided
herein, and the other transactions contemplated by the Transaction Documents to
occur on or prior to the Closing Date.
"UFOCs" has the meaning specified in Section 4.38(c).
"U.S. Government" means the federal government of the United States of
America or any department, agency or instrumentality thereof.
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"U.S. Person" means a citizen or resident of the United States of America,
a corporation, partnership or other entity created or organized in or under any
laws of the United States of America or of any State thereof, or any estate or
trust that is subject to federal income taxation regardless of the source of its
income.
"U.S. Taxes" has the meaning specified in Section 3.6(b).
"Voting Stock" with respect to any Person shall mean Capital Stock of such
Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of members of the
Board of Directors (or Persons performing similar functions) of such Person.
"Warrant" and "Warrants" have the meanings specified in Section 2.1(c).
"Warrant Stock" means (i) all shares of Common Stock issued or issuable
upon the exercise of any Warrant, and (ii) any securities issued or issuable by
the Parent with respect to shares of such Common Stock referred to in the
foregoing clause (i) by way of a stock dividend or stock split or in connection
with a combination or subdivision of shares, reclassification, merger,
consolidation or other reorganization of the Parent.
"Wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the shares of Capital Stock of which, other
than directors' qualifying shares, are owned, beneficially and of record, by
such Person and/or one or more Wholly-owned Subsidiaries of such Person.
Section 1.2. Accounting Terms. All accounting terms used in this Agreement
shall be applied on a consolidated basis for the applicable person and its
Subsidiaries, unless otherwise specifically indicated herein, provided that all
accounting terms used in this Agreement with respect to the Parent on a
consolidated basis shall exclude the Restaurant Subsidiaries. Any accounting
terms not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP.
Section 1.3. Rules of Construction. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Section or subsection. Reference herein to any Section
or subsection refers to such Section or subsection (as the case may be) hereof.
Words in the singular include the plural, and words in the plural include the
singular. Each covenant or agreement contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant
or agreement contained herein, so that compliance with any one covenant or
agreement shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant or agreement. Where any provision
herein refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such
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Person. All references to any instruments or agreements, including references to
any of the Transaction Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof, in each case,
made in accordance with the terms of the Transaction Documents. All references
to Persons include their respective successors and assigns (to the extent
permitted under the Note Documents).
Section 2. Sale and Purchase of Notes and Warrants.
Section 2.1. Authorization of Notes and Warrants.
(a) The Company has duly authorized the issue, sale and delivery of:
(i) its Senior Secured Guaranteed Revolving Notes Due
2001, in an aggregate principal amount at any time outstanding not
to exceed the Maximum Revolving Commitment, to be dated the date of
issue thereof, to bear interest from such date on the unpaid
principal amount thereof (calculated on the basis of a 360-day year
and actual days elapsed) at a variable rate per annum equal at any
time to the sum of (a) the Base Rate in effect at such time plus (b)
1.85%, such interest to be payable monthly in arrears on the first
day of each month (commencing October 1, 1998), and at maturity, to
mature on the Maturity Date, and to be substantially in the form of
Exhibit A-1 hereto attached (all such Notes issued pursuant to this
Agreement, or delivered in substitution or exchange for any thereof,
being collectively called the "Revolving Notes" and individually a
"Revolving Note");
(ii) its Senior Secured Guaranteed Term Notes Due 2001,
in the aggregate principal amount of $17,000,000, to be dated the
date of issue thereof, to bear interest from such date on the unpaid
principal amount thereof (calculated on the basis of a 360-day year
and actual days elapsed) at a rate per annum equal at any time to
the sum of (a) the Base Rate in effect at such time plus (b) 1.85%,
such interest to be payable monthly in arrears on the first day of
each month (commencing October 1, 1998), and at maturity, to mature
on the Maturity Date, and to be substantially in the form of Exhibit
A-2 hereto attached (all such Notes issued pursuant to this
Agreement, or delivered in substitution or exchange for any thereof,
being collectively called the "Term Notes" and individually a "Term
Note");
(b) So long as any Default or Event of Default shall have occurred
and be continuing and at the election of the Purchaser confirmed by written
notice to the Company, the interest rates applicable to the Notes shall be
increased by three percent (3%) per annum above the rates of interest otherwise
applicable hereunder ("Default Rate"), and all outstanding Obligations shall
bear interest at the Default Rate applicable to such Obligations. Interest at
the Default Rate shall accrue from the initial date of such Default or
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Event of Default until that Default or Event of Default is cured or waived and
shall be payable upon demand.
(c) The Parent has duly authorized the issuance and sale of its
warrants to the Purchaser, which warrants shall be exercisable under certain
circumstances to purchase up to an aggregate of 348,157 shares of Common Stock
then outstanding at an initial exercise price of $3.00 per share (subject to
adjustment as therein provided), each to be substantially in the form of Exhibit
E-1 hereto attached (all such warrants issued pursuant to this Agreement, or
delivered in substitution or exchange for any thereof, being collectively called
the "Warrants" and individually a "Warrant").
Section 2.2. Sale and Purchase of Revolving Notes.
(a) Subject to the applicable terms and conditions set forth in this
Agreement (including, without limitation, the applicable conditions set forth in
Section 6 hereof), the Company will issue, reissue and sell to the Purchaser,
and the Purchaser will purchase from the Company, from time to time during the
period from and including the Closing Date to but not including the Termination
Date or, if earlier, the date on which the Maximum Revolving Commitment of the
Purchaser shall have been reduced to $0, Revolving Notes at a purchase price
equal to 100% of the principal amount thereof; provided that the aggregate
outstanding principal amount of the Revolving Notes shall not exceed the Maximum
Revolving Commitment then in effect.
(b) Each issuance and sale of Revolving Notes hereunder shall be
made upon written notice by the Company to the Purchaser in the form of Exhibit
B hereto (each such notice a "Revolving Note Purchase Request") delivered not
later than 11:00 A.M. (New York City time) on the fifth Business Day prior to
the date such sale is to be effected, which notice shall specify (i) the
requested date of such sale (which shall not be on or after the Termination
Date) and (ii) the aggregate principal amount of Revolving Notes to be sold to
the Purchaser on such date (which shall be $250,000 or any greater amount which
is an integral multiple of $50,000). Not more than two sales of Revolving Notes
shall be effected during any one calendar month.
(c) The closing of each sale of Revolving Notes shall take place at
12:00 noon (New York City time) at the Principal Office of the Purchaser or at
such other place or places as the Company and the Purchaser may agree (except
for any sale of Revolving Notes effected on the Closing Date, which shall take
place at the time and place provided in Section 2.4).
(d) The Revolving Notes issued pursuant hereto shall evidence the
principal amount of Revolving Notes sold on the Closing Date (if any) and all
subsequent principal amounts of Revolving Notes sold hereunder, and the date and
the principal amount of each sale of Revolving Notes to the Purchaser by the
Company, as well as each payment
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or prepayment made on account of the principal thereof, and the resulting
aggregate unpaid principal balance thereof, shall be noted by the Purchaser on
the schedule attached to the Revolving Note held by it or any extension thereof;
provided, further, that failure by the Purchaser to make any such notation shall
not affect the obligations of the Company hereunder or under such Revolving
Note. Each such notation by the Purchaser shall be conclusive and binding for
all purposes in the absence of manifest error.
Section 2.3. Sale and Purchase of Term Notes and Warrants. Subject to the
applicable terms and conditions set forth in this Agreement, on the Closing
Date, the Company will issue and sell to the Purchaser, and the Purchaser will
purchase from the Company, Term Notes as provided in Section 2.4(b)(ii) in the
aggregate principal amount of $17,000,000 and the Warrants, at an aggregate
purchase price equal to 100% of the principal amount of the Term Notes.
Section 2.4. Closing.
(a) The initial closing of the sale and delivery of Notes and
Warrants shall take place at the offices of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 A.M., New York time on
September __, 1998 or such other date as the parties shall agree (herein called
the "Closing Date").
(b) On the Closing Date, the Company will deliver to the Purchaser:
(i) a single Revolving Note registered in the name of
the Purchaser or its nominee, duly executed and dated the Closing
Date, in the principal amount of $5,000,000, and
(ii) a single Term Note registered in the name of the
Purchaser or its nominee, duly executed and dated the Closing Date,
in the principal amount of $17,000,000,
(c) On the Closing Date, the Company will deliver to the Purchaser
the Warrants in such denominations as the Purchaser shall specify, duly executed
by the Parent and dated the Closing Date.
Section 2.5. Payments. Each payment by the Company hereunder of the
principal amount of the Notes, interest thereon, fees, costs, expenses,
indemnities and other amounts due hereunder shall be made in Dollars by wire
transfer or other immediately available funds, without deduction (except as
provided in Section 3.6(b)), set-off or counterclaim, to the Purchaser at the
Principal Office, not later than 2:00 P.M. (New York City time) on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a
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Business Day, that payment shall be made on the next succeeding Business Day and
the extension of time shall be included in the computation of interest due
thereon.
Section 2.6. Fees.
(a) On the Closing Date, the Company will pay to Nomura Securities
International, Inc. a non-refundable Structuring Fee referred to in paragraph
4(a) of that certain letter agreement (the "Commitment Letter") dated June 18,
1998, among Newriders, the Company and the Purchaser.
(b) In addition to all other fees and other amounts payable or paid
by the Company pursuant to this Agreement, the Note Documents or otherwise, on
the Closing Date, the Company shall pay to the Purchaser the non-refundable
Funding Fee referred to in paragraph 4(b) of the Commitment Letter.
(c) In addition to all other fees and other amounts payable or paid
by the Company pursuant to this Agreement, the Note Documents or otherwise, the
Company shall pay to the Purchaser an unused facility fee equal to 0.25% per
annum on the average daily balance of the excess of the Maximum Revolving
Commitment over the aggregate unpaid principal amount of Revolving Notes,
payable in arrears (i) for the preceding calendar month, on the first Business
Day of the succeeding calendar month commencing October 1, 1998, and (ii) on the
Termination Date. All computations of the foregoing fee shall be made by the
Purchaser on the basis of a three hundred sixty (360) day year, and for the
actual number of days occurring in the period for which such fee is payable.
(d) The Purchaser is hereby authorized to, and at its sole
discretion may, charge to the balance of the Revolving Notes (which shall
constitute an issuance and purchase of Revolving Notes hereunder) on behalf of
the Company and cause to be paid in full all fees, expenses, charges and costs
and interest and principal (other than principal of the Revolving Notes) owing
by the Credit Parties under this Agreement or any of the other Note Documents if
and to the extent any Credit Party fails to promptly pay any such amounts as and
when due, even if such charges would cause the aggregate principal amount of the
outstanding Revolving Notes of the Purchaser to exceed the Maximum Revolving
Commitment and notwithstanding the provisions of Section 2.2(b); provided that,
so long as no Default or Event of Default has occurred and is continuing, the
Purchaser shall give the Company 3 Business Days prior notice that any such
fees, expenses, charges and costs (other than principal and interest) are due
and owing prior to so charging the balance of the Revolving Notes. At the
Purchaser's option and to the extent permitted by law, any charges so made shall
constitute part of the principal under the outstanding Revolving Notes.
Section 2.7. Interest Rate Limitation. Notwithstanding any provisions of
this Agreement, the Notes or the other Note Documents, in no event shall the
amount of interest paid or agreed to be paid by the Company exceed an amount
computed at the highest rate of
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interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Notes or the
other Note Documents at the time performance of such provision shall be due,
shall involve exceeding the interest rate limitation validly prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligations to be fulfilled shall be reduced to an amount computed at
the highest rate of interest permissible under applicable law, and if for any
reason whatsoever the Purchaser shall ever receive as interest an amount which
would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Notes outstanding
hereunder (whether or not then due and payable), without prepayment charge,
premium or penalty, and not to the payment of interest, or shall be refunded to
the Company if such principal and all other obligations of the Company to such
Purchaser have been paid in full.
Section 2.8. Allocation of Purchase Price. It is hereby agreed that, for
purposes of Treasury Regulations 1.1273-2(h),(A)(i) the aggregate "issue price"
of the investment unit consisting of the Term Notes and the Warrants to be
issued pursuant to this Agreement on the Closing Date is equal to 100% of the
principal amount of such Term Notes, (ii) the aggregate fair market value and
aggregate purchase price of the Term Notes is the aggregate principal amount
thereof less the amount referred to in clause (iii) of this Section, (iii) the
aggregate fair market value and aggregate purchase price of the Warrants is
$[__________], and (iv) the aggregate fair market value and aggregate purchase
price of any Revolving Notes issued on or after the Closing Date is equal to
100% of the principal amount of such Notes. The Credit Parties and the Purchaser
agree to use the foregoing issue price, purchase prices and fair market values
for U.S. federal income tax purposes with respect to this transaction (unless
otherwise required by a final determination by the Internal Revenue Service or a
court of competent jurisdiction).
Section 3. Prepayments of Notes.
Section 3.1. Mandatory Payments and Prepayments.
(a) On the Maturity Date, the unpaid principal balance of the Notes
to the extent not sooner paid or prepaid hereunder, shall be paid in full,
together with accrued interest and fees thereon and all expenses, indemnities
and other amounts payable under the terms of the Notes, this Agreement or the
other Note Documents, and the Maximum Revolving Commitment shall automatically
and without notice or other action on the part of any Person be permanently
reduced to $0.
(b) In the event that the aggregate unpaid principal amount of the
Revolving Notes shall at any time and for any reason (including, without
limitation, a reduction in the Maximum Revolving Commitment pursuant to Section
3.4 exceed the amount of the Maximum Revolving Commitment then in effect, the
Company shall, without notice or demand by the Purchaser, (i) immediately notify
the Purchaser in writing of such
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event, specifying the amount of such excess and (ii) within one (1) Business Day
thereafter pay the amount of such excess to the Purchaser for application to the
unpaid principal amounts of the outstanding Revolving Notes in accordance with
the applicable provisions of Section 3.3 hereof, together with accrued interest
and fees on the principal amount so paid to the date of such payment, without
prepayment charge, premium or penalty.
(c) Commencing with the six-month period ending on March 31, 1999
and for each six-month period thereafter beginning on the first day after the
end of the previous six-month period, not later than 20 days after the end of
such period the Company shall deliver to the Purchaser an Officer's Certificate
setting forth in reasonable detail a calculation of Excess Cash Flow for such
period. Unless within 10 days after receipt of such notice, the Purchaser shall
deliver a written notice to the Company declining to accept any prepayment of
Notes from such Excess Cash Flow, not later than thirty (30) days after the end
of such period, an amount in cash equal to the lesser of (i) 35% of such Excess
Cash Flow and (ii) the aggregate unpaid principal amount of the Term Notes shall
be paid to the Purchaser, for application to the unpaid principal amounts of the
outstanding Term Notes in accordance with the applicable provisions of Section
3.3, without prepayment charge, premium or penalty. Nothing in this subsection
(c) shall be construed to permit, or to waive any required consent with respect
to, any transaction that is prohibited by another provision of this Agreement or
the other Note Documents.
(d) Not later than 30 days prior to any date on which (i) any Credit
Party shall issue or sell any of its Capital Stock (other than shares of Common
Stock issued pursuant to the Parent 1998 Executive Compensation Plan or upon
exercise of the Warrants and other than Capital Stock sold to another Credit
Party), or (ii) any Credit Party shall incur any Indebtedness for borrowed money
(other than Indebtedness permitted by Section 10.1), the Company shall deliver
to the Purchaser an Officer's Certificate setting forth in reasonable detail a
description of such issuance or sale of Capital Stock or incurrence of
Indebtedness (as the case may be), and stating the date such issuance or sale of
Capital Stock or incurrence of Indebtedness is expected to occur and the amount
of the Net Cash Proceeds expected to be received by such Person in connection
therewith and, if applicable, whether the Parent proposes to use any such Net
Cash Proceeds for the purposes described in the last sentence of this clause
(d). Concurrently with the receipt by such Person of such Net Cash Proceeds, an
amount in cash equal to the lesser of (i) 100% of such Net Cash Proceeds and
(ii) the aggregate unpaid principal amount of the Term Notes shall be paid to
the Purchaser, for application to the unpaid principal amounts of the
outstanding Term Notes in accordance with the applicable provisions of Section
3.3, without prepayment charge, premium or penalty. Nothing in this subsection
(d) shall be construed to permit or to waive any required consent with respect
to any transaction that is prohibited by another provision of this Agreement or
the Reorganization Documents. Notwithstanding the foregoing, the Parent shall be
permitted to retain up to $5,000,000 in the aggregate of the Net Cash Proceeds
resulting from the transactions described in clauses (i) and/or (ii) of the
first sentence of this subsection (d), to the extent that the Parent uses such
Net Cash Proceeds (x) to repay, within
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five (5) Business Days of receipt of such Net Cash Proceeds, principal and
interest owing under the Contributor Short-Term Subordinated Note and/or (y) to
fund up to $2,000,000 of operating expenses of any Credit Party.
Section 3.2. Optional Prepayments of the Notes.
(a) Upon notice given as provided in Section 3.2(b), the Company, at
its option, may prepay at any time all or from time to time any part (in an
aggregate amount of $250,000 or any greater amount which is an even multiple of
$50,000, or in an amount equal to the aggregate principal balance of all of the
Notes) of the principal amount of the Notes, together with accrued but unpaid
interest on the principal amount being prepaid to the date of such prepayment,
but without prepayment charge, premium or penalty; provided that not more than
two prepayments pursuant to this Section 3.2(a) shall be made in any calendar
month. Each prepayment made pursuant to this Section 3.2(a) shall be applied as
provided in Section 3.3(c).
(b) The Company shall call Notes for prepayment pursuant to Section
3.2(a) by giving written notice thereof to the Purchaser, not less than 5
Business Days prior to the date fixed for such prepayment, which notice shall
specify (i) the date fixed for such prepayment, (ii) the principal amount to be
prepaid on such date, and (iii) the amount of accrued interest to be paid or
anticipated to be paid on such date. Notice of prepayment having been so given,
the aggregate principal amount of the Notes so to be prepaid as specified in
such notice, together with interest accrued thereon to such date fixed for
prepayment, shall become due and payable on the specified prepayment date.
Section 3.3. Application of Principal Payments.
(a) All payments and prepayments of the principal amount of the
Notes made pursuant to Section 3.1(c) or (d) shall be applied to the outstanding
principal amount of the Term Notes until paid in full. The Term Notes, to the
extent paid or prepaid as herein provided, shall not be reissued.
(b) All payments and prepayments of principal made pursuant to
Section 3.1(b) shall be applied to the outstanding principal amount of the
Revolving Notes, any such payment or prepayment shall not affect the Maximum
Revolving Commitment and such Revolving Notes, notwithstanding such payment or
prepayment, may be reissued and sold in the manner and to the extent provided in
Section 2.2.
(c) All payments and prepayments of principal made pursuant to
Section 3.2(a) shall be applied first to the outstanding principal amount of the
Revolving Notes until such principal amount shall be reduced to $0, and
thereafter shall be applied to the outstanding principal amount of the Term
Notes. Amounts applied to the Revolving Notes pursuant to this subsection (c)
shall not affect the Maximum Revolving Commitment,
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and such Revolving Notes, notwithstanding such prepayment, may be reissued and
sold in the manner and to the extent provided in Section 2.2. The Term Notes, to
the extent prepaid as herein provided, shall not be reissued.
(d) In the event that, at the time any payment or prepayment
provided for herein shall be applied to the Revolving Notes or the Term Notes,
more than one Revolving Note or more than one Term Note shall be outstanding,
then such payment or prepayment shall be applied to the Revolving Notes or the
Term Notes (as the case may be) pro rata in accordance with the respective
outstanding principal amounts of the Notes of the applicable type.
(e) In any case in which a payment of the principal amount of the
Term Notes made pursuant to Section 3.1 (c) or (d) or Section 3.2 shall include
the entire unpaid principal amount of all Term Notes at the time outstanding,
such payment shall be accompanied by a payment of all interest accrued on such
principal amount to the date of such payment. In the case of any payment
pursuant to any of such provisions of less than the entire unpaid principal
amount of the Term Notes, interest accrued on the principal amount so paid to
the date of such payment shall be paid on the next regular date for payment of
interest on the Term Notes as provided in Section 2.1(a). In any case in which a
payment of the principal amount of the Revolving Notes made pursuant to Section
3.1(b) shall include the entire unpaid principal amount of all Revolving Notes
at the time outstanding, such payment shall be accompanied by a payment of all
interest accrued on such principal amount to the date of such payment. In the
case of any payment pursuant to such provision of less than the entire unpaid
principal amount of the Revolving Notes, interest accrued on the principal
amount so paid to the date of such payment shall be paid on the next regular
date for payment of interest on the Revolving Notes as provided in Section
2.1(a).
Section 3.4. Reductions of Commitments. The Company may terminate or
reduce the amount of the Maximum Revolving Commitment at any time or from time
to time, provided that (i) the Company shall give written notice to the
Purchaser of each such termination or reduction at least 5 Business Days prior
to the effective date thereof, which notice shall specify such effective date
and the amount of such reduction, (ii) each partial reduction of the Maximum
Revolving Commitment shall be in an aggregate amount at least equal to $250,000
or any greater amount which is an even multiple of $50,000, (iii) each such
reduction of the Maximum Revolving Commitment, and any such termination, shall
be irrevocable and permanent and (iv) no such reduction shall reduce the Maximum
Revolving Commitment to an amount that is less than the aggregate principal
amount of the Revolving Notes at the time outstanding.
Section 3.5. Purchase of Notes. The Company will not, nor will it permit
any of its Subsidiaries or Affiliates to, acquire directly or indirectly by
purchase or prepayment or otherwise any of the outstanding Notes except by way
of payment or prepayment in accordance with the provisions of such Notes and of
this Agreement. If the Company or any
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of its Subsidiaries or Affiliates acquires any Notes in violation of this
Section 3.5 or in any other manner, such Notes shall thereafter be cancelled and
shall not be reissued, no Note shall be issued in substitution therefor, and
such Notes shall not be deemed to be outstanding for any purpose under this
Agreement.
Section 3.6. Taxes.
(a) All payments by the Company under this Agreement or the Notes to
the Purchaser shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings imposed on or with respect to such payments, and all liabilities
with respect thereto, excluding (except as provided in subsection (b) of this
Section 3.6) net income or franchise taxes imposed on or measured by such
holder's net income and imposed as a result of the holder being organized under
the laws of, or having its lending office in, the jurisdiction imposing such tax
(other than any office arising solely from the holder having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement in such jurisdiction) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes").
(b) If the Company shall be required by law to deduct any taxes,
levies, imposts, deductions, charges or withholdings imposed by the United
States of America or any taxing authority thereof ("U.S. Taxes") from or in
respect of any sum payable hereunder to any holder which is not a U.S. Person,
(i) except as provided in subsection (f) below, 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
3.6), 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 taxation
authority or other authority in accordance with applicable law. Upon the
occurrence of any event giving rise to the operation of this Section 3.6(b) with
respect to any holder, such holder shall, if requested by the Company, use
reasonable efforts to designate another office of such holder through which its
Notes are held, with the object of preventing the consequence of the event
giving rise to the operation of this Section 3.6(b); provided that such
designation would not (y) result, in the sole opinion of the holder, in any
material cost, expense or other detriment to such holder, or (z) violate any
Statute or Order to which such holder or the Company is then subject.
(c) In addition, the Company agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made under this Agreement or the
Notes or from the execution, delivery, transfer, enforcement or registration of,
or otherwise with respect to, this Agreement, the Notes or any other Note
Document (hereinafter referred to as "Other Taxes").
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(d) Except as provided in subsection (f) of this Section 3.6, the
Company will indemnify each holder of Notes for the full amount of Taxes, U.S.
Taxes or Other Taxes imposed by any jurisdiction and paid by such holder, and
any liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes, U.S. Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date such holder makes written demand therefor
(which demand shall identify the nature and amount of Taxes, U.S. Taxes or Other
Taxes for which indemnification is being sought and shall include a copy of the
relevant portion of any written assessment from the relevant taxing authority
demanding payment of such Taxes, U.S. Taxes or Other Taxes).
(e) Within 30 days after the date of any payment of Taxes, U.S.
Taxes or Other Taxes, the Company will furnish to the Purchaser the original or
a certified copy of any receipt furnished by the relevant taxing authority
evidencing payment thereof.
(f) The Company shall have no obligation to pay additional amounts
in respect of U.S. Taxes to any holder of Notes which is not a U.S. Person
pursuant to subsection (b) of this Section 3.6, or to indemnify such holder in
respect of such U.S. Taxes pursuant to subsection (d) of this Section 3.6, if
such U.S. Taxes are imposed solely by reason of such holder's failure (i) to
provide the Company, immediately prior to the time such Person becomes a holder,
with two duly completed copies of United States Internal Revenue Service Form
1001 or 4224 or successor applicable form, as the case may be, certifying in
each case that the holder is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax, or (ii) to provide the Company, on or before the date that any form
previously supplied to the Company pursuant to this Section 3.6(f) expires or
becomes obsolete or immediately subsequent to the occurrence of any event
requiring a change in the form most recently supplied by it to the Company, two
further copies of such Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, certifying that the holder is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and is exempt from United States backup withholding tax
unless a change in treaty, law or regulation or interpretation thereof has
occurred prior to the date on which the delivery of the forms required by this
Section 3.6(f)(ii) would otherwise be due renders any such form inapplicable or
prevents the holder from duly completing and delivering any such form and the
holder advises the Company that it is no longer capable of receiving payments
without deduction or withholding. Each holder agrees that it will designate a
different lending office to receive payments on the Notes if such designation
will avoid the need for, or reduce the amount of, such Taxes and will not, in
the sole opinion of such holder, be disadvantageous to such holder.
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(g) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 3.6
shall survive the payment in full of principal, interest, fees and any other
amounts payable hereunder (other than amounts payable pursuant to this Section
3.6).
Section 4. Representations and Warranties of the Parent and the Company.
The Parent and the Company jointly and severally represent and warrant to the
Purchaser that:
Section 4.1. Corporate Existence and Power. Each Credit Party is a
corporation, partnership and/or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is duly qualified to do business in each additional
jurisdiction where the failure to so qualify is reasonably likely to have a
Material Adverse Effect. Each Credit Party has all requisite organizational
power to own its Properties and to carry on its businesses as now being
conducted and as proposed to be conducted and to execute, deliver and perform
its obligations under this Agreement, the Notes, the Warrants and the other
Transaction Documents to which it is a party.
Section 4.2. Corporate Authority. The execution, delivery and performance
by each Credit Party of this Agreement, the Notes, the Warrants and the other
Transaction Documents to which it is a party are within its organizational power
and have been duly authorized by all necessary organizational action on the part
of its Board of Directors and stockholders.
Section 4.3. Binding Effect. This Agreement, the Notes, the Warrants and
each of the other Transaction Documents to which any Credit Party is a party
have been duly executed and delivered by such Credit Party which is a party
thereto, and are the legal, valid and binding obligations of such Credit Party,
as the case may be, enforceable against it in accordance with their terms,
except, in each of the foregoing cases, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relative to or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity.
Section 4.4. Capital Stock.
(a) As of the Closing Date after giving effect to the Transactions,
the authorized and issued shares of each class of Capital Stock of each Credit
Party are as set forth in Schedule 4.4 hereto. All of the issued and outstanding
shares of Capital Stock of each Credit Party are validly issued, fully paid and
non-assessable. As of the Closing Date after giving effect to the Transactions,
except for the Warrants and as otherwise set forth on Schedule 4.4 hereto, there
are no securities outstanding that are convertible into or exchangeable for any
shares of Capital Stock of any Credit Party, nor are there outstanding any
rights to subscribe for or purchase, or any options or warrants for the purchase
of, or any agreements (contingent or otherwise) providing for the issuance of,
or any calls, commitments or claims of any character relating to, any shares of
Capital Stock of any Credit
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Party or any securities convertible into or exchangeable for any such shares.
Each Credit Party has good title to all of the shares of Capital Stock it owns,
free and clear in each case of any Lien (except Liens created by the Security
Documents).
(b) On the Closing Date, after giving effect to the Transactions, no
Credit Party will be subject to any obligation (contingent or otherwise) to
repurchase, acquire or retire (i) any of its Capital Stock, (ii) any securities
convertible into or exchangeable for any of its Capital Stock, or (iii) any
options, warrants or other rights to subscribe for, purchase or acquire any of
its Capital Stock, except for shareholders' appraisal rights in connection with
the Reorganization under Nevada law and the obligation of Parent to convert
and/or exchange options and warrants to acquire shares of common stock of
Newriders into or for options and/or warrants for Common Stock.
(c) The shares of Common Stock issuable upon exercise of the
Warrants have been duly and validly reserved for issuance upon such exercise
and, when issued and delivered against payment therefor as provided therein,
will be duly authorized, validly issued, fully paid and non-assessable and
subject to no Liens in respect of the issuance thereof.
Section 4.5. Business Operations and Other Information: Financial
Condition.
(a) The Credit Parties have delivered to the Purchaser true and
complete copies of (i) the audited consolidated balance sheets of each of (1)
the Paisano Companies, (2) Newriders and its Subsidiaries and (3) El Paso and
its Subsidiaries, in each case as of December 31, 1996 and 1997, and the related
audited consolidated statements of income, shareholders' equity and cash flows
for each of the fiscal years then ended of each of (1) the Paisano Companies,
(2) Newriders and its Subsidiaries and (3) El Paso and its Subsidiaries,
together with the notes thereto and the reports thereon of Deloitte & Touche LLP
(or with respect to Newriders and its Subsidiaries as of and for the fiscal year
ended December 31, 1996, ▇▇▇▇▇, ▇▇▇▇▇▇ & Company), and (ii) the unaudited
balance sheets of each of (1) of the Paisano Companies, (2) Newriders and its
Subsidiaries and (3) El Paso and its Subsidiaries, in each case as of March 31,
1998 and June 30, 1998, and the related unaudited statements of income,
shareholders' equity and cash flows for each of the fiscal quarters then ended,
together with the notes thereto (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP (subject, in the
case of the unaudited quarterly financial statements, to normal year-end audit
adjustments and absence of certain of the notes required by GAAP), and present
fairly, in all material respects, the consolidated financial position and
related consolidated results of operations and cash flows of the Paisano
Companies, Newriders and El Paso, as applicable, as at each of the dates and for
each of the periods respectively covered thereby.
(b) As of the date of each of the balance sheets included in the
Financial Statements, no Credit Party had any Indebtedness or liability,
absolute or contingent, liquidated or unliquidated, except Indebtedness and
liabilities reflected or reserved against
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on such respective balance sheets or described in the notes thereto. Except as
set forth on Schedule 4.5B, since December 31, 1997, no Material Adverse Effect
has occurred;
(c) Attached hereto as Schedule 4.5C is a true and complete copy of
the latest (as of the Closing Date) projections of the consolidated net income
and cash flow of (i) the Parent and its Subsidiaries on a consolidated basis and
(ii) the Paisano Group, (assuming completion of the Transactions) for each of
the fiscal years of the Parent in the period from the Closing Date through
December 31, 2001. Such projections have been prepared by management of the
Parent on the basis of assumptions, set forth in Schedule 4.5C, which such
management reasonably believes as of the Closing Date are fair and reasonable in
light of the historical financial performance of the Credit Parties and of
current and reasonably foreseeable business conditions, and represent such
management's best estimate of the Credit Parties' future financial performance
(after giving effect to the Transactions).
(d) Attached hereto as Schedule 4.5D is a true and complete copy of
a pro forma balance sheet for (i) the Parent and its Subsidiaries on a
consolidated basis and (ii) the Paisano Group, prepared by management of the
Parent on the basis of the historical unaudited balance sheet of the Paisano
Companies as of March 31, 1998, as though the Transactions had been completed
immediately prior to such date. Such pro forma balance sheet fairly presents in
all material respects the consolidated financial position of the (i) Parent and
its Subsidiaries and (ii) the Paisano Group, respectively, on a consolidated
basis as of the close of business on such date on a pro forma basis as if the
Transactions had been completed immediately prior to such date, and contains all
pro forma adjustments necessary in order to fairly reflect such assumption.
(e) Attached as Schedule 4.5E is a true and complete statement of
the sources and uses of all funds to be received or expended by the Credit
Parties in connection with the Transactions, including, without limitation, an
itemized statement of all costs and expenses which, as of the Closing Date, are
expected to be incurred in connection with the Transactions.
Section 4.6. Subsidiaries. Except as set forth on Schedule 4.6, (i) none
of the Credit Parties has any Subsidiaries, or, except as set forth on Schedule
4.10B, owns any shares of Capital Stock of, or has any direct or indirect equity
interest in, any other Person, and (ii) each Credit Party has good title to all
of the shares of Capital Stock it owns of each such Subsidiary, free and clear
of any Lien (except Liens created by the Security Documents).
Section 4.7. Litigation; No Violation of Governmental Orders or Laws.
(a) Except as set forth on Schedule 4.7, there are no judicial,
administrative, arbitral or other actions, suits or proceedings pending, or, to
the knowledge of the Company or the Parent after due inquiry, threatened against
or affecting any Credit Party or any Properties or rights of any of them (i)
which, if adversely determined,
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individually or in the aggregate is reasonably likely to have a Material Adverse
Effect, or (ii) which seek to enjoin, or otherwise prevent the consummation of,
the Transactions or to recover any damages or obtain any relief as a result of
any of the Transactions in any court or before any arbitrator of any kind or
before or by any Governmental Body.
(b) No Credit Party is in default under or in violation of any Order
of any court, arbitrator or Governmental Body, or of any Statute which default
or violation, individually or in the aggregate together with all other such
defaults and violations, has had or is reasonably likely to have a Material
Adverse Effect.
Section 4.8. No Conflicts with Agreements, Statutes, Orders, Etc. Neither
the execution and delivery by any Credit Party of this Agreement, the Notes, the
Warrants or any of the other Transaction Documents to which it is a party, nor
the offering, issuance or sale of the Notes or the Warrants, nor the fulfillment
of or compliance with the terms and provisions hereof or thereof, will conflict
with, or result in a breach or violation of the terms, conditions or provisions
of, or constitute a default under, or result in the creation of any Lien (other
than Liens created pursuant to the Security Documents) on any Properties of any
Credit Party pursuant to, the charter or by-laws of any Credit Party, or any
contract, agreement, mortgage, indenture, lease or instrument to which either of
them is a party or by which either of them is bound or to which either of them
or any of their assets are subject, or any Order or Statute to which either of
them or any of their assets are subject.
Section 4.9. Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any Governmental Body or any
nongovernmental Person (including, without limitation, any creditor or
stockholder of any Credit Party, and also including, without limitation, any
consent, approval, authorization, declaration or filing or the expiration of any
waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust Improvements Act of 1976),
is required in connection with the execution, delivery or performance by any
Credit Party of this Agreement, the Notes, the Warrants or the other Transaction
Documents, or as a condition to the legality, validity or enforceability of this
Agreement, the Notes, the Warrants or any other Transaction Document or to the
consummation of the Transactions, except for (a) filing of financing statements,
filing of assignments of patents, trademarks, copyrights and similar items and
recording of Mortgages and fixture filings, required in each case in order to
perfect the Liens of the Purchaser in the Collateral, and (b) such consents,
approvals, authorizations, declarations, registrations, filings and other
actions as are listed in Schedule 4.9, all of which listed consents, approvals,
authorizations, declarations, registrations, filings and other actions have been
or will on or prior to the Closing Date be obtained and are or will then be in
full force and effect.
Section 4.10. Outstanding Indebtedness; Investments. (a) Schedule 4.10A
sets forth a correct and complete list and brief description as of the Closing
Date of all Indebtedness for borrowed money of each Credit Party and all Liens
securing such Indebtedness (excluding any Indebtedness evidenced by the Notes
and any Liens created by the Security
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Documents) existing on the Closing Date before giving effect to the
Transactions, indicating which such Indebtedness and Liens will be discharged
and paid in full on the Closing Date (the "Non-Continuing Indebtedness") and
which such Indebtedness and Liens will be continuing after giving effect to the
Transactions (the "Continuing Indebtedness"). On the Closing Date after giving
effect to the Transactions, no default or event of default has occurred and is
continuing with respect to any Continuing Indebtedness.
(b) Schedule 4.10B sets forth a correct and complete list and brief
description of all Investments of each Credit Party as of the Closing Date after
giving effect to the Transactions.
Section 4.11. Assets and Properties.
(a) As of the Closing Date after giving effect to the Transactions,
no Credit Party owns any real Property. Schedule 4.11 sets forth a true and
complete list, as of the Closing Date after giving effect to the Transactions,
of all leases of real Property to which any Credit Party is a party, identifying
the parties to each such lease and the Property to which it relates, as of the
Closing Date after giving effect to the Transactions contemplated to occur on
the Closing Date. True and complete copies of all such leases, together with all
amendments, modifications and supplements thereto to the date of this Agreement,
have been delivered to the Purchaser or its representatives. Each Credit Party
has good and marketable title to all of its respective Properties (other than
Properties leased from others), subject to no Lien of any kind except Permitted
Liens.
(b) The Properties owned by, leased to or used by each Credit Party
are in good operating condition and repair, ordinary wear and tear excepted, and
are able to serve the function for which they are currently being used in all
material respects. Neither this Agreement nor any other Transaction Document,
nor any of the Transactions, will materially adversely affect any right, title
or interest of any Credit Party in and to any of the assets or properties owned,
leased or used by Credit Party.
Section 4.12. Taxes. Each Credit Party has filed, or on behalf of each of
them there have been filed, all tax returns and informational returns which are
required to have been filed, and there have been paid all taxes shown to be due
and payable on such returns and all other material taxes and assessments payable
by any of them, except to the extent that any such tax liability is being
diligently contested in good faith and such Credit Party has adequately reserved
against such tax liability on its books and financial statements in accordance
with GAAP. No material tax liens have been filed and no material claims are
being asserted with respect to any such taxes as of the date hereof. No material
tax assessment against any Credit Party has been proposed, and all of their
respective tax liabilities are adequately provided for on their respective books
and financial statements in accordance with GAAP.
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Section 4.13. Disclosure. Neither this Agreement nor any other document,
certificate or statement (including, without limitation, the Registration
Statement, but in any event excluding the Confidential Information Memorandum,
dated March 1998, prepared by Imperial Capital, LLC) furnished to the Purchaser
by or on behalf of any Credit Party in connection herewith contained, as of its
respective date, or now contains, any untrue statement of a material fact or as
of any such date omitted, or now omits, to state a material fact necessary in
order to make the statements contained herein and therein not misleading,
provided that any statement or other disclosure contained in the Registration
Statement (or any amendments thereto which are filed with the SEC prior to the
Closing Date), which provides correct and complete information with respect to
any untrue statement of material fact or omission of material fact otherwise
contained in any document, certificate or statement previously furnished to the
Purchaser, shall be deemed to correct such untrue statement or omission. Except
as set forth on Schedule 4.5B, neither the Parent nor the Company knows of any
facts (other than matters of a general economic or political nature) that
individually or in the aggregate have had a Material Adverse Effect or are
reasonably likely to have a Material Adverse Effect in the future.
Section 4.14. Offering of Securities. No Credit Party nor any
representative thereof has, directly or indirectly, offered any of the Notes or
Warrants or any security similar to any of them for sale to, or solicited any
offers to buy any of the Notes or Warrants or any security similar to any of
them from, or otherwise approached or negotiated with respect thereto with, more
than [10] Persons including the Purchaser, and no Credit Party nor its
representatives has taken or will take any action which would subject the
issuance or sale of any of the Notes or the Warrants to the provisions of
Section 5 of the Securities Act or violate the provisions of any securities or
Blue Sky laws of any applicable jurisdiction.
Section 4.15. Broker's or Finder's Commissions. Except for compensation to
Imperial Capital LLC due on the Closing Date consisting of (x) a cash fee of
approximately $1,485,000 (10% of which shall be paid to Franchise Mortgage
Acceptance Company) plus (y) warrants to purchase up to an aggregate of 2.5% (on
a fully diluted basis) of shares of Common Stock then outstanding at an exercise
price of $4.3125, no broker's or finder's fee or commission will be payable by
any Credit Party with respect to the issuance and sale of the Notes or Warrants
or any of the Transactions. The Company agrees to indemnify the Purchaser and
hold it harmless against any loss, cost, claim or liability (including, without
limitation, reasonable attorneys' fees and disbursements for the investigation
and defense of claims) arising out of or relating to any such actual or alleged
fee or commission.
Section 4.16. Labor Matters. Except as set forth in Schedule 4.16, during
the three years preceding the Closing Date, there has been no strike, work
stoppage, slowdown or other labor dispute or grievance involving any Credit
Party thereof or the employees of any of such Persons, nor to the knowledge of
the Company or the Parent after due inquiry is any such action, dispute or
grievance pending or threatened against any Credit Party thereof as of the
Closing Date. No Credit Party is a party to any collective bargaining agreement
and
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neither the Company nor the Parent has knowledge after due inquiry of any
pending or threatened effort to organize any of their employees. Except as set
forth in Schedule 4.16, there are no pending retaliatory or wrongful discharge
claims or employment discrimination charges or complaints or administrative or
judicial complaints arising therefrom pending against any Credit Party, or
against any employees of any of such Persons, before any Governmental Body,
which have had or could reasonably be expected to have a Material Adverse
Effect, nor to the knowledge of the Company or the Parent after due inquiry are
any such charges or complaints threatened against any Credit Party. Each Credit
Party is in compliance with all applicable Statutes and Orders relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, bonuses, collective bargaining agreements, equal pay,
occupational safety and health, equal employment opportunity and wrongful or
retaliatory termination of employment, except for such noncompliance as in the
aggregate is not reasonably likely to, and will not, result in a Material
Adverse Effect.
Section 4.17. Environmental Matters. Except as set forth in Schedule 4.17:
(a) there is no pending Environmental Matter, and after due inquiry
neither the Company nor the Parent is aware of any facts that could reasonably
be expected to result in any Environmental Matter. No Credit Party has agreed to
assume by contract or otherwise any liability of any other Person for cleanup,
compliance, or required Capital Expenditures in connection with any
Environmental Matter;
(b) the Properties used, owned, leased, operated, managed or
controlled at any time by each Credit Party are free of contamination from
Hazardous Materials, including, without limitation, any contamination of the
associated air, soil, groundwater or surface waters, and are free of any other
potentially harmful chemical or physical conditions that would reasonably be
expected to have a Material Adverse Effect;
(c) each Credit Party is in material compliance with all applicable
Environmental Laws and is not currently in receipt of any notice of violation of
any Environmental Law or of any potential liability for cleanup of Hazardous
Materials. Each Credit Party holds and is in material compliance with all
governmental permits, licenses, and authorizations necessary to operate their
businesses that relate to siting, wetlands, coastal zone management, air
emissions, discharges to surface or ground water, discharges to any sewer or
septic system, noise emissions, solid waste disposal or the generation, use,
transportation or other management of Hazardous Materials. To the best knowledge
of the Company and the Parent after due inquiry, no Credit Party has at any time
generated, manufactured, refined, recycled, discharged, emitted, released,
buried, processed, produced, reclaimed, stored, treated, transported, or
disposed of any Hazardous Materials except in material compliance with all
applicable Statutes and Orders;
(d) no real Property used, owned, leased, operated, managed or
controlled by any Credit Party is (i) listed or proposed for listing on the
National Priorities List under
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CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any Governmental Body;
(e) no Properties of any Credit Party are subject to any Lien or
claim for Lien in favor of any Person as a result of any Environmental Matter or
response thereto; and
(f) no Credit Party has any liabilities, absolute or contingent on
the date hereof with respect to Hazardous Materials, except for such liabilities
as are not in the aggregate reasonably likely to have a Material Adverse Effect.
Section 4.18. Margin Regulations. No Credit Party owns or now intends to
acquire any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System of the United States (12 CFR 221). No part of the
proceeds from the sale of the Notes will be used, and no part of the proceeds of
any loans repaid with the proceeds from the sale of the Notes was used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of such Regulation U, or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve any Credit
Party in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
No Credit Party or any agent acting on behalf of any Credit Party, has taken or
will take any action which might cause this Agreement, the Notes or the other
Note Documents to violate Regulation T, Regulation U, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or as the same may hereafter be
in effect. As used in this Section, the term "purpose of buying or carrying" has
the meaning assigned thereto in the aforesaid Regulation U.
Section 4.19. Compliance with ERISA.
(a) Except as set forth on Schedule 4.l9(a), no Credit Party
maintains or contributes to or has any obligation with respect to, and none of
the employees of any of the Credit Parties is covered by, any bonus, deferred
compensation, severance pay, pension, profit-sharing, retirement, insurance,
stock purchase, stock option, or other fringe benefit plan, arrangement or
practice, written or otherwise, or any other "employee benefit plan," as defined
in Section 3(3) of ERISA, whether formal or informal (collectively, the "Benefit
Plans" ). None of the Benefit Plans is (i) a Multiemployer Plan, (ii) a
"multiple employer plan," as defined in ERISA or the Code, or (iii) a funded
welfare benefit plan, as defined in Section 419 of the Code. No Credit Party has
ever contributed to any Plan subject to Section 412 of the Code, Title I,
Subtitle B, Part 3 of ERISA or Title IV of ERISA other than the Paisano
Publications, Inc. Defined Benefit Pension Plan. No Credit Party has any
agreement or commitment to create any additional Benefit Plan or to modify or
change any existing Benefit Plan. No Credit Party has any other ERISA
Affiliates.
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(b) With respect to each Benefit Plan, the Credit Parties have
heretofore delivered or caused to be delivered to Newriders true, correct and
complete copies of (i) all documents which comprise the most current version of
each of such Benefit Plans, including any related trust agreements, insurance
contracts, or other funding or investment agreements and any amendments thereto,
and (ii) with respect to each Benefit Plan that is a Plan, (A) the three most
recent Annual Reports (Form 5500 Series) and accompanying schedules for each of
the Plans for which such a report is required, (B) the most current summary plan
description (and any summary of material modifications), (C) the three most
recent certified financial statements and actuarial valuations for each of the
Plans for which such a statement or actuarial valuation is required or was
prepared, (D) the Forms PBGC-l filed in each of the three most recent plan
years for the Pension Plan, and (E) for each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code, all the Internal Revenue
Service determination letters issued with respect to such Plan. Except as set
forth on Schedule 4.19(b), since the date of the documents delivered, there has
not been any material change in the assets or liabilities of any of the Benefit
Plans or any change in their terms and operations which could reasonably be
expected to affect or alter the tax status or materially affect the cost of
maintaining such Benefit Plan, and none of the Benefit Plans has been or will be
amended prior to the Closing Date. Each of the Benefit Plans can be amended,
modified or terminated by a Credit Party within a period of thirty (30) days,
without payment of any additional compensation or amount or the additional
vesting or acceleration of any such benefits, except to the extent that such
vesting is required under the Code upon the complete or partial termination of
any Plan intended to be qualified within the meaning of Section 401(a) of the
Code.
(c) Each Credit Party has performed and complied in all respects
with all of its obligations under and with respect to each of the Benefit Plans
and each of the Benefit Plans has, at all times, in form, operation and
administration complied in all material respects with its terms, and, where
applicable, the requirements of the Code, ERISA and all other applicable laws
and regulations. Each Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and nothing has occurred which reasonably
could be expected to adversely affect such qualified status.
(d) There are no unpaid contributions due prior to the date hereof
with respect to any Benefit Plan that are required to have been made under its
terms and provisions, any related insurance contract or any applicable law or
regulation.
(e) (i) With respect to the Pension Plan, there has occurred no
failure to meet the minimum funding standards of Section 412 of the Code
(whether or not waived in accordance with Section 412(d) of the Code) or failure
to make by its due date a required installment under Section 412(m) of the Code,
and (ii) (A) no Credit Party has withdrawn from the Pension Plan during a plan
year in which it was a "substantial employer," as defined in Section 4001(a)(2)
of ERISA, where such withdrawal could result in liability of such
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substantial employer pursuant to Section 4062(e) or 4063 of ERISA, (B) no Credit
Party has filed a notice of intent to terminate the Pension Plan or adopted any
amendment to treat any such Plan as terminated, (C) the PBGC has not instituted
proceedings to terminate the Pension Plan, (D) no other event or condition has
occurred which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, the Pension Plan,
(E) no accumulated funding deficiency, whether or not waived, exists with
respect to the Pension Plan, and no condition has occurred or exists which by
the passage of time would be expected to result in an accumulated funding
deficiency as of the last day of the current plan year of the Pension Plan, (F)
all required premium payments to the PBGC have been paid when due, (G) no
reportable event, as described in Section 4043 of ERISA (whether or not waived),
has occurred with respect to the Pension Plan, (H) no excise taxes are payable
under the Code, (I) no amendment with respect to which security is required
under Section 307 of ERISA or Section 401 (a)(29) of the Code has been made or
is reasonably expected to be made, and (J) there has been no event which could
subject any of the Credit Parties to liability under Section 4064 or 4069 of
ERISA.
(f) With respect to the Pension Plan, (i) the funding method used in
connection with the Pension Plan is acceptable under ERISA and the actuarial
assumptions used in connection with funding such Plan meet the requirements of
Section 302 of ERISA and (ii) the actuarial present value of vested and
nonvested "benefit liabilities," as defined in Section 4001(a)(16) of ERISA,
calculated on a termination basis and taking into account all contingent and
subsidized benefits (the "Benefit Liabilities") of the Pension Plan, determined
as of the date hereof for such Plan, did not, and as of the Closing Date will
not, exceed the fair market value of the assets of such Plan as of such date.
(g) All group health plans covering employees of any of the Credit
Parties have been operated in compliance with the requirements of Section 4980B
of the Code (and any predecessor provisions) and Part 6 of Title I of ERISA
("COBRA").
(h) No Credit Party has any obligation to provide any deferred
compensation, pension or non-pension benefits to retired or other former
employees, except for health benefits as specifically required by COBRA or
pension benefits payable from a Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code.
(i) No Credit Party, nor any other "disqualified person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as defined in Section
4975 of the Code or Section 406 of ERISA, with respect to any Benefit Plan nor
have there been any fiduciary violations under ERISA which could subject any
Credit Party (or any officer, director or employee thereof) to any penalty or
tax under Section 502(i) of ERISA or Section 4971 and 497 of the Code.
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(j) Except as set forth on Schedule 4.19(j), with respect to any
Benefit Plan: (i) no filing, application or other matter is pending with the
Internal Revenue Service, the PBGC, the United States Department of Labor or any
other governmental body, (ii) there is no action, suit or claim pending (nor, to
the knowledge of any of the Credit Parties, any basis for such a claim), other
than routine claims for benefits, and (iii) there are no outstanding liabilities
for taxes, penalties or fees.
(k) No Credit Party has incurred any liability or taken any action,
and no Credit Party has any knowledge of any action or event that could cause
any one of them to incur any liability, (i) under Section 412 of the Code or
Title IV of ERISA with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA), (ii) on account of a partial or complete
withdrawal (as defined in Sections 4203 and 4205 of ERISA, respectively) with
respect to any Multiemployer Plan, or (iii) on account of unpaid contributions
to any Multiemployer Plan.
(l) Neither the execution and delivery of this Agreement nor the
consummation of any or all of the Transactions will: (i) entitle any current or
former employee of a Credit Party to severance pay, unemployment compensation or
any similar payment, (ii) accelerate the time of payment or vesting or increase
the amount of any compensation due from any Credit Party to any such employee or
former employee, or (iii) directly or indirectly result in any payment made or
to be made to or on behalf of any person to constitute a "parachute payment"
within the meaning of Section 280G of the Code.
Section 4.20. Material Contracts. Schedule 4.20 contains a list of all
Material Contracts to which any Credit Party is a party as of the Closing Date
after giving affect to the Transactions contemplated to occur on the Closing
Date. True and complete copies of each of such Material Contracts, with all
amendments, modifications and supplements thereto to the date hereof, have
previously been furnished by the Company to the Purchaser or its
representatives. Each of such Material Contracts is valid, subsisting and in
full force and effect and no Material Contract (and no present or future
interest of any Credit Party, in whole or in part, in, to or under any such
Material Contract) is currently assigned, pledged, hypothecated or otherwise
transferred to any Person. No Credit Party is in breach or violation of any of
the terms, conditions or provisions of any of such Material Contracts and to the
knowledge of the Company and the Parent no third party to any of the Material
Contracts is in breach or violation of any of the terms, conditions or
provisions thereof. No Credit Party is a party to any Material Contract or
subject to any restriction contained in its charter or by-laws which
individually or in the aggregate has had or is reasonably likely to have a
Material Adverse Effect.
Section 4.21. Insurance. Schedule 4.21 sets forth a true and complete list
and brief descriptions of all policies of workers compensation, general
liability, fire, property, casualty, marine, business interruption, errors and
omissions, flood, earthquake and other insurance carried by the Credit Parties,
true and complete copies of which policies have previously been delivered to the
Purchaser. Such policies are in full force and effect, and
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none of the Credit Parties has received notice of cancellation with respect to
any such policy. All premiums payable with respect to such policies have been or
will then have been paid in respect of the coverage periods specified in
Schedule 4.21.
Section 4.22. Possession of Franchises, Licenses, Etc. The Credit Parties
possess all franchises, security clearances, certificates, licenses, permits,
registrations, and other authorizations from Governmental Bodies, free from
burdensome restrictions, that are necessary for the ownership, maintenance and
operation of its Properties and assets, and for the conduct of its businesses as
now conducted, and none of the Company and their Subsidiaries is in violation of
any thereof in any material respect, except for such matters as in the aggregate
are not reasonably likely to, and will not, result in a Material Adverse Effect.
Section 4.23. Use of Proceeds. The proceeds of the issuance and sale of
the Term Notes will be used to repay a portion of the Easyriders Sub II Note
simultaneously with the consummation of the Paisano Merger, to repay the other
Non-Continuing Indebtedness, and to pay related fees and expenses. The proceeds
of the issuance and sale of the Revolving Notes will be used to pay fees and
expenses incurred by the Company in connection with the Reorganization and for
working capital and other corporate purposes of the Credit Parties.
Section 4.24. Intellectual Property.
(a) Schedule 4.24(a) sets forth (i) a complete and correct list of
each Copyright, Copyright application, ▇▇▇▇ (including, where applicable, the
registration number and date for each ▇▇▇▇ for which a registration has been
issued, or the application number and date for each ▇▇▇▇ for which an
application for registration is pending in, the United States Patent and
Trademark Office or other similar office in any foreign jurisdiction) and all
other Intellectual Property or usage rights, including all Intellectual Property
relating to the Publications owned by any Credit Party (collectively, the
"Intangible Personal Property") and the name of the Credit Party which owns it,
and (ii) a complete and correct list of all material License Agreements to which
each Credit Party is a party either as licensee or licensor for each such item
of Intangible Personal Property. The Credit Parties have all right, title and
interest in and to the Intangible Personal Property in the countries listed in
Schedule 4.24(a) (the "Protected Countries") insofar as such Intangible Personal
Property is used in the operation of the business of the Credit Parties and the
Intangible Personal Property consists of all intellectual property which is used
or useful in the operation of the business of the Credit Parties.
(b) Except as set forth on Schedule 4.24(b):
(i) Since January l, 1993, there have been no actions,
judicial or arbitration proceedings or other formal proceedings commenced or
pending involving any Credit Party concerning any item of Intangible Personal
Property, and no such action or
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proceeding is threatened and no claim or other demand has been made by any
Person relating to any item of Intangible Personal Property;
(ii) None of the Credit Parties is subject to any continuing
decree of any court, governmental body or arbitration panel concerning any item
of Intangible Personal Property;
(iii) The Credit Parties have the right and authority to use
each item of Intangible Personal Property in the Protected Countries in
connection with the conduct of its businesses in the manner presently conducted
and to convey such right and authority, and such use does not conflict with,
infringe upon or violate any intellectual property or usage rights of any other
person or entity;
(iv) The conduct by the Credit Parties of their business does
not conflict in any material way with the valid intellectual property or usage
rights of others;
(v) Neither ▇▇▇▇▇▇ nor any Credit Party pays any royalty to
anyone for the use of any of the Marks, and neither ▇▇▇▇▇▇ nor any Credit Party
pays any royalty outside of the ordinary course of business to anyone for the
use of any other item of Intangible Personal Property;
(vi) Each Credit Party owns all of the Marks necessary to the
conduct of their respective businesses, and each Credit Party owns or licenses
all other Intangible Personal Property necessary to the conduct of their
respective businesses;
(vii) As of the Closing Date, the Credit Parties shall
continue to have the same rights in and to the Intangible Personal Property used
in connection with the business of the Credit Parties as the Credit Parties have
on the date of this Agreement and shall be able to use and exploit the
Intangible Personal Property to the full extent provided by applicable law
without any material restriction on such use or exploitation; and
(viii) None of the Intangible Personal Property used in the
conduct of the business, or the exploitation thereof by any Credit Party, or the
transfer thereof pursuant to the Paisano Stock Contribution Agreement, libels,
defames, infringes, violates the rights of privacy or publicity, or violates any
trademark, trade dress or service ▇▇▇▇, common law or other similar right of any
Person. No Credit Party has received any notice or demand letter relating to any
claim thereof.
(c) (i) Except as set forth in Schedule 4.24(c), (A) all
Copyrights that are owned or controlled by a Credit Party are valid, existing,
unexpired and enforceable in the United States and all countries party to the
Universal Copyright Convention or the Berne Convention; and (B) none of the
Copyrights is in the public domain in the United States or any country party to
the Universal Copyright Convention or the Berne Convention.
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No Credit Party has received notice to the effect that the validity of any
Copyright is contested;
(ii) A registration for each Copyright set forth in Schedule
4.24(c) has been properly issued by the United States Copyright Office in the
applicable Credit Party's name (and are owned in each case by such Credit
Party). The application to register each Copyright listed in Schedule 4.24(c)
was duly and properly filed in the United States Copyright Office, and required
materials have been deposited with the Library of Congress and the United States
Copyright Office. Schedule 4.24(c) sets forth the registered title, registration
number and registration date for each such registered Copyright;
(iii) No other Person uses, has the right to use or claims the
right to use the Copyrights; and
(iv) Each Credit Party has taken all necessary steps to
secure, protect and maintain the Copyrights in the United States and has
disclosed in a Schedule herein all infringements or potential infringements,
known to the Credit Parties.
(d) (i) Each ▇▇▇▇ that is necessary or useful to the conduct of
the Credit Parties' business is valid, subsisting, unexpired, enforceable and
has not been abandoned. Each application for the federal registration in the
United States of a ▇▇▇▇ (including, without limitation, any renewals thereof)
has been duly and properly filed, and each registration has been properly
issued;
(ii) There are no marks held by Persons other than the Credit
Parties that conflict with or infringe on the Marks owned or used by any of the
Credit Parties in the conduct of their business, third party claims against such
Marks, or potential infringements against such Marks;
(iii) No other Person uses, has the right to use or claims the
right to use the Marks or any combination or derivation thereof; and
(iv) Each Credit Party has taken all necessary steps to
secure, protect and maintain the Marks in the United States and has disclosed in
a Schedule herein all infringements or potential infringements, known to the
Credit Parties.
(d) Each Credit Party has the sole and exclusive right to bring
actions for infringement or unauthorized use of the Intellectual Property and
software that is listed on Schedule 4.24 owned by such Credit Party, as the case
may be.
Section 4.25. Depositary Accounts. Schedule 4.25 hereto contains a true
and complete list of all Depositary Accounts maintained as of Closing Date by
any Credit Party, setting forth the name and address of each bank, savings
institution, securities broker or
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dealer, other financial intermediary or other depositary institution at which
each such Depositary Account is maintained, and stating the title and account
number of each such Depositary Account.
Section 4.26. Suppliers; Distributors; Printers. The Company does not know
or have any reason to believe that ▇.▇. ▇▇▇▇▇▇▇▇▇ & Sons Company, ▇▇▇▇▇▇
Circulation Company or any supplier of paper to any Credit Party will cease to
do business with any Credit Party after the consummation of the Reorganization
in the same manner and at the same levels as previously conducted with such
Credit Party. To the best knowledge of each Credit Party, no such Person has
notified such Credit Party of any expected or projected increase in the cost of
goods or services provided by such Person.
Section 4.27. Status under Certain Laws. No Credit Party is an "investment
company" or a "person directly or indirectly controlled by or acting on behalf
of an investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended. No Credit Party is subject to
regulation as a "common carrier" or "contract carrier" or any similar
classification by the Interstate Commerce Commission or under the laws of any
state, or is subject to regulation under any other Statute which limits its
ability to incur Indebtedness.
Section 4.28. Foreign Assets Control Regulations. No Credit Party nor, to
the best of the Company's or Parent's knowledge after due inquiry, any Affiliate
of the Company, is by reason of being a "national" of a "designated foreign
country" or a "specially designated national" within the meaning of the
Regulations of the Office of Foreign Assets Control, United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V), or for any other reason, in
violation of, any United States Federal Statute or Presidential Executive Order
concerning trade or other relations with any foreign country or any citizen or
national thereof or the ownership or operation of any Property.
Section 4.29. Certain Transactions. Except for the Indebtedness
represented by the Subordinated Seller Notes or as set forth on Schedule 4.29
hereto and with respect to salaries and related employee compensation and
expense reimbursement, no Credit Party is indebted, directly or indirectly, to
any of their respective officers, directors or shareholders or to any of the
respective spouses or children of any of such Persons in any amount whatsoever;
and, except as set forth on Schedule 4.29, none of such officers, directors or
shareholders, or any member of their immediate families, is indebted to any
Credit Party in any amount whatsoever. Except as set forth on Schedule 4.29
hereto (or, as to Material Contracts or relationships arising subsequent to the
date of this Agreement which are permitted under this Agreement, as otherwise
promptly disclosed to the Purchaser in writing), no officer, director or
shareholder of any Credit Party, or any member of their immediate families, is,
directly or indirectly, interested in any Material Contract with any Credit
Party.
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Section 4.30. Places of Business. (i) The principal place of business and
the chief executive office of each Credit Party is located at the respective
locations listed in Schedule 4.30, (ii) the books and records (including,
without limitation, all records of Accounts) of the Credit Parties are located
only at the locations set forth in Schedule 4.30 and designated therein as
locations of Accounts, (iii) Inventory of each Credit Party is located only at
the locations set forth in Schedule 4.30 and designated therein as locations of
Inventory, except for Inventory which is currently in transit to such locations
and Consigned Inventory, and (iv) Equipment (as defined in the Security
Agreement) of each Credit Party is located only at the locations set forth in
Schedule 4.30 and designated therein as locations of Equipment. Other than
Consigned Inventory, no Inventory of any Credit Party is in the possession or
control of any warehouseman, bailee or any of such Credit Party's agents or
processors. References in this Section to Schedule 4.30 shall mean such Schedule
as it may be supplemented from time to time by timely notices delivered pursuant
to Section 10.16 hereof.
Section 4.31. Other Names. The business conducted by each Credit Party has
not been conducted under any corporate, trade or fictitious name other than
those names listed on Schedule 4.31 (or, after the Closing Date, in compliance
with the applicable provisions of Section 10.16).
Section 4.32. Reorganization Documents; Transaction Documents. Each
Reorganization Document to which any Credit Party is a party has been duly
executed and delivered by such Credit Party and by the parties thereto other
than Credit Party and is in full force and effect. The Company has delivered to
the Purchaser and its special counsel true and correct copies of each such
Reorganization Document (including all exhibits and schedules thereto),
including all amendments, modifications and supplements thereto, and of each
document, certificate or statement required to be executed or delivered by any
party thereunder (there being no amendments or modifications to such documents,
and no waiver of any rights thereunder by the Company, nor of any condition to
the obligations of such Persons under any thereof, except as heretofore
disclosed to the Purchaser in writing). This Agreement and the other Transaction
Documents constitute the only material agreements relating to the Transactions
to which the Credit Parties are party. The representations and warranties of the
Credit Parties contained in each Transaction Document are true and correct in
all material respects on the date hereof and will be true and correct in all
material respects on the Closing Date, and the Purchaser shall be entitled to
rely upon such representations and warranties with the same force and effect as
if they were incorporated in this Agreement and made to the Purchaser directly.
To the best knowledge of the Company and the Parent, the representations and
warranties of each party (other than the Credit Parties) to each Transaction
Document contained therein are true and correct in all material respects on the
date hereof and on the Closing Date as if made on and as of the date hereof and
the Closing Date. To the best knowledge of Company and Parent, none of the
documents delivered to the Company's shareholders in connection with the
Reorganization contains any untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The offer, issuance and sale of the shares of Capital
Stock of the Company and the Subordinated Seller Notes and any other securities
or Indebtedness issued pursuant to the Reorganization have been registered under
the Securities Act or are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
Section 4.33. Solvency. Each Credit Party is Solvent on the Closing Date
both before and after giving effect to the Transactions to be effected on the
Closing Date and the application of the net proceeds of the issuance and sale of
the Notes to be issued on the Closing Date.
Section 4.34. Ranking of Notes and other Obligations. The Obligations of
each Credit Party pursuant to the Note Documents to which it is a party are
secured by a first priority Lien on the Collateral pledged by such Credit Party
and constitute senior Indebtedness of such Credit Party, as the case may be, and
rank pari passu in right of payment with all unsubordinated Indebtedness of such
Credit Party, and senior in right of payment to any subordinated Indebtedness of
such Credit Party.
Section 4.35. Business of Parent. The Parent has not prior to the date
hereof been engaged in any business other than the negotiation, execution and
delivery of the Reorganization Documents, and the consummation of the
Reorganization and other activities incidental to its organization and
capitalization or contemplated in any of the foregoing documents.
Section 4.36. Licensing Interests; Easyriders Cafe.
(a) The Paisano Companies own all of the licensing interests
relating to the magazine and calendar titles (the "Publications") set forth on
Schedule 4.36 hereto. The Paisano Companies own all of the publishing interests
currently (prior to consummation of the Transaction) owned or controlled by
▇▇▇▇▇▇.
(b) [▇▇▇▇▇▇ and] the Paisano Companies own all interests in and to
the Easyriders Cafe concept.
Section 4.37. Circulation.
(a) Accurate and complete copies of the two most recent six-month
audit reports issued by the Audit Bureau of Circulations ("ABC") with respect to
each Publication, the circulation of which is audited by ABC, are attached to
Schedule 4.37(a) hereto. Except as disclosed on Schedule 4.37(a), from the date
of the latest such ABC audit report, there has
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been no decline in the total circulation revenue (excluding advertising revenue)
of any Publication.
(b) All representations contained in any materials which were
submitted by ▇▇▇▇▇▇ or the Credit Parties to the ABC for the periods covered by
such audit reports and which were used by the ABC in connection with the
preparation of such audit reports were true and correct.
(c) Since December 31, 1994, except with respect to special editions
of the Publications, the Credit Parties have not made any material change in
their policies for the pricing of circulation for the Publications.
(d) Section 4.37(d) sets forth current lists, as of December 31,
1997 or such later date as is specified in such lists, of all of the Credit
Parties' (i) independent contractors which distribute the Publications and (ii)
current dealers of the Publications.
(e) The Credit Parties have not, during the past twelve months, sold
copies of any Publication whose circulation is audited by the ABC at discounts
which, if known to the ABC, would have resulted in the ABC not including such
sales in its reports with respect to the circulation of such Publication during
such period.
Section 4.38. Relationships with Franchisees.
(a) Except as set forth in Section 4.38, (i) since December 31,
1994, no franchisee of any Credit Party has canceled or otherwise modified its
relationship with such Credit Party, (ii) to the best knowledge of the Paisano
Companies, no such franchisee has threatened or has any intention to do so, and
(iii) the consummation of the Transactions will not give any such franchisee the
right to terminate its relationship with such Credit Party or reduce the amount
of royalties payable by such franchisee to such Credit Party. Schedule 4.38
contains a true, complete and accurate list of all franchisees of each Credit
Party as of the date hereof. True and complete copies of the franchise agreement
with each such franchisee have been provided to Purchaser.
(b) Schedule 4.38 sets forth a true and complete list of (i) all
states in which the Credit Parties are, as of the date of this Agreement,
registered to sell franchises; (ii) all states in which the Credit Parties have
received an official notice from the appropriate state officials that the Credit
Parties' offer to sell and the sale of their franchises are exempt from the
registration provisions of such jurisdiction's franchise registration law; and
(iii) all other states in which the Credit Parties have offered to sell or have
sold their franchises based upon a claimed exemption from the registration
provisions of such state's applicable franchise registration laws. True and
correct copies of all notices of registrations and all notices of exemption, as
described in clauses (i) and (ii) above, have been furnished to
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Purchaser, and such registration and exemption notices are in full force and
effect as of the date hereof except as set forth in Schedule 4.38.
(c) The Credit Parties have delivered to Purchaser true and correct
copies of the Credit Parties' Uniform Franchise Offering Circulars ("UFOCs"),
which are currently being used in connection with the offers to sell and the
sales of its franchises. The UFOCs, and all UFOCs heretofore used by the Credit
Parties (i) comply in all material respects with all applicable federal and
state laws and regulations pertaining to offers to sell and the sale of
franchises, including, without limitation the Federal Trade Commission's
Disclosure Rule entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures", 16 C.F.R. Section 436; and (ii)
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 4.39. Customer, Advertiser, Subscriber and Mailing Lists. The
Credit Parties have maintained and currently possesses all rights to subscriber
lists (subject to applicable statutory law or common law decisions regarding the
use of subscriber lists), customer lists, advertiser lists and mailing lists
used in connection with the conduct of its business as currently conducted,
including all such lists necessary to continue the operation of its business
consistent with current practice, and all of such lists are in such condition as
is required in connection with the operation of its business, as currently
conducted.
Section 4.40. Advertising.
(a) Schedule 4.40 sets forth a complete and correct list of the
published rates for advertising lineage for each of the Publications and a
complete and correct list of and the amount of revenues generated by each of the
Publication's largest (by dollar amount) ten advertisers for the past year.
(b) Since December 31, 1995, no Credit Party has had any actual or
threatened cancellation, non-renewal or material modification of any agreements
or relationships with advertisers who, during any 12-month period, accounted for
more than $50,000 in revenues to the Credit Parties, which advertisers are
listed in Schedule 4.40, nor has any Credit Party made any material change in
its written policies for the pricing of advertising for the Publications and no
advertiser listed in Schedule 4.40 has provided written notice of its intent to
(i) cancel previously scheduled or contracted for advertising in the
Publications for the period following the Closing Date, or (ii) terminate or
modify significantly their relationship with any Credit Party.
Section 4.41. Model Releases. Each Credit Party has obtained all necessary
releases from models appearing for commercial purposes in Publications or videos
owned or produced by such Credit Party.
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Section 4A. Representations of the Purchaser. The Purchaser hereby
represents that it is purchasing the Notes and Warrants hereunder for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, except in compliance with applicable
provisions of the Securities Act.
Section 5. Closing Conditions. The Purchaser's obligation to
purchase and pay for the Notes to be purchased by it hereunder on the Closing
Date shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions:
Section 5.1. Proceedings Satisfactory. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated to occur on the Closing Date and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchaser and its
special counsel, and the Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request, including, without limitation:
(a) certificates dated as of a recent date prior to the Closing
Date as to the good standing and payment of taxes of each Credit Party in
each jurisdiction where any of such Person is organized or is authorized
to do business as a foreign corporation;
(b) certified copies of the certificate or articles of
incorporation (or other comparable constituting document) of each Credit
Party with all amendments thereto to the Closing Date;
(c) certified copies of the by-laws (or other comparable
constituting document) of each Credit Party, with all amendments thereto
to the Closing Date;
(d) certified copies of resolutions of the Board of Directors of
each Credit Party authorizing the execution, delivery and performance of
this Agreement, the Notes, the Warrants and the other Note Documents to
which such Credit Party is a party, as applicable; and
(e) certificates as to the incumbency and signatures of each of
the officers of each Credit Party who shall execute this Agreement or any
Note, Warrant or other Note Document on behalf of such respective party.
Section 5.2. Opinion of Purchaser's Special Counsel. The Purchaser
shall have received from Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel
for the Purchaser in connection with the Transactions, a favorable legal opinion
dated the Closing Date and addressed to the Purchaser, covering such matters as
the Purchaser may reasonably request.
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Section 5.3. Opinions of Counsel to the Credit Parties; Tax Opinion;
Reliance Letters.
(a) The Purchaser shall have received from (i) ▇▇▇▇, Scholer,
Fierman, ▇▇▇▇ & Handler, LLP, special counsel to the Parent, Newriders,
Easyriders Sub I and Easyriders Sub II in connection with the Paisano
Acquisition and the El Paso Acquisition and special counsel to the Credit
Parties in connection with the purchase of the Notes by, and the issuance of the
Warrants to, the Purchaser, (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., special securities
law counsel to the Parent, Newriders, Easyriders Sub I and Easyriders Sub II in
connection with the Transactions, (iii) ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, corporate
counsel to the Parent, Newriders, Easyriders Sub I and Easyriders Sub II, (iv)
Fulwider, Patton, ▇▇▇ and ▇▇▇▇▇▇ LLP, intellectual property counsel to the
Paisano Companies, (v) Masters & Ribakoff, corporate counsel to the Paisano
Companies and (vi) ▇▇▇▇▇▇▇▇▇▇ Cross, corporate counsel to El Paso, favorable
legal opinions, each dated the Closing Date and addressed to the Purchaser,
covering such matters incident to the Transactions as the Purchaser may
reasonably request. The Purchaser shall also have received such favorable legal
opinions of local or special counsel to the Credit Parties as the Purchaser may
request (including, without limitation, as to matters related to the
Reorganization and real estate matters), dated the Closing Date and addressed to
the Purchaser, covering the matters incident to the Transactions as the
Purchaser may reasonably request.
(b) The Purchaser shall have received from Deloitte & Touche LLP, a
favorable tax opinion, dated the Closing Date and addressed to the Purchaser,
covering matters incident to the Transactions as the Purchaser may reasonably
request.
(c) The Purchaser shall have received reliance letters in form and
substance satisfactory to the Purchaser with respect to each legal opinion
delivered under or in connection with the Reorganization Documents from counsel
rendering such opinion stating that the Purchaser may rely on such opinion as if
such opinion were addressed to the Purchaser.
Section 5.4. Representations and Warranties True, Etc.; Certificates. The
representations and warranties of the Parent and the Company contained in
Section 4 and elsewhere in this Agreement and of the Credit Parties in the other
Note Documents shall be true on and as of the Closing Date with the same effect
as if such representations and warranties had been made on and as of the Closing
Date after giving effect to the Transactions. Each of the Credit Parties shall
have performed all agreements on its part required to be performed under this
Agreement on or prior to the Closing Date, and there shall exist no Default or
Event of Default on the Closing Date after giving effect to the Transactions.
The Company shall have delivered to the Purchaser an Officer's Certificate,
dated the Closing Date, to the effect of the matters stated in the foregoing
sentences of this Section 5.4 and in Sections 5.5 and 5.6.
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Section 5.5. Absence of Material Adverse Effect, Etc. Since December 31,
1997, no Material Adverse Effect shall have occurred.
Section 5.6. Consents and Approvals. All necessary consents, waivers,
approvals and authorizations of, and declarations, registrations and filings
with, Governmental Bodies and nongovernmental Persons required in order to issue
and sell the Notes and the Warrants as contemplated hereby and to consummate the
Transactions shall have been obtained or made and shall be in full force and
effect.
Section 5.7. Absence of Litigation, Orders, Etc. Except as disclosed on
Schedule 4.7 attached hereto, there shall not be pending or, to the knowledge of
the Parent or the Company after due inquiry, threatened, any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Credit Party or its Property (and, as to any action, suit, proceeding,
governmental investigation or arbitration so disclosed, there shall not have
occurred since the date of this Agreement any development) which seeks to enjoin
or restrain any of the Transactions or which the Purchaser reasonably believes
is likely to have a Material Adverse Effect. No Order of any court, arbitrator
or Governmental Body shall be in effect which purports to enjoin or restrain any
of the Transactions or which the Purchaser reasonably believes to constitute a
Material Adverse Effect.
Section 5.8. Guarantee. Each Credit Party (other than the Company and the
Restaurant Subsidiaries) shall have executed and delivered the Guarantee.
Section 5.9. Security Documents. The Purchaser shall have received each of
the following documents executed by the parties thereto, which shall be
satisfactory to the Purchaser in form and substance in all respects:
(a) The Security Agreement, duly executed by each Credit Party
(other than the Restaurant Subsidiaries) existing on the Closing Date together
with:
(i) duly executed financing statements in proper form for
filing under the Uniform Commercial Code in all such jurisdictions as the
Purchaser may deem necessary or desirable in order to perfect and protect
the Liens created by the Security Agreement, covering the Collateral
described in the Security Agreement,
(ii) stock certificates representing all of the issued and
outstanding shares of Capital Stock of each such Credit Party's
Subsidiaries existing on the Closing Date, accompanied by stock powers
satisfactory to the Purchaser in form and substance duly executed by the
respective Credit Party in blank, and any intercompany notes held by each
such Credit Party, each accompanied by a bond power satisfactory to the
Purchaser duly executed by such Credit Party in blank,
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(iii) an acknowledgment of the Security Agreement duly executed
by each Subsidiary whose Capital Stock is pledged thereunder pursuant to
preceding clause (ii),
(iv) the promissory note of ▇▇▇▇▇▇ in favor of the Parent, in
the principal amount of $2,300,000, accompanied by a bond power
satisfactory to the Purchaser duly executed by the Parent in blank, and
(v) such other instruments of assignment and other documents
in respect of the Collateral as the Purchaser may request.
(b) The Intellectual Property Security Agreement duly executed by
each Credit Party (other than the Restaurant Subsidiaries) existing on the
Closing Date, together with duly executed assignments in proper form for filing
with the United States Patent and Trademark Office and any necessary state and
foreign patent or trademark offices (as necessary).
(c) A Blocked Account Agreement with respect to each Depositary
Account listed in Schedule 4.25 hereto (other than Depositary Accounts of the
Restaurant Subsidiaries), in each case executed by the applicable Credit Party
maintaining such Depositary Account and the bank or other depositary institution
at which such Depositary Account is maintained, together with duly executed
financing statements in proper form for filing under the Uniform Commercial Code
and all other documents required thereby or which, in the sole judgment of the
Purchaser, may be necessary or appropriate to grant to the Purchaser valid and
perfected first priority Liens in such Depositary Account.
(d) Such consents, approvals and authorizations of, and
declarations, registrations and filings with, Governmental Bodies, and such
consents, waivers, amendments and Estoppel Letters of bailees, lessors of real
and personal Property owned or used by the Credit Parties, and of other
nongovernmental third parties, as the Purchaser may deem necessary or desirable
in connection with the use, occupancy or the operation of the real Properties
subject to the Mortgages (including without limitation, certificates of
occupancy) or otherwise in order to protect its rights and interests in the
Collateral.
(e) Searches, by a Person satisfactory to the Purchaser, of the
Uniform Commercial Code (or the equivalent thereof in foreign jurisdictions),
and judgment and tax lien filings which may have been filed with respect to the
Collateral confirming that all Collateral constituting personal Property is (or
will be upon release of the Liens securing the Non-Continuing Indebtedness)
subject to no Liens except Permitted Liens.
(f) Evidence satisfactory to the Purchaser that valid policies of
insurance are in full force and effect in accordance with the requirements of
this Agreement and the
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Security Documents, in each case naming the Purchaser as loss payee and
additional insured, as its interests may appear.
(g) Deeds of trust, trust deeds and mortgages, each substantially in
the form of Exhibit G hereto (with appropriate local variations) and covering
all leasehold Property of the Credit Parties located in Agoura Hills, California
(collectively, together with any such documents subsequently executed and
delivered pursuant to Section 9.5, the "Mortgages"), duly executed by the
applicable Credit Party, together with:
(i) certificates, affidavits, questionnaires or returns as
shall be required in connection with the recording or filing of the
Mortgages and evidence that all mortgage recording taxes, filing fees and
recording charges incurred in connection with the filing or recording of
the Mortgages have been paid or provided for;
(ii) extended coverage title insurance policies ("Mortgage
Policies") issued to the Purchaser by Commonwealth Land Title Insurance
Company or such other title insurer or insurers as shall be acceptable to
the Purchaser, in such forms, with such endorsements and in such amounts
as shall be acceptable to the Purchaser, insuring each of the Mortgages to
be valid and perfected first priority Liens on the Property described
therein, free and clear of all defects (including, but not limited to,
mechanics' and materialmen's liens) and encumbrances, dated the Closing
Date, paid for by the applicable Credit Party and providing for such other
affirmative insurance and with such reinsurance with such other title
insurers as the Purchaser may deem necessary or desirable and with such
affidavits, certificates and instruments of indemnification as shall be
reasonably required to induce the title insurers to issue the Mortgage
Policies;
(iii) ALTA surveys, dated not more than 30 days before the
Closing Date, certified to the Purchaser and the issuer of the Mortgage
Policies in a manner satisfactory to the Purchaser by a land surveyor duly
registered and licensed in the states in which the Property described in
such surveys is located and acceptable to the Purchaser, showing all
buildings and other improvements, any off-site improvements, the location
of any easements, parking spaces, rights of way, building set-back lines
and other dimensional regulations and the absence of encroachments, either
by such improvements or on to such Property, and other defects, other than
encroachments and other defects acceptable to the Purchaser;
(iv) an appraisal of such real Property subject to a Mortgage
as the Purchaser may require by an appraiser satisfactory to the
Purchaser;
(v) evidence satisfactory to the Purchaser that there does not
exist any material violation of any law, regulation or order affecting the
real Properties
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subject to the Mortgages, including, without limitation, those laws,
regulations and Orders relating to zoning, subdivision and building
restrictions; and
(vi) evidence that all other action that the Purchaser may
deem necessary or desirable in order to create valid and perfected first
priority Liens on the Property described in the Mortgages has been taken.
Section 5.10. Employee Stock Options. (a) The Purchaser shall have
received satisfactory evidence that (i) the stockholders of Newriders shall have
approved the Parent 1998 Executive Compensation Plan, (ii) the Newriders'
Executive Compensation Plan shall have terminated and (iii) all awards granted
under the Newriders' Executive Compensation Plan shall have been be exchanged
for awards under the Parent 1998 Executive Compensation Plan.
(b) The Purchaser shall have received true and correct copies of the
Parent 1998 Executive Compensation Plan which shall be in form and substance
satisfactory to the Purchaser.
Section 5.11. Assignment of Representations, Warranties, Covenants and
Indemnities. The Purchaser shall have received a duly executed copy of an
Assignment of Representations, Warranties, Covenants, Indemnities and Rights in
the form of Exhibit J hereto (the "Assignment of Representations, Warranties,
Covenants and Indemnities"), in respect of the Parent's and the Company's rights
under the Paisano Stock Contribution Agreement and the El Paso Contribution
Agreement, respectively, which assignments shall be expressly permitted under
the Paisano Stock Contribution Agreement and the El Paso Contribution Agreement
or shall have been consented to in writing by the respective sellers under such
agreements.
Section 5.12. Initial Revolving Note Purchase Request. On or prior to the
Closing Date, the Purchaser shall have received a Revolving Note Purchase
Request with respect to the Revolving Notes to be sold to the Purchaser on the
Closing Date (if any). The aggregate unpaid principal amount of the Revolving
Notes, immediately after giving effect to the purchase of Revolving Notes to be
effected on the Closing Date (if any), shall not exceed $3,000,000.
Section 5.13. Reorganization Transactions. (a) All of the terms,
conditions and provisions of each of the Reorganization Documents shall be
satisfactory to the Purchaser and its counsel in all respects in form and
substance and no term, condition or provision thereof shall have been
supplemented, amended, modified or waived without the Purchaser's prior written
consent. Each of the Reorganization Documents shall have been duly executed and
delivered by the respective parties thereto and shall be in full force and
effect. The Purchaser shall have received a copy of each of the Reorganization
Documents (including all amendments, modifications and supplements thereto to
and including the Closing Date),
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certified by a duly authorized officer of the Company as true, correct and
complete. All conditions to the consummation of the Reorganization shall have
been satisfied (or waived with the written approval of the Purchaser) and such
transactions (other than the Paisano Merger) shall have been consummated (and
the Paisano Merger will be consummated simultaneously with the initial purchase
of Notes hereunder) in accordance with the terms of the Reorganization
Documents.
(b) ▇▇▇▇▇▇ shall have purchased approximately 4,036,797 shares of
Common Stock from the Parent for $12,300,000 (the "▇▇▇▇▇▇ Equity Investment"),
on terms and conditions satisfactory to the Purchaser in all respects, which
amount shall be paid by $5,000,000 in cash and by issuance of two promissory
notes by ▇▇▇▇▇▇ to the Parent in the aggregate principal amount of $7,300,000
(the "▇▇▇▇▇▇ Notes"). The Purchaser shall have received such certificates and
other evidence with respect to the foregoing as it shall request.
Section 5.14. Subordinated Seller Notes; Intercreditor Agreement. (a) The
Parent shall have issued the Subordinated Seller Notes to ▇▇▇▇▇▇ on terms
(including without limitation subordination provisions) and conditions
satisfactory to the Purchaser in all respects and in an aggregate original
principal amount of $13,000,000.
(b) The Purchaser shall have received from ▇▇▇▇▇▇, a duly executed
and delivered intercreditor and subordination agreement with respect to the
Subordinated Seller Notes on terms and conditions satisfactory to the Purchaser
in all respects.
Section 5.15. Discharge of Non-Continuing Indebtedness. All principal
amounts, prepayment charge, if any, accrued interest, and fees, charges and
other obligations of the Company and the other Credit Parties in respect of the
Non-Continuing Indebtedness shall have been paid and discharged in full
(including, without limitation, all obligations in respect of outstanding
letters of credit issued in connection therewith), and the Purchaser shall have
received the originals or copies authenticated to its satisfaction of (i) all
promissory notes outstanding in connection therewith, duly cancelled by the
respective payees thereof, (ii) duly executed discharge letters and receipts
evidencing payment in full of all amounts due thereunder, (iii) duly executed
releases and UCC-3 Termination Statements satisfactory in form and substance to
the Purchaser, effectively releasing and discharging all Liens incurred in
connection with such Non-Continuing Indebtedness (including duly cancelled stock
powers), in proper form for filing or recording, as applicable and (iv) such
other documents as the Purchaser may reasonably request in order to evidence the
discharge of such Non-Continuing Indebtedness and obligations and the release of
such Liens.
Section 5.16. Fees. The fees required to be paid on the Closing Date
pursuant to Section 2.6(a) and (b) shall be paid concurrently with the issuance
and sale of Notes to be sold on the Closing Date. The fees and expenses incurred
by Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP and any local or special counsel to the
Purchaser in connection with the preparation of this Agreement, the Notes the
Warrants and the other Note Documents, and
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in connection with the other Transactions contemplated hereby, shall be paid by
the Company on the Closing Date.
Section 5.17. Wire Instructions. The Purchaser shall have received not
less than two Business Days prior to the Closing Date wire instructions prepared
by the Company as to all wire transfers or other payments to be effected on the
Closing Date in connection with the Transactions to be consummated on the
Closing Date pursuant to this Agreement or the other Transaction Documents,
which wire instructions shall identify the payor and payee of each such wire
transfer or payment, shall describe the manner of transfer or payment and shall
otherwise be satisfactory in form and substance to the Purchaser.
Section 5.18. Shareholder Approval. The Purchaser shall have received
evidence satisfactory to it that (i) the Reorganization shall have been approved
by a majority of the outstanding shares of Newriders common stock as of the
record date established for the purpose of determining those stockholders of
Newriders that are entitled to notice of and to vote at the annual meeting of
shareholders at which the Reorganization was considered and (ii) holders of no
more than 5% of such outstanding shares of Newriders common stock have delivered
to Newriders a written notice of intention to demand payment for such holders'
shares pursuant to subsection 1 of Section 92A of the Nevada Revised Statutes
("NRS")
Section 5.19. Mergers. Without limiting any other section of this
Agreement, including Section 5.13, (a) the Purchaser shall have received
evidence satisfactory to it that the Newriders Merger shall have been
consummated in accordance with the relevant provisions of Chapter 92A of the
NRS, including without limitation, by the execution and filing of the articles
of merger in respect thereof, all in form and substance satisfactory to the
Purchaser and (b) the Paisano Merger shall be consummated simultaneously with
the initial purchase of Notes hereunder pursuant to Section 1100 et seq. of the
California General Corporation Law.
Section 5.20. Transaction Costs; Payables. The Purchaser shall have
received satisfactory evidence that the aggregate costs of the Transactions
(including fees, expenses and assumed Indebtedness) shall not exceed
$58,500,000. On the Closing Date, the Credit Parties' trade payables shall be
current and all expenses and liabilities shall have been paid in the ordinary
course of business and without acceleration of sales.
Section 5.21. Solvency Opinion. The Purchaser shall have received a
solvency opinion in form and substance satisfactory to it from ▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Co., Inc. (or another valuation or investment banking firm acceptable to the
Purchaser) to the effect that, as of the Closing Date and before and after
giving effect to the initial purchase of Notes hereunder, and the consummation
of the Transactions, the Credit Parties, on a consolidated basis, are Solvent.
In addition, the Purchaser shall have received an analysis from the Chief
Financial Officer of Paisano Publications to the effect that, as of the Closing
Date and before and after giving effect to the Transactions, including (x) the
assumption by Paisano
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Publications, as the surviving corporation of the Paisano Merger, of all of the
obligations of Easyriders Sub I hereunder and (y) the execution and delivery of
the Guarantee, each Paisano Company is Solvent.
Section 5.22. Insurance. (a) The Purchaser shall have received
certificates of insurance and other evidence satisfactory to the Purchaser that
the insurance required under Section 9.4 is in full force and effect.
(b) The Company shall have obtained key person insurance coverage
for ▇▇▇▇▇▇, in the amount of $2,000,000 from a reputable insurance company
satisfactory to the Purchaser, naming the Purchaser as beneficiary and assignee.
Section 5.23. Certificate As to Use of Proceeds. The Purchaser shall have
received a certificate of the Company's Chief Financial Officer certifying in
reasonable detail the Company's use of the proceeds of the issuance and sale of
the Notes and Warrants.
Section 5.24. Due Diligence Reports. The Purchaser shall have completed
its due diligence review in respect of the Permitted Holders, and the results of
such review shall be satisfactory to the Purchaser, in its sole judgment, and in
all respects.
Section 5.25. Registration Rights Agreement. Each of the parties thereto
shall have executed and delivered the Registration Rights Agreement.
Section 5.26. Employment Agreements; Shareholders' Agreements; Leases. The
Purchaser shall have received true and correct copies of:
(i) all employment agreements entered into by Teresi, Prather,
▇▇▇▇▇▇, Mr. ▇▇▇▇▇▇ ▇▇▇▇▇, Mr. ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇
▇▇▇▇, in connection with the Reorganization (the "Employment Agreements");
(ii) the shareholders' agreements entered into by ▇▇▇▇▇▇ and
▇▇▇▇▇▇ in connection with the Reorganization (the "Shareholders'
Agreement");
(iii) all leases of real property entered into by any Credit
Party and effective after giving effect to the Reorganization (the
"Leases");
all of which Employment Agreements, Shareholders' Agreement and Leases shall be
informant substances satisfactory to the Purchaser.
Section 5.27. Registration Statement. The Purchaser shall have received
evidence that the Registration Statement shall have been declared effective by
the SEC.
Section 6. Additional Conditions to Obligations to Purchase Revolving
Notes. The obligations of the Purchaser to purchase Revolving Notes at any time
after the Closing Date
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shall be subject to the satisfaction, at or before the time of such purchase, of
the following additional conditions:
Section 6.1. Note Purchase Request. The Purchaser shall have received a
Revolving Note Purchase Request with respect to the Revolving Notes to be
purchased in accordance with the provisions of Section 2.2 hereof.
Section 6.2. Representations and Warranties True. The representations and
warranties of the Credit Parties contained in Section 4 and elsewhere in this
Agreement and the representations and warranties of the Credit Parties contained
in the other Note Documents shall be true and correct on and as of the date of
such purchase with the same effect as if such representations and warranties had
been made on and as of such date, except that any such representation or
warranty which is expressly made only as of a specified date need be true only
as of such date. Except as set forth on Schedule 4.5B, no Material Adverse
Effect shall have occurred since December 31, 1997. Each request to purchase
Revolving Notes shall constitute, and each Revolving Note Purchase Request shall
contain, a representation and warranty by the Company on the date of such
purchase as to the matters referred to in this Section 6.2 and in Sections 6.3
and 6.4 hereof.
Section 6.3. No Default or Event of Default. On the date of such purchase
of Notes, both immediately before and immediately after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing or would
result from such purchase.
Section 6.4. Credit Limit Not Exceeded. Immediately after giving effect to
such purchase, the aggregate unpaid principal amount of the outstanding
Revolving Notes shall not exceed the Maximum Revolving Commitment as in effect
on the date of such purchase.
Section 6.5. Legal Prohibitions. Such purchase shall not violate any Order
of any court, arbitrator or Governmental Body or any Statute at the time
applicable to the Purchasers.
Section 6.6. Other Requirements. The Purchaser shall have received, in
form and substance satisfactory to it, all certificates, orders, authorizations,
consents, affidavits, schedules, instruments, Security Documents and other
documents which are provided for hereunder, or which the Purchaser may at any
time reasonably request after reasonable notice.
Section 7. Financial Statements and Information. The Company will furnish
to the Purchaser until all of the Obligations have been indefeasibly paid in
full and no Notes are outstanding and the Termination Date has occurred (and,
with respect to the documents and information referred to in subsections (a),
(b)(i), (c)(i), (e), (f) and (g), so long as they shall hold any Warrants or any
shares of Warrant Stock):
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(a) as soon as available and in any event within 30 days after the
end of each month, copies of the consolidated and consolidating balance sheets
of each of (i) the Parent and its Subsidiaries and (ii) the Parent and its
Subsidiaries (other than the Restaurant Subsidiaries), in each case as of the
end of such month and the related consolidated and consolidating statements of
income for such month and for the portion of the fiscal year ended with the last
day of such month, and stating in comparative form the corresponding figures
from the consolidated budget for such period and the prior year, all Certified
by the Chief Financial Officer of the Parent;
(b) as soon as available and in any event within 45 days after the
end of each quarterly accounting period (other than the fourth quarterly
accounting period) in each fiscal year of the Parent,
(i) copies of the consolidated and consolidating balance
sheets of each of (i) the Parent and its Subsidiaries and (ii) the Parent
and its Subsidiaries (other than the Restaurant Subsidiaries), in each
case as of the end of such accounting period, together with, in each case,
the related consolidated and consolidating statements of income,
shareholders' equity and cash flows for such accounting period and for the
portion of the fiscal year ended with the last day of such accounting
period, all in reasonable detail and stating in comparative form (i) the
consolidated and consolidating figures as of the end of and for the
corresponding date and period in the previous fiscal year and (ii) the
corresponding figures from the consolidated budget for such period, all
Certified by the Chief Financial Officer of the Parent, and
(ii) a written statement of the Chief Financial Officer of the
Parent setting forth computations in reasonable detail showing whether or
not as at the end of such fiscal quarter there existed any Default or
Event of Default resulting from a breach or violation of any of Sections
10.1, 10.7, 10.10, 10.11 and 10.18 hereof;
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of the Parent,
(i) copies of the audited consolidated and unaudited
consolidating balance sheets of each of (i) the Parent and its
Subsidiaries and (ii) the Parent and its Subsidiaries (other than the
Restaurant Subsidiaries), in each case as of the end of such fiscal year,
together with, in each case, the related audited consolidated and
unaudited consolidating statements of income, shareholders' equity and
cash flows for such fiscal year, and the notes thereto, all in reasonable
detail and stating in comparative form (i) the respective audited
consolidated and unaudited consolidating figures as of the end of and for
the previous fiscal year or part thereof and (ii) the corresponding
figures from the consolidated budget for such fiscal year, (x) in the case
of each of such audited consolidated financial statements, accompanied by
a report thereon of Deloitte & Touche LLP, or other independent public
accountants
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of recognized national standing selected by the Parent and reasonably
acceptable to the Purchaser (the "Accountants"), which report shall be
unqualified as to going concern and scope of audit and shall state that
such consolidated financial statements present fairly, in all material
respects, the consolidated financial position of such Credit Parties as at
the end of such fiscal year and the consolidated results of operations and
cash flows for such fiscal year in conformity with GAAP and that the
examination by the Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards, and (y) in the case of such unaudited consolidating
financial statements, Certified by the Chief Financial Officer of the
Parent; and
(ii) a written statement of the Accountants (x) setting forth
computations in reasonable detail showing whether or not as at the end of
such fiscal year there existed any Default or Event of Default resulting
from a breach or violation of any of Sections 10.1, 10.7, 10.10, 10.11 and
10.18 hereof, and (y) stating that in making the examination necessary for
their report on such financial statements they obtained no knowledge of
any default by any Credit Party in the fulfillment of any of the terms,
covenants, provisions or conditions of this Agreement or any of the other
Note Documents, or if such Accountants shall have obtained knowledge of
any such default, specifying the nature and status thereof;
(d) concurrently with the financial statements furnished pursuant to
subsections (b) and (c) of this Section 7, an Officer's Certificate of the
Company stating that, based upon such examination or investigation and review of
this Agreement as in the opinion of the signer is necessary to enable the signer
to express an informed opinion with respect thereto, no Default or Event of
Default exists or has existed during such period or, if such a Default or Event
of Default shall exist or have existed, the nature and period of existence
thereof and what action the applicable Credit Party has taken, is taking or
proposes to take with respect thereto;
(e) concurrently with the financial statements furnished pursuant to
subsections (b) and (c) of this Section 7, a brief management discussion and
analysis of the financial condition and results of operations of the Credit
Parties, as of the end of and for the period covered by such financial
statements (including a comparison thereof with the financial condition and
results of operations of the Credit Parties, as of the end of and for the
comparable period in the prior fiscal year), and describing any significant
events relating to the Credit Parties occurring during such period;
(f) promptly after the same are available and in any event within 10
days thereof, copies of all such proxy statements, financial statements, notices
and reports as any Credit Party shall send or make available generally to their
security holders, and copies of all regular and periodic reports and of all
registration statements (other than on Form S-8 or a similar form) which any
Credit Party may file with the SEC or with any securities exchange;
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(g) promptly after the receipt thereof by any Credit Party, and in
any event within 10 days thereof, copies of any management letters and any
reports as to material inadequacies in accounting controls (including reports as
to the absence of any such inadequacies) submitted to any such corporation by
the Accountants in connection with any audit of such corporation made by the
Accountants;
(h) promptly (and in any event within 5 days) after becoming aware
of (1) the existence of any Default or Event of Default on the part of any
Credit Party, an Officer's Certificate of the Company specifying the nature and
period of existence thereof and what action the applicable Credit Party is
taking or proposes to take with respect thereto; or (2) any Indebtedness of any
Credit Party being declared due and payable before its expressed maturity, or
any holder of such Indebtedness having the right to declare such Indebtedness
due and payable before its expressed maturity, because of the occurrence of any
default (or any event which, with notice and/or the lapse of time, shall
constitute any such default) under such Indebtedness, an Officer's Certificate
of the Company describing the nature and status of such matters and what action
the applicable Credit Party is taking or proposes to take with respect thereto;
(i) promptly and in any event within 10 days after any Credit Party
or any ERISA Affiliate knows or, in the case of a Pension Plan has reason to
know, that any event or condition described in Section 4.19 hereof has occurred
or exists, or is reasonably likely to occur or exist, an Officer's Certificate
of the Company setting forth information as to such occurrence and what action,
if any, the applicable Credit Party or such ERISA Affiliate is required or
proposes to take with respect thereto, together with any notices concerning such
occurrences which are (i) required to be filed by any Credit Party or any ERISA
Affiliate or the plan administrator of any Pension Plan controlled by any Credit
Party, or any ERISA Affiliate with the Internal Revenue Service or the PBGC,
(ii) received by any Credit Party, or any ERISA Affiliate from any plan
administrator of a Pension Plan not under their control or from a Multiemployer
Plan, or (iii) proposed to be given;
(j) within five Business Days after the annual report (Form 5500) of
each Plan or Pension Plan is filed with the Internal Revenue Service, a complete
copy thereof (including schedules and attachments) to the Purchaser;
(k) promptly after becoming aware of any Material Adverse Effect
with respect to which notice is not otherwise required to be given pursuant to
this Section 7, an Officer's Certificate of the Company setting forth the
details of such Material Adverse Effect and stating what action the applicable
Credit Party has taken or proposes to take with respect thereto;
(l) promptly (and in any event within 10 days) after the Parent or
the Company knows of (i) the institution of, or threat of, any action, suit,
proceeding,
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governmental investigation or arbitration against or affecting any Credit Party
or any Property of any of them, or (ii) any material development in any such
action, suit, proceeding, governmental investigation or arbitration, which, in
either case, if adversely determined, is likely to have a Material Adverse
Effect, an Officer's Certificate of the Company describing the nature and status
of such matter in reasonable detail;
(m) as soon as available (and in any event not later than 30 days
after the beginning of each fiscal year of the Company), a copy of a
consolidated and consolidating budget of the Credit Parties, in each case
prepared by the Company for such fiscal year, and all amendments thereto which
may be in effect from time to time;
(n) at least once in each fiscal year, a report of a reputable
insurance broker with respect to all insurance maintained by the Credit Parties,
together with a certificate of insurance evidencing the effectiveness of the
policies of insurance required to be maintained by the provisions of Section
9.4(a);
(o) together with each delivery of financial statements pursuant to
subsection (b) or (c) of this Section 7, a report as to any new trademark,
patent and copyright registrations or applications, license agreements or other
matters referred to in Section 5.2 of the Intellectual Property Security
Agreement, together with any instruments of assignment with respect thereto
required thereunder;
(p) promptly following, and in any event within ten Business Days of
any Casualty or Taking involving Property of any Credit Party with a value equal
to or greater than the Material Loss Amount, an Officer's Certificate of the
Company describing the nature and status of such occurrence;
(q) promptly (and in any event within 10 days) after the Parent or
the Company knows of the institution of any action, suit or proceeding against
any Credit Party pursuant to Section 1300 et seq. of the California General
Corporation Law or otherwise relating to the Transactions;
(r) to the extent not otherwise provided for in Section 14.7, as
soon as available, any press release or other public announcement or statement
by any Credit Party; and
(s) any other information, including financial statements and
computations, relating to the performance of obligations arising under this
Agreement and/or the affairs of the Credit Parties that the Purchaser may from
time to time reasonably request and which is capable of being obtained, produced
or generated by such Credit Party or of which any of them has knowledge.
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It is further understood and agreed that, for the purpose of effecting
compliance with Rule 144A promulgated by the SEC in connection with any resales
of Notes and Warrants that may hereafter be effected pursuant to the provisions
of such Rule, (a) each prospective purchaser of Notes or Warrants designated by
a holder thereof shall have the right to obtain from the Parent, upon the
written request of such holder, copies of (i) the consolidated balance sheet of
the Credit Parties as of the end of then most recently completed fiscal year of
the Company (or, if such fiscal year shall have ended within the preceding 90
days, as of the end of the next preceding fiscal year), together with the
related consolidated statements of income, shareholders' equity and cash flows
for the fiscal year then ended, (ii) similar financial statements for such part
of the two preceding fiscal years of the Parent (which financial statements, and
the financial statements referred to in clause (i) of this paragraph, shall be
audited to the extent reasonably available), (iii) a consolidated balance sheet
of the Credit Parties as of the end of then most recently completed fiscal
quarter of the Parent (or, if such fiscal quarter shall have ended within the
preceding 60 days, as of the end of the next preceding fiscal quarter), together
with the related consolidated statements of income, shareholders' equity and
cash flows for the portion of the current fiscal year then ended, and (iv) any
other information that is necessary to comply with such Rule, and (b) each such
holder and each such prospective purchaser shall have the right to obtain from
the Parent, upon the written request of such holder, a very brief statement of
the nature of the business of the Credit Parties and the products and services
it offers, dated as of a date within 12 months prior to the date of resale of
such Notes or Warrants (as the case may be).
The Company and the Parent will keep at its principal executive office a
true copy of this Agreement, and cause the same to be available for inspection
at said office during normal business hours by any holder of Notes or Warrants
or by any prospective purchaser of Notes or Warrants designated in writing by
the holder thereof.
Section 8. Inspection of Properties and Books. The Purchaser, until all of
the Obligations have been indefeasibly paid in full and no Notes are outstanding
and the Termination Date has occurred, shall have the right to visit and inspect
any of the Properties of the Credit Parties, to examine their books of account
and records, to make copies and extracts therefrom at their expense, and to
discuss their affairs, finances and accounts with, and to be advised as to the
same by, their officers and employees and their independent public accountants
(whose fees and expenses shall be paid by the Parent, and by this provision the
Parent authorizes the Accountants to discuss its affairs, finances and accounts
and those of its Subsidiaries, and agrees to make such Accountants available to
the Purchaser for such discussions, whether or not any of such officers or
employees is present, it being understood that nothing contained in this Section
8 is intended to confer any right to exclude any such officers or employees from
such discussions), during the Parent's normal business hours with reasonable
frequency and (except upon the occurrence and during the continuance of an Event
of Default) upon reasonable prior notice to the Parent. The Parent and the
Company agree jointly and severally to pay all reasonable out-of-pocket expenses
incurred by the Purchaser in connection with the Purchaser's exercise of their
rights under this Section
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8 at any time when a Default or Event of Default shall have occurred and be
continuing. The Purchaser, through their representatives, shall be entitled to
meet with the senior management of the Parent at least once during each fiscal
quarter of the Parent to discuss the Parent's, and its Subsidiaries' financial
statements, business, assets, operations and prospects.
Section 9. Affirmative Covenants. The Parent and the Company jointly and
severally covenant and agree that, until all of the Obligations have been
indefeasibly paid in full and no Notes are outstanding and the Termination Date
has occurred it shall and shall cause each of it Subsidiaries to comply with the
following covenants:
Section 9.1. Payment of Principal and Interest. The Company will duly and
punctually pay the principal of and interest on the Notes, and will timely pay
and perform all of its other Obligations, in accordance with the terms of such
Notes, this Agreement and the other Note Documents. The Credit Parties will
comply with all of the covenants, agreements and conditions contained in this
Agreement and the other Note Documents.
Section 9.2. Payment of Taxes and Claims. Each Credit Party will pay
before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon such Credit Party (or any other Subsidiaries of any Credit Party
which are part of any affiliated group, within the meaning of Section 1504(a)(1)
of the Code, with any Credit Party) or their income or profits or upon their
Property, real, personal or mixed, or upon any part thereof;
(b) all claims for labor, materials and supplies which, if unpaid,
would result in the creation of a Lien upon Property of any Credit Party; and
(c) all claims, assessments, or levies required to be paid by such
Credit Party or any ERISA Affiliates pursuant to any Pension Plan, Multiemployer
Plan or other Plan, or any agreement, contract, Statute or Order governing or
relating to any thereof;
provided, that the taxes, assessments, claims, charges and levies described in
Section 9.2(a) and (b) need not be paid while being diligently contested in good
faith and by appropriate proceedings so long as (i) adequate book reserves have
been established with respect thereto in accordance with GAAP and (ii) such
Credit Party's title to and right to use its Property is not materially
adversely affected by such non-payment. Each Credit Party will timely file all
tax returns required to be filed in connection with the payment of taxes
required by this Section 9.2. If an Event of Default shall have occurred and be
continuing and any such contested items shall have resulted in a Lien or claim
upon any Credit Party's Property, the Purchaser may, at its election (but shall
not be obligated to), (a) procure the release and discharge of any such Lien or
claim and any judgment or decree thereon, without inquiring into or
investigating the amount, validity or enforceability of such Lien or claim and
(b) effect any settlement or compromise of the same, and any amounts expended by
the
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Purchaser in connection therewith including premiums paid or security furnished
in connection with the issuance of any surety company bonds, shall be reimbursed
by the Company within five Business Days of demand therefor by the Purchaser.
Section 9.3. Maintenance of Properties, Records and Corporate Existence.
Each Credit Party will:
(a) maintain its Properties in good condition, reasonable wear and
tear excepted, and make all necessary renewals, repairs, replacements,
additions, betterments, and improvements thereto;
(b) keep books of records and accounts in which full and correct
entries will be made of all their respective business transactions and will
reflect in their financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP at the time in effect and consistently
applied;
(c) maintain the same fiscal year during and after the current
fiscal year ending December 31, 1998;
(d) do or cause to be done all things necessary to preserve and keep
in full force and effect their respective corporate existence, and material
rights, powers and franchises including, without limitation, any necessary
qualification or licensing in any foreign jurisdiction;
(e) comply with all applicable Statutes, Orders, franchises,
authorizations, licenses and permits of, and all applicable restrictions imposed
by, any Governmental Body, in respect of the conduct of its business and the
ownership of its Properties (including, without limitation, all applicable
Statutes and Orders relating to Environmental Laws, the violation of which would
have a Material Adverse Effect on the Credit Parties taken as a whole); and
(f) keep any Property owned or operated by it free of contamination
from Hazardous Materials and any other potentially materially harmful chemical
or physical conditions. If any Credit Party receives notice or becomes aware of
any Environmental Matter or contamination with Hazardous Materials that relates
to any of them or their respective Properties, then the Company shall promptly
provide written notice thereof to the Purchaser and, upon written request from
the Purchaser, shall provide the Purchaser with such reports, certificates,
engineering studies or other written material or data as the Purchaser may
request so as to satisfy the Purchaser that the Credit Parties are in compliance
with their obligations under this subsection (f) and subsection (e) of this
Section 9.3. The Purchaser shall also have the right, at any time and from time
to time after receipt of notice or knowledge of any such Environmental Matter or
contamination, to require the Company at its expense to employ a qualified
environmental consultant acceptable to the Purchaser to conduct an environmental
review, audit, assessment or report with respect thereto concerning
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the Credit Parties' operations and Property. The Credit Parties agree to
cooperate fully with such consultant in connection with any such review, audit,
assessment or report, including, without limitation, by providing such access to
the Credit Parties' books, records, Properties, employees and agents and by
furnishing such written and oral information as such consultant may reasonably
request in connection with any such review, audit, assessment or report.
Section 9.4. Insurance.
(a) The Credit Parties will carry and maintain in full force and
effect at all times, with financially sound and reputable insurance companies or
associations rated [AA] (Class [12]) or better by A.M. Best & Co. (or, as to
workers' compensation or similar insurance, in an insurance fund or by
self-insurance authorized by the jurisdiction in which its operations are
carried on): (i) insurance against loss or damage to the tangible real and
personal Property of the Credit Parties by fire, theft, explosion, spoilage,
flood and other perils covered by a "special form" insurance policy and all
other hazards and risks ordinarily insured against by other owners or users of
such Property in similar businesses, (ii) all workers' compensation or similar
insurance as may be required under the laws of any jurisdiction, (iii) public
liability insurance against claims for libel and slander and for personal
injury, death or property damage suffered upon, in or about any premises
occupied by any of them or occurring as a result of the ownership, maintenance
or operation by any of them of any automobile, truck or other vehicle or as a
result of the use of products manufactured, constructed or sold by any of them,
or services rendered by any of them, (iv) business interruption insurance
covering risk of loss as a result of the cessation of any substantial part of
the business conducted by any of them, (v) key person insurance coverage for
▇▇▇▇▇▇ in the amount of no less than $2,000,000, naming the Purchaser as
beneficiary and assignee and (vi) insurance against such other risks as are
usually insured against by corporations of established reputation engaged in the
same or similar businesses and similarly situated. In addition, should any
Credit Party maintain any key person insurance coverage on any of its officers
or directors, the Purchaser shall be named as beneficiary thereunder and
assignee thereof.
(b) Insurance specified in clause (a)(i) of this Section 9.4 shall
(i) be maintained in such form and amounts and having such coverage as may be
reasonably satisfactory to the Purchaser, and in any event in an amount not less
than the full insurable value of the Property covered thereby, (ii) provide that
no cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the Purchaser
of written notice thereof, (iii) name the Purchaser as loss payee, (iv) provide
for waivers of subrogation by the respective issuers in favor of the Purchaser
and (v) be reasonably satisfactory to the Purchaser in all other respects. Each
Credit Party hereby directs all insurers under such policies of insurance, and
all Persons making any payment with respect to any Taking of Property of the
Credit Parties, to pay all proceeds of such insurance policies arising out of
any Casualty, and all amounts payable in respect of any such Taking, to any of
the Collateral, directly to the Purchaser (and if any Credit Party shall
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receive any such proceeds or amounts such Credit Party will hold, such proceeds
and amounts in trust for the benefit of the Purchaser and immediately pay the
same to the Purchaser); provided that, if the amount of such loss or damage is
less than the Material Loss Amount, such proceeds may be paid by such insurers
directly to such Credit Party. The Purchaser shall release such insurance
proceeds to the applicable Credit Party upon the written request of the Company
when and as necessary to pay for the repair, replacement or reconstruction of
the Properties subject to such Casualty, provided that:
(i) at the time of any requested release of funds, no Default or
Event of Default shall have occurred and be continuing);
(ii) the repair, replacement or reconstruction of such assets shall
be substantially completed within 180 days of such Casualty; and
(iii) each release of funds shall be conditioned upon receipt by the
Purchaser of architect's certificates, completion certificates, waivers of
mechanics liens and such other documentation as the Purchaser or the
Purchaser may reasonably request.
In the event the conditions set forth above are not met, the Purchaser may elect
to apply the proceeds of casualty insurance policies to the prepayment of the
outstanding principal amount of the Term Notes, pro rata in accordance with the
outstanding principal amounts thereof, together with accrued interest on the
amount so paid, and thereafter to the outstanding principal amount of the
Revolving Notes, pro rata in accordance with the outstanding principal amounts
thereof, together with accrued interest on the amount so paid (and to the extent
of such prepayment of principal, the Maximum Revolving Commitment shall be
permanently reduced).
(c) In the event of a Casualty (or a Taking) with respect to any
Collateral which is equal to or greater than the Material Loss Amount, the
Purchaser shall have the right, but not the obligation to settle insurance
claims (and condemnation proceeds or awards, as the case may be), with respect
to such Property; provided, however, the Purchaser shall have the right, but not
the obligation, to settle all such claims (and proceedings) with respect to any
Property of the Credit Parties following the occurrence and during the
continuance of an Event of Default. If the Purchaser elects not to settle such
claim or proceeding, the Company shall do so; provided, however, any settlement
of any such claim or proceeding reached by the Company shall be subject to the
Purchaser's prior written approval. The Purchaser will endeavor to consult with
the Company in connection with the Purchaser's exercise of any such right;
provided that the failure of the Purchaser to so consult with the Company after
the occurrence and during the continuance of a Default or Event of Default shall
not subject the Purchaser to any liability hereunder.
(d) Insurance specified in clauses (a)(iii), (a)(iv) and (a)(vi) of
this Section 9.4 shall be maintained in such amounts (and with co-insurance,
deductibles and
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self-insured retention, if any) as such insurance is usually carried by
corporations of established reputation engaged in the same or similar businesses
and similarly situated. Insurance specified in clause (a)(v) shall be maintained
in an amount no less than that existing on the Closing Date. All such insurance
shall name the Purchaser as additional insured, as their interests may appear.
(e) If any Credit Party shall fail to obtain, maintain or renew any
insurance required pursuant to this Section 9.4, or to pay the premiums
therefor, or to deliver to the Purchaser proper evidence thereof beyond any
applicable notice and cure period, if any, for the performance of such actions,
the Purchaser, at its sole option and without any obligation to do so, may
procure and pay for such insurance, and any sums expended by it to procure any
such insurance shall be repaid by the Company, together with any late charge
imposed by any such insurer, if applicable, within five Business Days after
receipt of bills therefor from the Purchaser.
(f) All proceeds of any key person insurance covering any Permitted
Holder or any other officer of a Credit Party shall, upon receipt by the
Purchaser, be applied to the prepayment of the outstanding principal amount of
the Term Notes, pro rata in accordance with the outstanding principal amounts
thereof, together with accrued interest on the amount so paid, and thereafter to
the outstanding principal amount of the Revolving Notes, pro rata in accordance
with the outstanding principal amounts thereof, together with accrued interest
on the amount so paid (and to the extent of such prepayment of principal, the
Maximum Revolving Commitment shall be permanently reduced).
Section 9.5. After Acquired Real Property. Without affecting the
obligations of any of the Company or any of its Subsidiaries under any of the
Security Documents, in the event that any Credit Party at any time after the
date hereof acquires (whether as an owner, a lessee or otherwise) any interest
in any real Property (each such interest, an "After Acquired Real Property"),
such Credit Party shall immediately provide written notice thereof to the
Purchaser, setting forth with specificity a description of the interest
acquired, the identity of the acquirer, the location of the After Acquired Real
Property, any structures or improvements thereon and the Fair Market Value of
such real property. As soon as practicable thereafter, such Credit Party shall
cause the acquirer with respect to such After Acquired Real Property to execute
and deliver to the Purchaser a Mortgage substantially in the form of the
document set forth as Exhibit G hereto (with appropriate local variations and
appropriate variations if the After Acquired Real Property covered thereby is a
fee interest), together with (x) such of the other documents and instruments
described in Section 5.9(g) and (y) an environmental review and audit report as
described in Section 9.13, all as the Purchaser shall reasonably require. In no
event shall any title insurance policy covering such After Acquired Real
Property obtained pursuant to the requirements set forth herein be in an amount
which is less than the Fair Market Value of such After Acquired Real Property.
Such Credit Party shall also deliver to the Purchaser one or more opinions of
counsel for the Company or such Subsidiary (including opinions of local counsel)
covering such legal
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matters with respect to such mortgages, trust deeds and other instruments and
documents as the Purchaser may reasonably request. The applicable Credit Party
shall pay all reasonable fees and expenses, including, without limitation,
attorneys' fees and expenses of counsel for the Purchaser, and all title
insurance charges and premiums, in connection with its obligations under this
Section 9.5.
Section 9.6. Future Guarantors and Securing Subsidiaries. Promptly upon
any Person becoming a direct or indirect Subsidiary of the Parent (other than
the Restaurant Subsidiaries), such Subsidiary shall immediately provide written
notice thereof to the Purchaser, setting forth with specificity a description of
such Subsidiary and of all material real and personal Property owned or leased
by it. In the event that such Subsidiary shall own or lease any interest in real
Property, such interest shall be deemed to be After Acquired Property and the
Parent shall promptly cause such Subsidiary to comply with all of the provisions
of Section 9.5 with respect thereto. The Parent shall also promptly cause such
Subsidiary to execute and deliver to the Purchaser the Guarantee, the Security
Agreement and the Intellectual Property Security Agreement, together with such
additional security agreements and other documents as may be required or
appropriate under the law of the jurisdiction in which such Subsidiary or its
Property is located, and such assignments, financing statements and other
documents as shall in the sole opinion of the Purchaser be necessary or
advisable in order that such Subsidiary grant to the Purchaser valid and
perfected first priority Liens in all of the personal Property of such
Subsidiary. The Parent shall also deliver (or caused to be delivered) to the
Purchaser pursuant to the Security Agreement(and the Parent hereby agrees to
make any modifications thereto necessary to effectuate such delivery), as
applicable, stock certificates representing all of the Capital Stock of such
Subsidiary held by the Parent or by any Subsidiary thereof, accompanied by stock
powers duly executed in blank. The Parent shall also identify all Depositary
Accounts maintained by such Subsidiary and shall deliver to the Purchaser a
Blocked Account Agreement with respect to each such Depositary Account duly
executed by such Subsidiary and by the bank or other depositary institution at
which such Depositary Account is maintained. The Parent or such Subsidiary shall
also deliver one or more opinions of counsel to the Parent or such Subsidiary
(including opinions of local counsel) covering such legal matters with respect
to such agreements and other instruments and documents as the Purchaser may
reasonably request. All of such agreements, instruments, opinions and documents
shall be reasonably satisfactory in form and substance in all respects to
counsel to the Purchaser.
Section 9.7. New Depositary Accounts. Immediately following the
establishment by any Credit Party of any new Depositary Account not in existence
on the Closing Date, such Credit Party shall deliver to the Purchaser (a) a
written notice stating the name and address of the bank or depositary
institution at which such Depositary Account is maintained, and identifying the
type and number of such Depositary Account, and (b) a Blocked Account Agreement
with respect to that Depositary Account duly executed by the applicable Credit
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Party (as the case may be) and the bank or depositary institution at which such
Depositary Account is maintained.
Section 9.8. ERISA Covenants. Each Credit Party and each ERISA Affiliate
will (i) continue to meet the representations and warranties set forth under
Section 4.19 of this Agreement, (ii) not establish or adopt any new Pension Plan
or modify any existing Pension Plan so as to increase its obligations thereunder
(except in the ordinary course of business, consistent with past practice)
which, in the opinion of the Purchaser, could have a Material Adverse Effect and
(iii) not establish or adopt an employee welfare benefit plan as defined in
Section 3(1) of ERISA that provides for employer-provided benefits for employees
after they leave the employment of the Credit Parties or ERISA Affiliates (other
than any such benefits required to be provided by the Consolidated Omnibus
Budget Reconciliation Act of 1985 or other similar federal or state law).
Section 9.9. Further Assurances. Promptly following the Purchaser's
request, each Credit Party from time to time execute, acknowledge, notarize,
deliver, record, register and file any and all further financing statements,
security agreements, pledge agreements, mortgages, hypothecs, deeds of trust,
deeds of pledge, intellectual property assignments and security agreements, and
other agreements, instruments and documents (including, without limitation, the
substantial equivalents of any of the foregoing in any foreign jurisdiction),
and take all further actions (including, without limitation, the payment of all
filing, recording, registration, notary and other fees and charges which may be
incurred in connection with any of the foregoing), which may in any such case be
required under applicable law, or which the Purchaser otherwise may reasonably
request, in order to effectuate the transactions contemplated by this Agreement
and in order to grant, preserve, protect and perfect the validity and first
priority of the Liens and security interests created by the Security Documents.
Section 9.10. Year 2000. Each Credit Party has made an assessment of the
microchip and computer-based systems and the software used in its business and
based upon such assessment believes that the Credit Parties will be "Year 2000
Compliant" by January 1, 2000. For purposes of this paragraph, "Year 2000
Compliant" means that all software, embedded microchips and other processing
capabilities utilized by, and material to the business operations or financial
condition of, the Credit Parties are able to interpret, store, transmit, receive
and manipulate data on and involving all calendar dates in and after the Year
2000. From time to time, at the request of the Purchaser, the Company shall
provide to the Purchaser such updated information as is requested regarding the
status of its efforts to become Year 2000 Compliant.
Section 9.11. Early Refinancing. The Parent and the Company understand and
agree that the Notes are intended to serve as a temporary financing arrangement
until the Company is able to undertake a permanent refinancing of its
Indebtedness, which it anticipates completing prior to the Maturity Date.
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Section 9.12. Consummation of Paisano Merger. The Parent will, immediately
upon consummation of the Reorganization and in any event prior to 5 p.m. (New
York time) on the Closing Date, cause (a) Easyriders Sub II and Paisano
Publications to consummate the Paisano Merger, and (b) Easyriders Sub II to
execute and deliver the Assumption Agreement attached at the end of this
Agreement and all other documents to be executed and delivered by the Company
under Section 5, and to take all other actions and deliver all instruments,
documents and agreements which the Purchaser requires in furtherance thereof.
Section 9.13. Environmental Reports. Promptly following the Purchaser's
request, the Credit Parties shall from time to time deliver (x) Phase I
Environmental Site Assessment Reports, consistent with American Society of
Testing and Materials (ASTM) Standard E1527-94, and applicable state
requirements, on any of the real Property of the Credit Parties encumbered, or
to be encumbered, by a Mortgage, dated no more than 6 months prior to the date
of delivery to the Purchaser, prepared by environmental engineers satisfactory
to the Purchaser, all of which shall be in form and substance satisfactory to
the Purchaser in its sole discretion, (y) such environmental review and audit
reports, including Phase II reports, with respect to the real Property of any
Credit Party as the Purchaser may from time to time request, all of which shall
be in form and substance satisfactory to the Purchaser in its sole discretion
and (z) letters executed by the environmental firms preparing any such
environmental reports, in form and substance satisfactory to the Purchaser,
authorizing the Purchaser to rely on such reports.
Section 10. Negative and Maintenance Covenants. The Parent and the Company
jointly and severally covenant and agree that, until all of the Obligations have
been indefeasibly paid in full and no Notes are outstanding and the Termination
Date has occurred, it shall and shall cause each of its Subsidiaries to comply
with the following covenants:
Section 10.1. Restrictions on Indebtedness. No Credit Party will incur,
create, assume, guarantee or in any way become liable for, or permit to exist,
Indebtedness other than:
(a) Indebtedness incurred pursuant to this Agreement, the Notes and
the other Note Documents;
(b) Indebtedness of the Credit Parties existing on the Closing Date
and described on Schedule 4.10A hereto (in each case after giving effect to the
Transactions, including the Subordinated Seller Notes but excluding in any event
the Non-Continuing Indebtedness);
(c) Indebtedness of any Wholly-owned Subsidiary of the Parent (other
than the Restaurant Subsidiaries and Easyriders of Columbus) to the Parent or to
another
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Wholly-owned Subsidiary of the Parent (other than the Restaurant Subsidiaries),
provided that such Indebtedness is evidenced by a subordinated demand note, in
form and substance (including the terms of subordination provisions)
satisfactory to the Purchaser, which note shall be pledged and delivered to the
Purchaser pursuant to the Security Agreement as additional collateral for the
Obligations;
(d) Indebtedness consisting of Liens permitted by subsections (a)
through (e), inclusive, of Section 10.2;
(e) Indebtedness secured by Liens permitted by Section 10.2(g)
hereof, provided that the aggregate outstanding principal amount of Indebtedness
incurred pursuant to this subsection (e) shall not at any time exceed $500,000;
(f) so long as no Event of Default has occurred and is continuing,
Indebtedness consisting of intercompany loans by the Company to the Parent in a
principal amount per fiscal month not in excess of the lesser of (x) 35% of
Excess Cash Flow for the preceding fiscal month and (y) $100,000; and
(g) Indebtedness evidenced by the Newriders Subordinated Note.
Section 10.2. Restrictions on Liens. No Credit Party will directly or
indirectly, create, assume or suffer to exist any Lien upon any of their
respective Properties whether now owned or hereafter acquired, except for:
(a) Liens for taxes, assessments or governmental charges or claims
the payment of which is not at the time required by Section 9.2;
(b) statutory Liens of landlords, if any, Liens of carriers,
warehousemen, mechanics, materialmen, if any, and other Liens imposed by law
incurred in the ordinary course of business, in each case for sums the payment
of which is not at the time required by Section 9.2;
(c) Liens (other than any Lien imposed by ERISA, and other than any
Lien securing an obligation for the payment of borrowed money) incurred or
deposits made in the ordinary course of business in connection with obligations
not due or delinquent with respect to workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations; provided, that no such Lien shall be permitted to the extent it
encumbers any real Property of any Credit Party;
(d) any attachment or judgment Lien (including judgment or appeal
bonds) which shall, within 30 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or which shall have been discharged
within 30 days after the
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expiration of any such stay or which is being diligently contested in good faith
so long as a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; provided that such Liens shall
not in any event exceed $100,000 in the aggregate at any time outstanding;
(e) zoning restrictions, easements, licenses, reservations,
restrictions on the use of real Property or minor irregularities incident
thereto (and, with respect to leasehold interests, Liens and other encumbrances
that are incurred, created, assumed or permitted to exist on or with respect to
the leased Property and arise by, through or under or are asserted by a landlord
or owner of the leased Property, with or without consent of the lessee) which
(i) in the case of any such Lien encumbering real Property of a Credit Party
which is not also encumbered by a Mortgage, were not incurred in connection with
the borrowing of money and which do not in the aggregate materially detract from
the value of the Property of any Credit Party or impair the use of such Property
for the purposes for which such Property is held by such Credit Party, or (ii)
in the case of any such Lien encumbering real Property which is also encumbered
by a Mortgage, constitute Permitted Exceptions (as defined in such Mortgage);
(f) Liens (including Liens created pursuant to Capitalized Leases)
existing on the Closing Date and described in Schedule 4.10A hereto (in each
case after giving effect to the Transactions contemplated to occur on the
Closing Date, but excluding in any event Liens securing Non-Continuing
Indebtedness which Liens shall be fully terminated and released on the Closing
Date);
(g) Liens (including Liens created pursuant to Capitalized Leases)
in respect of personal Property acquired by any Credit Party after the Closing
Date, which Liens exist or are created at the time of acquisition of such
Property or within six months thereafter, to secure Indebtedness permitted by
Section 10.1(e) which is assumed or incurred to finance all or any part of the
purchase price of acquisition of such Property, but any such Lien shall cover
only the Property so acquired and any improvements thereto, and may not exceed
the lesser of (x) 100% of the Fair Market Value of such Property or (y) the
purchase price of such acquisition; and
(h) the Liens created by the Security Documents.
Section 10.3. Limitation on Sale and Leasebacks. No Credit Party will
enter into any arrangement whereby any such Credit Party shall sell or transfer
any Property owned by such Credit Party to any Person and thereupon such Credit
Party shall lease or intend to lease, as lessee, the same Property.
Section 10.4. Consolidation, Merger or Disposition of Assets;
Acquisitions. No Credit Party will enter into any transaction of merger,
amalgamation or consolidation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell,
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lease, license, transfer or otherwise dispose of, in one transaction or a series
of transactions, all or any part of the business or Property (tangible or
intangible, including, without limitation, any Intellectual Property or License
Agreement) of any Credit Party whether now owned or hereafter acquired, or
acquire by purchase or otherwise any of the outstanding Capital Stock of, or all
or any substantial part of the business, operating assets and Property of, any
Person, except that (i) any Credit Party may in the ordinary course of business
sell Inventory owned by them, (ii) any Credit Party may sell or otherwise
dispose of Property (other than Intellectual Property) having a net book value
at the time of such sale or disposition of not more than $100,000 in any fiscal
year, provided that the aggregate net book value of all such Property sold or
disposed of pursuant to this clause (ii) shall not exceed [$175,000], (iii)
after giving effect to the Reorganization, the Capital Stock of El Paso may be
transferred to Newriders, and (iv) the Credit Parties may acquire the Capital
Stock or assets of any Person so long as the aggregate consideration paid by the
Credit Parties for such acquisition in any fiscal year does not exceed $250,000
and the Purchaser shall be satisfied in its discretion with the nature and
extent of any Indebtedness and other liabilities (including without limitation
contingent liabilities) assumed (by contract, operation of law or otherwise) by
the Credit Parties in connection with such acquisition.
Section 10.5. Sale or Discount of Receivables. No Credit Party will,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of their respective Accounts or notes
receivable , except that the Company may discount its Accounts or notes
receivable in the ordinary course of business and consistent with past
practices.
Section 10.6. Conduct of Business. The Parent will not engage in a
business other than the ownership, directly or indirectly, of the Capital Stock
of its Subsidiaries. No member of the Paisano Group will, engage in any business
other than the Permitted Business. Easyriders of Columbus will not engage in any
business other than the operation of its store, cafe and tatoo studio located in
Columbus, Ohio, the sale of Easyriders apparel, and the businesses of motorcycle
customization, custom and pre-owned motorcycle sales, motorcycle parts and
accessory sales, motorcycle servicing, and custom leather embroidery, and any
businesses that are reasonably related thereto.
Section 10.7. Restricted Payments and Restricted Investments.
(a) No Credit Party will, directly or indirectly, make any
Restricted Payment.
(b) No Credit Party will make any Restricted Investment.
Section 10.8. Issuance of Capital Stock. No Credit Party will issue or
have outstanding any shares of Capital Stock (or any warrants, options,
conversion rights, or other rights to subscribe for, purchase or acquire such
Capital Stock), except (i) Capital Stock,
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warrants, options, conversion rights or other such rights outstanding on the
Closing Date and listed on Schedule 4.4, (ii) Common Stock issued under the
Parent 1998 Executive Compensation Plan, and (iii) Common Stock issued by the
Parent after the Closing Date.
Section 10.9. Transactions with Affiliates. Subject to the immediately
succeeding sentence, no Credit Party will, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any Property or the rendering of any service), with
any Affiliate of such Credit Party unless such transaction is otherwise not
prohibited under this Agreement, is in the ordinary course of such Credit
Party's business, is on fair and reasonable terms that are not less favorable to
such Credit Party, as the case may be, than those that would be obtainable at
the time in an arms' length transaction with a Person who is not such an
Affiliate and such transaction has been approved by the disinterested directors
of the Parent, provided that Restricted Payments as described in clauses (vii)
and (viii) of paragraph (e) of the definition thereof shall be permitted.
Notwithstanding the foregoing and other than the transactions described on
Schedule 10.9, no Credit Party will, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any Property or the rendering of any service) with
(i) any Restaurant Subsidiary, (ii) Easyriders of Columbus (other than
transactions with respect to magazine sales and which satisfy the conditions of
the immediately preceding sentence) or (iii) any Permitted Holder.
Section 10.10. Capital Expenditures. No Credit Party will make any Capital
Expenditure or incur such any contractual commitment with respect thereto,
except that so long as no Event of Default has occurred and is continuing the
Paisano Group may make Capital Expenditures and incur commitments therefor to
the extent that, after giving effect thereto, the aggregate amount of all
Capital Expenditures by the Paisano Group shall not exceed, for each fiscal year
of the Paisano Group set forth below, the corresponding amount set forth
opposite such fiscal year:
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Fiscal Year Ended
December 31, Permitted Amount
------------ ----------------
1998 $550,000
1999 $550,000
2000 $550,000
2001 $550,000
Section 10.11. Operating Leases. No Credit Party will enter into (as
lessee) any Operating Lease if, after giving effect thereto, the aggregate
amount of rentals and other payments required to be made by such Credit Parties
under all Operating Leases during any fiscal year shall be greater than
$[____________].
Section 10.12. Certain Contracts. No Credit Party will enter into or
be a party to:
(a) any contract providing for the making of loans, advances or
capital contributions to any Person other than the Credit Parties, or for the
purchase of any Property from any Person, in each case primarily in order to
enable such Person to maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses, or
(b) any contract for the purchase of materials, supplies or other
Property or services if such contract (or any Reorganization Document) requires
that payment for such materials, supplies or other Property or services shall be
made regardless of whether or not delivery of such materials, supplies or other
Property or services is ever made or tendered, or
(c) any contract to rent or lease (as lessee) any real or personal
Property if such contract (or any Reorganization Document) provides that the
obligation to make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general use or
requires that the lessee purchase or otherwise acquire securities or obligations
of the lessor (provided, that this subsection (c) shall not be construed to
prevent any Credit Party from being a party to or complying with any provision
of any lease to which any of them is a party on the date hereof), or
(d) any contract for the sale or use of materials, supplies or other
Property, or the rendering of services, if such contract (or any Reorganization
Document) requires that payment for such materials, supplies or other Property,
or the use thereof, or payment for such services, shall be subordinated to any
Indebtedness (of the purchaser or
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user of such materials, supplies or other Property or the Person entitled to the
benefit of such services) owed or to be owed to any Person, or
(e) except as permitted by Section 10.1, and except for Investments
which are not Restricted Investments, any other contract which, in economic
effect, is substantially equivalent to a Contingent Obligation.
Section 10.13. Limitation on Dividend Restrictions Affecting Subsidiaries.
Except pursuant to this Agreement, no Credit Party will permit any of its
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction which by its
terms restricts the ability of any such Subsidiary to (a) pay dividends or make
any other distributions on such Subsidiary's Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Credit Party, (c) make any loans
or advances to the Company or any other Credit Party or (d) transfer any of its
Property or assets to the Company or any other Credit Party.
Section 10.14. No Amendment of Charter, By-Laws. No Credit Party will
effect any amendment to or modification of its charter documents or by-laws,
except in each case with the prior written consent of the Purchaser.
Section 10.15. Acquisition of Margin Securities. No Credit Party will own,
purchase or acquire (or enter into any contract to purchase or acquire) any
"margin security" as defined by any regulation of the Board of Governors of the
United States Federal Reserve System as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, the Purchaser shall have received an opinion of
counsel satisfactory to the Purchaser to the effect that such purchase or
acquisition will not cause this Agreement or the Notes to be in violation of
Regulation T or Regulation U or any other regulation of such Board then in
effect.
Section 10.16. Collateral Locations; Other Names. Except with the express
prior written approval of the Purchaser, neither the location of the principal
place of business and chief executive office of any Credit Party, nor the
locations of Collateral respectively granted or pledged by them as set forth on
Schedule 4.30 hereto, shall be changed nor shall there be established additional
places of business or additional locations at which any such Collateral is
stored, kept or processed, nor shall any Credit Party conduct business under any
corporate, trade or fictitious name other than the names listed on Schedule
4.30, unless (i) the Company shall give to the Purchaser at least 30 days prior
notice of any such changed chief executive office or changed or additional
places of business or locations of Collateral or change of corporate, trade or
fictitious name, and (ii) prior to making any such change of location, place of
business, chief executive office or corporate, trade or fictitious name or
establishing such new place of business or location of Collateral, the Company
shall execute and file, and shall cause each other Credit Party to execute and
file, any additional financing statements or other documents or notices
reasonably required by the Purchaser in order to preserve the
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perfection of security interests in such Collateral and, if such location is not
owned by such Credit Party, the Company shall obtain, and shall cause such
Credit Party to obtain, and deliver to the Purchaser such duly executed Estoppel
Letters in respect of such location as may be reasonably required by the
Purchaser. Following the occurrence of an Event of Default, the Company shall,
upon the request of the Purchaser, notify any such warehouseman, bailee or
processor which has not already delivered an Estoppel Letter to the Purchaser of
the Liens created in favor of the Purchaser, and shall instruct such Person to
hold all Collateral located on premises owned or operated by such Person for the
Purchaser's account subject to the Purchaser's instructions.
Section 10.17. Amendments to Certain Documents. Without the prior written
consent of the Purchaser, no Credit Party will (i) consent to or request any
amendment, modification or supplement to any provision of any Reorganization
Document or (ii) amend, modify or supplement in any material respect, any
Material Contract which has a face amount or otherwise involves aggregate
payments or obligations in excess of $250,000.
Section 10.18. Financial Covenants.
(a) Consolidated Working Capital. The Company shall not permit
Consolidated Working Capital of the Paisano Group, measured as at the end of
each fiscal quarter of the Paisano Group, to be less than $______.
(b) Minimum Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth of the Parent as of the end of any fiscal quarter to be
less than the sum of (i) [$_________] plus (ii) 100% of the aggregate amount of
the Consolidated Net Income of the Parent and its Subsidiaries (other than the
Restaurant Subsidiaries) for each fiscal quarter of the Parent ending on or
after December 31, 1998 with respect to which the Consolidated Net Income of the
Parent and its Subsidiaries (other than the Restaurant Subsidiaries) was greater
than zero.
(c) Maintenance of Leverage Ratio. The Company shall not permit the
ratio of (i) Consolidated Total Indebtedness (other than the Subordinated Seller
Notes) as of each date set forth below to (ii) Consolidated EBITDA, of the
Paisano Group for the four consecutive fiscal quarters of the Parent ended on
such date (or, in the case of any such date which is earlier than September 30,
1999, for the period from the Closing Date to and including such date), to
exceed the corresponding amount set forth opposite such date:
Fiscal Quarter Ended: Ratio
----------------- --------
December 31, 1998 8.5:1.00
March 31, 1999 5.5:1.00
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June 30, 1999 4.0:1.00
September 30, 1999 3.4:1.00
December 31, 1999 3.5:1.00
March 31, 2000 3.4:1.00
June 30, 2000 3.3:1.00
September 30, 2000 3.2:1.00
December 31, 2000 3.1:1.00
March 31, 2001 3.1:1.00
June 30, 2001 3.0:1.00
September 30, 2001 3.0:1.00
(d) Minimum Consolidated EBITDA. The Company shall not permit the
Consolidated EBITDA of the Paisano Group, measured as of each date set forth
below for the period of four consecutive full fiscal quarters of the Paisano
Group ended on such date, to be less than the corresponding amount set forth
opposite such date; provided, however, that in the case of any such measuring
date which is earlier than September 30, 1999, the applicable measuring period
shall be the period from the Closing Date to and including such measuring date:
Measuring Date Amount
-------------- ------
December 31, 1998 $2,500,000
March 31, 1999 $3,925,000
June 30, 1999 $5,400,000
September 30, 1999 $6,350,000
December 31, 1999 $6,000,000
March 31, 2000 $6,175,000
June 30, 2000 $6,400,000
September 30, 2000 $6,600,000
December 31, 2000 $6,800,000
March 31, 2001 $7,000,000
June 30, 2001 $7,400,000
September 30, 2001 $7,800,000
(e) Maintenance of Interest Coverage Ratio. The Company will not
permit the ratio of (i) Consolidated EBITDA less Capital Expenditures made
during any period of determination, in each case, of the Paisano Group to (ii)
Consolidated Interest Expenses of the Paisano Group, measured as of each date
set forth below for the period of four consecutive full fiscal quarters of the
Paisano Group ended on such date, to be less than the ratio set forth opposite
such date; provided, however, that in the case of any such
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measuring date which is earlier than September 30, 1999, the applicable
measuring period shall be the period from the Closing Date to and including such
measuring date:
Fiscal Quarter Ended Ratio
-------------------- -----
December 31, 1998 3.5:1.00
March 31, 1999 3.0:1.00
June 30, 1999 2.9:1.00
September 30, 1999 2.9:1.00
December 31, 1999 2.7:1.00
March 31, 2000 2.8:1.00
June 30, 2000 2.9:1.00
September 30, 2000 3.0:1.00
December 31, 2000 3.1:1.00
March 31, 2001 3.2:1.00
June 30, 2001 3.4:1.00
September 30, 2001 3.5:1.00
Section 10.19. Board Observer Rights. The Parent will give to the
Purchaser notice of all regular meetings and all special meetings of the
Parent's Board of Directors at the time notice is given to the directors, and
will permit an employee of the Purchaser or any Affiliate of the Purchaser
designated by the Purchaser to attend such meetings as an observer (but with no
voting rights), and will provide such designee with all information provided to
directors of the Parent at the time such information is provided to the
directors.
Section 11. Events of Default.
Section 11.1. Events of Default; Remedies. If any of the following events
(herein called "Events of Default") shall have occurred and be continuing
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or by operation of law or otherwise and such Event of Default
shall be deemed to be continuing until waived by the Purchaser in accordance
with the terms hereof):
(a) the Company shall default in the due and punctual payment or
prepayment of all or any part of the principal of any Note when and as the same
shall become due and payable, whether at stated maturity, by acceleration, by
notice of prepayment or otherwise;
(b) any Credit Party shall default in the due and punctual payment
or prepayment of any interest or fees on any Note or any other Obligations
(other than principal
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of any Note) when and as such interest, fees or other Obligations, shall become
due and payable, and such default shall continue for a period of five days;
(c) any Credit Party shall default in the performance or observance
of any of the covenants, agreements or conditions contained in Section 10 of
this Agreement;
(d) any Credit Party shall default in the performance or observance
of any of the covenants, agreements or conditions contained in this Agreement
(other than those referred to in any subsection of this Section 11.1 other than
this subsection (d)), or any Credit Party shall default in the performance or
observance of any of the covenants, agreements or conditions contained in any of
the other Note Documents, and such default shall continue for a period of 30
days;
(e) (i) any Credit Party shall fail to pay any principal of, premium
or interest on or any other amount payable in respect of Indebtedness of such
Person that is outstanding in a principal amount of at least $100,000 in the
aggregate (excluding Indebtedness represented by the Notes) when the same
becomes due and payable (whether at scheduled maturity, or by required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating to any such
Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to permit the acceleration of the maturity of such Indebtedness
(whether or not such acceleration occurs); or (iii) any such Indebtedness shall
be declared to be due and payable or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Indebtedness shall be required
to be made, in each case prior to the stated maturity thereof;
(f) any Credit Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii) be
generally unable to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Bankruptcy Code or the foreign equivalent thereof, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) fail to controvert in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or the foreign equivalent thereof, (vii) admit in writing its
inability to pay its debts generally as such debts become due, (viii) take any
action under the laws of its jurisdiction of organization analogous to any of
the foregoing, or (ix) take any requisite action for the purpose of effecting
any of the foregoing;
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(g) a proceeding or case shall be commenced, without the application
or consent of any Credit Party in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, dissolution, winding up of any Credit Party
or composition or readjustment of the Indebtedness of any of them, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of any
Credit Party or of all or any substantial part of the assets of any of them, or
(iii) similar relief in respect of any Credit Party under any law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 30 days; or an order for relief shall
be entered in an involuntary case under the Bankruptcy Code, against any Credit
Party; or action under the laws of the jurisdiction of organization of any
Credit Party analogous to any of the foregoing shall be taken with respect to
any Credit Party and shall continue undismissed, or unstayed and in effect, for
a period of 30 days;
(h) final judgment for the payment of money shall be rendered by a
court of competent jurisdiction against any Credit Party and such Credit Party
shall not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, within 30 days from the date of
entry thereof and within said period of 30 days, or such longer period during
which execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal, and such judgment
together with all other such judgments shall exceed in the aggregate $125,000;
(i) any representation, warranty or statement made by or on behalf
of any Credit Party or any officer of any Credit Party in this Agreement, or any
representation, warranty or statement made by or on behalf of such Credit Party
or any officer of such Credit Party in any of the Transaction Documents or in
any financial statement, Officer's Certificate or other instrument or document
now or hereafter delivered pursuant to or in connection with any provision of
this Agreement or the Transaction Documents, shall prove to be false or
incorrect or breached in any material respect on the date as of which made;
(j) any event or condition described in Section 4.19 hereof shall
occur or exist and, as a result of such event or condition, together with all
other such events or conditions, any Credit Party or any ERISA Affiliate shall
incur, or in the opinion of the Purchaser is reasonably likely to incur, a
liability of any kind under ERISA or otherwise that, in the opinion of the
Purchaser, could have a Material Adverse Effect;
(k) any provision of any of this Agreement, the Notes or the other
Note Documents shall, for any reason, not be or shall cease to be in full force
and effect, or not be, or be asserted in writing by any Credit Party not to be,
valid, binding and enforceable against any Person purported to be bound by it;
(l) any of the Security Documents shall not give or shall cease to
give the Purchaser the Liens and the rights, powers and privileges purported to
be created thereby, including, without limitation, a valid, enforceable and
perfected first priority security interest in, and Lien on, all of the
Collateral subject thereto in favor of the Purchaser, superior and
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prior to the rights of all third Persons (except as otherwise expressly
permitted by this Agreement or the Security Documents); or
(m) any Change of Control shall occur;
then (i) upon the occurrence of any Event of Default described in subsection (f)
or (g), the unpaid principal amount of all Notes, together with the interest
accrued thereon and all fees, costs, expenses, indemnities and other amounts
payable hereunder or under the other Note Documents shall automatically become
immediately due and payable, and all obligations of the Purchaser to purchase
Revolving Notes hereunder shall terminate, without presentment, demand, notice,
declaration, protest or other requirements of any kind, all of which are hereby
expressly waived, or (ii) upon the occurrence of any other Event of Default, the
Purchaser may, by written notice to the Company, declare the unpaid principal
amount of all Notes to be, and the same shall forthwith become, immediately due
and payable, together with the interest accrued thereon and all fees, costs,
expenses, indemnities and other amounts payable hereunder or under the other
Note Documents, and/or terminate all obligations of the Purchaser to purchase
Revolving Notes hereunder, all without presentment, demand, notice, protest or
other requirements of any kind, all of which are hereby expressly waived.
Section 11.2. Suits for Enforcement; Remedies Against Collateral. If any
Event of Default shall have occurred and be continuing, the Purchaser may,
proceed to protect and enforce its rights, either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement, and may proceed to enforce the payment of all sums
due upon such respective Notes, and such further amounts as shall be sufficient
to cover the costs and expenses of collection (including, without limitation,
reasonable counsel fees and disbursements), or to enforce any other legal or
equitable right of the Purchaser. In addition, the Purchaser shall have all of
the rights and remedies of a secured creditor under the applicable provisions of
the Uniform Commercial Code or the foreign equivalent thereof, and all rights
and remedies provided for in the Security Documents or at law or in equity or
otherwise.
Section 11.3. Remedies Cumulative. No remedy conferred in this Agreement
or in the other Note Documents upon the Purchaser, the holder of any Note or the
Purchaser is intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Section 11.4. Remedies Not Waived. No course of dealing between any Credit
Party and the Purchaser, and no delay or failure in exercising any rights
hereunder or under such Note or the Note Documents in respect thereof, shall
operate as a waiver of any of the rights of the Purchaser.
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Section 12. Registration; Exchange; and Transfer of Notes. The Company
will keep at its principal executive office a register, in which, subject to
such reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company will provide for the registration and
transfer of Notes. Whenever any Note or Notes shall be surrendered either at the
principal executive office of the Company, or at the place of payment named in
the Note, for transfer or exchange, accompanied (if so required by the Company)
by a written instrument of transfer in form reasonably satisfactory to the
Company duly executed by the holder thereof or by such holder's attorney duly
authorized in writing, the Company will execute and deliver in exchange therefor
a new Note or Notes of the same class in such denominations as may be requested
by such holder, of like tenor and in the same aggregate unpaid principal amount
as the aggregate unpaid principal amount of the Note or Notes so surrendered.
Any Note issued in exchange for any other Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, and neither gain nor loss of interest
shall result from any such transfer or exchange. Any transfer tax or
governmental charge relating to such transaction shall be paid by the holder
requesting the exchange. The Company and any of its agents may treat the Person
in whose name any Note is registered as the sole and exclusive record and
beneficial holder and owner of such Note for the purpose of receiving payment of
the principal of, and interest and other amounts on such Note and for all other
purposes whatsoever, whether or not such Note be overdue.
Section 13. Lost, Stolen, Damaged and Destroyed Notes. At the request of
any holder of any Note, the Company will issue and deliver at its expense, in
replacement of any Note or Notes lost, stolen, damaged or destroyed, upon
surrender thereof, if mutilated, a new Note or Notes in the same aggregate
unpaid principal amount, and otherwise of the same tenor, as the Note or Notes
so lost, stolen, damaged or destroyed, duly executed by the Company. The Company
may condition the replacement of a Note or Notes reported by the holder thereof
as lost, stolen, damaged or destroyed, upon the receipt from such holder of an
indemnity and/or security reasonably satisfactory to the Company; provided that
if such holder shall be the Purchaser or its nominee, such Purchaser's unsecured
agreement of indemnity shall be sufficient for purposes of this Section.
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Section 14. Miscellaneous.
Section 14.1. Amendment and Waiver.
(a) No amendment or waiver of any provision of this Agreement, the
Notes or (except as otherwise expressly provided therein) any other Note
Document, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Purchaser and the Parent.
(b) Any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Neither any failure nor
any delay on the part of the Purchaser in exercising any right, power or
privilege hereunder or under the Notes or any of the other Note Documents shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. Except as otherwise provided herein or in the Notes
or any other Note Document, no notice to or demand on any Credit Party in any
case shall entitle such Credit Party to any other or further notice or demand in
the same, similar or other circumstances.
Section 14.2. Expenses. The Parent and the Company, jointly and severally
agree, whether or not the transactions hereby contemplated shall be consummated,
to pay and save the Purchaser harmless against any and all liability for the
payment of all reasonable out-of-pocket expenses arising in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Notes,
the other Note Documents and the other instruments and documents hereby and
thereby contemplated and the closing of the transactions contemplated hereby,
all such expenses incurred with respect to the enforcement of any provision of
any such agreement or instrument, all reasonable expenses incurred in connection
with the copying and compilation of such agreements and instruments and all
stamp and other similar taxes (together in each case with interest and
penalties, if any, to the extent permitted by applicable law) which may be
payable in respect of the execution and delivery of such agreement or
instruments, all fees, taxes and other charges incurred in connection with the
filing or recording of any Security Documents and in connection with any Lien,
tax and judgment searches, including appraisal, survey and other title costs,
the reasonable fees and disbursements of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
and of any special, local or foreign counsel in connection with the preparation
of such agreements and instruments and the transactions hereby and thereby
contemplated, and the fees and disbursements of the Accountants, and the
reasonable out-of-pocket expenses incurred by the Purchaser in the
administration of the provisions of this Agreement and the other Note Documents,
including, without limitation, expenses incurred in connection with the exercise
of the Purchaser's rights of visitation and inspection pursuant to Section 8 and
attendance at meetings of the Board of Directors of the Parent and committees
thereof pursuant to Section 10.19. The Credit Parties, jointly and severally,
also agree to pay all reasonable expenses incurred by the Purchaser (including
counsel fees and disbursements) in connection
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with any amendment or requested amendment of, or waiver or consent or requested
waiver or consent under or with respect to, this Agreement, the Notes or any of
the other Note Documents, whether or not the same shall become effective, and
all reasonable expenses incurred by Purchaser (including counsel fees and
disbursements) following the occurrence and during the continuance of any
Default or Event of Default or incident to the negotiation of any workout,
restructuring or similar arrangement relating to any Credit Party. The
obligations of the Parent and the Company under this Section 14.2 shall survive
the payment or prepayment in full or transfer of any Note, the termination of
the Purchaser's obligations to purchase Revolving Notes, the enforcement of any
provision hereof or thereof, any such amendments, waivers or consents, any such
Default or Event of Default, and any such workout, restructuring or similar
arrangement.
Section 14.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement or otherwise in connection herewith, shall
(i) survive the execution and delivery of this Agreement and the delivery of the
Notes to the Purchaser and shall continue in effect, until all of the
Obligations have been indefeasibly paid in full and no Notes are outstanding and
the Termination Date has occurred and thereafter as provided in Sections 14.2
and 14.6, and (ii) be deemed to be material and to have been relied upon by the
Purchaser, regardless of any investigation made by such Purchaser or on its
behalf.
Section 14.4. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
the Parent, the Company, the Purchaser and their respective successors and
assigns; provided, however, that neither the Parent nor the Company shall have
the right to assign its rights hereunder or any interest herein or to delegate
any of its duties or obligations hereunder without the prior written consent of
the Purchaser.
(b) The Purchaser may at any time sell or assign to any Person (each
an "Assignee") all or any part of its interests in the Notes, this Agreement and
the Note Documents and in the obligations of the Credit Parties under this
Agreement, the Notes and the Note Documents, and each such Assignee shall assume
the obligations of the Purchaser hereunder and thereunder (including, without
limitation, the obligation of the Purchaser to purchase Revolving Notes), to the
extent provided in such assignment, and to the extent of such assumption the
Purchaser shall be released from its obligations hereunder and thereunder. Upon
execution and delivery of such an instrument, such Assignee shall be a party to
this Agreement and shall have the rights and obligations of a Purchaser
(including, without limitation, its rights under this Section 14.4(b)), to the
extent of such assignment, and the Purchaser shall be released from its
obligations hereunder to a corresponding extent. Upon the consummation of any
assignment pursuant to this Section 14.4(b), the Purchaser and the Company shall
make appropriate arrangements so that, if required, new Notes shall be issued to
the Purchaser and the Assignee. The Purchaser shall give the Company prior
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written notice of the date that any such assignment shall become effective,
which date shall be no less than ten days after the date such notice is given.
From and after the date of such assignment, the term "Purchaser" as used in this
Agreement shall be deemed to refer collectively to the holders of Notes at the
time outstanding.
Section 14.5. Notices. All notices hereunder shall be in writing and shall
be conclusively deemed to have been received and shall be effective (a) on the
day on which delivered if delivered personally or transmitted by telex or
telegram or telecopier, or (b) one Business Day after the date on which the same
is delivered to a nationally recognized overnight courier service, and shall be
addressed:
(i) in the case of the Parent or the Company, to:
Paisano Publications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Scholer, Feirman, ▇▇▇▇ & Handler, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) in the case of the Purchaser to:
Nomura Holding America Inc.
2 World Financial ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, or his authorized representative
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Nomura Holding America Inc.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Legal Department
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇; and
or at such other address and/or telecopy number and/or to the attention of such
other Person as any of such Persons shall have advised the others by notice in
the manner herein specified.
Section 14.6. Indemnification. In consideration of the execution and
delivery of this Agreement by the Purchaser, the Parent and the Company hereby,
jointly and severally, agree to defend, indemnify, exonerate and hold harmless
the Purchaser and its officers, directors, stockholders, affiliates, trustees,
employees and agents, and each other Person, if any, controlling any the
Purchaser or any of its Affiliates (herein collectively called the
"Indemnitees") from and against any and all actions, causes of action, suits,
losses, liabilities and damages, and expenses in connection therewith,
including, without limitation, reasonable counsel fees and disbursements
incurred in the investigation and defense of claims and actions (herein
collectively called the "Indemnified Liabilities"), incurred by the Indemnitees
or any of them as a result of, or arising out of or relating to:
(i) the execution, delivery and performance of the
Reorganization Documents and the consummation of the Reorganization
contemplated thereby,
(ii) the execution, delivery, performance or enforcement of
this Agreement, the Notes, the Warrants, any other Note Document, or any
instrument or document contemplated hereby or thereby by any of the
Indemnitees, or any act, event or transaction related or attendant thereto
or contemplated hereby or thereby, or any action or inaction by any
Indemnitee under or in connection therewith, or
(iii) any Environmental Matter, any Environmental Law or the
actual or alleged existence or release of any Hazardous Material,
except for any such Indemnified Liabilities that are finally judicially
determined to have resulted from the respective Indemnitee's gross negligence,
bad faith or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Parent and the Company
hereby, jointly and severally, agree to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The obligations of the Parent and the Company
under this Section 14.6 shall be in addition to any liability that the Parent
and the Company may otherwise have and shall survive the payment or prepayment
in full or transfer of any Note,
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the termination of any Purchaser's obligations to purchase Revolving Notes and
the enforcement of any provision hereof or thereof.
Section 14.7. Public Announcements. The Parent and the Company agree that
neither of them nor any other Credit Party will issue any press release or make
any other public announcement, statement or filing with regard to this
Agreement, the Notes, the Warrants or the other Note Documents or the
Transactions without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld and shall in no event be withheld in any case where
such press release, public announcement, statement or filing is required by
applicable law (including applicable rules and regulations of the SEC).
Section 14.8. No Fiduciary Relationship. The relationship between the
Purchaser, on the one hand, and the Credit Parties on the other hand, is solely
that of creditor and debtor, and the Purchaser shall not be deemed to have any
fiduciary or other special relationship with any Credit Party. No provision of
this Agreement, the Notes or any of the other Note Documents shall be construed
to create a fiduciary duty on the part of the Purchaser or any trustee or agent
therefor in favor of any Credit Party or their Affiliates, or their respective
director, officers, employees, agents, stockholders or creditors.
Section 14.9. Integration and Severability. This Agreement, the Notes and
the other Note Documents (including the schedules and exhibits thereto) embody
the entire agreement and understanding among the Purchaser and the Credit
Parties, and supersede all prior agreements and understandings relating to the
subject matter hereof. In case any one or more of the provisions contained in
this Agreement, the Notes or any other Note Document, or any application
thereof, shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
Section 14.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
SECTION 14.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14.12. SUBMISSION TO JURISDICTION: WAIVER OF SERVICE AND VENUE.
(a) EACH OF THE PARENT AND THE COMPANY CONSENTS AND AGREES TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON
CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES
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THAT, EXCEPT WITH THE WRITTEN CONSENT OF THE PURCHASER, ANY DISPUTE CONCERNING
THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE ONE HAND, AND THE PARENT AND THE
COMPANY, ON THE OTHER HAND, OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS
AGREEMENT OR OTHERWISE, SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
(b) EACH OF THE PARENT AND THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY HAND DELIVERY TO THE COMPANY AT ITS ADDRESS SET FORTH
BELOW, OR, AT THE OPTION OF THE PURCHASER, BY SERVICE UPON CT CORPORATION, WHICH
EACH OF THE PARENT AND THE COMPANY IRREVOCABLY APPOINTS AS ITS AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF NEW YORK. IN
ADDITION, THE PURCHASER AGREES TO PROMPTLY FORWARD BY REGISTERED MAIL ANY
PROCESS SO SERVED UPON SAID AGENT TO THE COMPANY AT ITS ADDRESS SET FORTH ABOVE
IN SECTION 14.5. THE COMPANY HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
(c) NOTHING IN THIS SECTION 14.12 SHALL AFFECT THE RIGHT OF THE
PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST THE PARENT
OR THE COMPANY OR THEIR PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
SECTION 14.13. WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE PARENT, THE
COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH
OF THE PARENT, THE COMPANY AND THE PURCHASER HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
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THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 14.14. Dating. Although this Agreement is dated as of the date
first written above for convenience, this Agreement shall be effective on
September , 1998.
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IN WITNESS WHEREOF, the Company, the Parent and the Purchaser have
executed this Agreement by their duly authorized officers.
EASYRIDERS, INC.
By:
-------------------------------
Its:
EASYRIDERS SUB II, INC.
(to be merged with and into
PAISANO PUBLICATIONS, INC.)
By:
-------------------------------
Its:
NOMURA HOLDING AMERICA INC.
By:
-------------------------------
Its: Attorney-In-Fact
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Assumption Agreement
PAISANO PUBLICATIONS, INC., successor to Easyriders Sub II, Inc. by
merger, hereby assumes all obligations and liabilities of Easyriders Sub II,
Inc. under the foregoing Note and Warrant Purchase Agreement, dated as of
September__, 1998 between Easyriders, Inc., Easyriders Sub II, Inc. and Nomura
Holding America Inc., and all the Notes and Note Documents referred to therein
to which Easyriders Sub II, Inc. is a party and joins in the foregoing Note and
Warrant Purchase Agreement and such Notes and Note Documents for the purpose of
agreeing to be bound by all covenants and agreements attributable to it in said
Note and Warrant Purchase Agreement and such Notes and Note Documents.
PAISANO PUBLICATIONS, INC.
By:
-------------------------------
Name:
Title:
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TABLE OF CONTENTS
(Not Part of Agreement)
Section Heading Page
------- ------- ----
1. Definitions...........................................................................................2
1.1. Defined Terms.................................................................................2
1.2. Accounting Terms.............................................................................23
1.3. Rules of Construction........................................................................23
2. Sale and Purchase of Notes and Warrants..............................................................24
2.1. Authorization of Notes and Warrants..........................................................24
2.2. Sale and Purchase of Revolving Notes.........................................................25
2.3. Sale and Purchase of Term Notes and Warrants.................................................26
2.4. Closing......................................................................................26
2.5. Payments.....................................................................................26
2.6. Fees.........................................................................................27
2.7. Interest Rate Limitation.....................................................................27
2.8. Allocation of Purchase Price.................................................................28
3. Prepayments of Notes.................................................................................28
3.1. Mandatory Payments and Prepayments...........................................................28
3.2. Optional Prepayments of the Notes............................................................30
3.3. Application of Principal Payments............................................................30
3.4. Reductions of Commitments....................................................................31
3.5. Purchase of Notes............................................................................32
3.6. Taxes........................................................................................32
4. Representations and Warranties of the Parent and the Company.........................................34
4.1. Corporate Existence and Power................................................................34
4.2. Corporate Authority..........................................................................34
4.3. Binding Effect...............................................................................34
4.4. Capital Stock................................................................................35
4.5. Business Operations and Other Information: Financial Condition...............................35
4.6. Subsidiaries.................................................................................37
4.7. Litigation; No Violation of Governmental Orders or Laws......................................37
4.8. No Conflicts with Agreements, Statutes, Orders, Etc..........................................37
4.9. Consents, Etc................................................................................37
4.10. Outstanding Indebtedness; Investments.......................................................38
4.11. Assets and Properties.......................................................................38
4.12. Taxes.......................................................................................39
4.13. Disclosure..................................................................................39
4.14. Offering of Securities......................................................................39
4.15. Broker's or Finder's Commissions............................................................40
4.16. Labor Matters...............................................................................40
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Section Heading Page
------- ------- ----
4.17. Environmental Matters.......................................................................40
4.18. Margin Regulations..........................................................................41
4.19. Compliance with ERISA.......................................................................42
4.20. Material Contracts..........................................................................45
4.21. Insurance...................................................................................45
4.22. Possession of Franchises, Licenses, Etc.....................................................45
4.23. Use of Proceeds.............................................................................45
4.24. Intellectual Property.......................................................................46
4.25. Depositary Accounts.........................................................................48
4.26. Suppliers; Distributors; Printers...........................................................48
4.27. Status under Certain Laws...................................................................49
4.28. Foreign Assets Control Regulations..........................................................49
4.29. Certain Transactions........................................................................49
4.30. Places of Business..........................................................................49
4.31. Other Names.................................................................................50
4.32. Reorganization Documents; Transaction Documents.............................................50
4.33. Solvency....................................................................................50
4.34. Ranking of Notes and other Obligations......................................................51
4.35. Business of Parent..........................................................................51
4.36. Licensing Interests; Easyriders Cafe........................................................51
4.37. Circulation.................................................................................51
4.38. Relationships with Franchisees..............................................................52
4.39. Customer, Advertiser, Subscriber and Mailing Lists..........................................53
4.40. Advertising.................................................................................53
4.41. Model Releases..............................................................................53
4A. Representations of the Purchaser.....................................................................53
5. Closing Conditions...................................................................................54
5.1. Proceedings Satisfactory.....................................................................54
5.2. Opinion of Purchaser's Special Counsel.......................................................54
5.3. Opinions of Counsel to the Credit Parties; Tax Opinion; Reliance Letters.....................54
5.4. Representations and Warranties True, Etc.; Certificates......................................55
5.5. Absence of Material Adverse Effect, Etc......................................................55
5.6. Consents and Approvals.......................................................................56
5.7. Absence of Litigation, Orders, Etc...........................................................56
5.8. Guarantee....................................................................................56
5.9. Security Documents...........................................................................56
5.10. Employee Stock Options......................................................................59
5.11. Assignment of Representations, Warranties, Covenants and Indemnities........................59
5.12. Initial Revolving Note Purchase Request.....................................................59
5.13. Reorganization Transactions.................................................................59
5.14. Subordinated Seller Notes; Intercreditor Agreement..........................................60
5.15. Discharge of NonContinuing Indebtedness.....................................................60
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Section Heading Page
------- ------- ----
5.16. Fees........................................................................................61
5.17. Wire Instructions...........................................................................61
5.18. Shareholder Approval........................................................................61
5.19. Merger......................................................................................61
5.20. Transaction Costs; Payables.................................................................61
5.21. Solvency Opinion............................................................................61
5.22. Insurance...................................................................................62
5.23. Certificate As to Use of Proceeds...........................................................62
5.24. Due Diligence Reports.......................................................................62
5.25. Registration Rights Agreement...............................................................62
5.26. Employment Agreements; Shareholders' Agreements; Leases.....................................62
5.27. Registration Statement......................................................................63
6. Additional Conditions to Obligations to Purchase Revolving Notes.....................................63
6.1. Note Purchase Request........................................................................63
6.2. Representations and Warranties True..........................................................63
6.3. No Default or Event of Default...............................................................63
6.4. Credit Limit Not Exceeded....................................................................63
6.5. Legal Prohibitions...........................................................................63
6.6. Other Requirements...........................................................................63
7. Financial Statements and Information.................................................................64
8. Inspection of Properties and Books...................................................................69
9. Affirmative Covenants................................................................................69
9.1. Payment of Principal and Interest............................................................69
9.2. Payment of Taxes and Claims..................................................................69
9.3. Maintenance of Properties, Records and Corporate Existence...................................70
9.4. Insurance....................................................................................71
9.5. After Acquired Real Property.................................................................74
9.6. Future Guarantors and Securing Subsidiaries..................................................74
9.7. New Depositary Accounts......................................................................75
9.8. ERISA Covenants..............................................................................75
9.9. Further Assurances...........................................................................75
9.10. Year 2000...................................................................................76
9.11. Early Refinancing............................................................................76
9.12. Consummation of Paisano Merger...............................................................76
9.13. Environmental Reports........................................................................76
10. Negative and Maintenance Covenants..................................................................76
10.1. Restrictions on Indebtedness................................................................77
10.2. Restrictions on Liens.......................................................................77
10.3. Limitation on Sale and Leasebacks...........................................................79
10.4. Consolidation, Merger or Disposition of Assets; Acquisitions................................79
10.5. Sale or Discount of Receivables.............................................................79
10.6. Conduct of Business.........................................................................79
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Section Heading Page
------- ------- ----
10.7. Restricted Payments and Restricted Investments..............................................80
10.8. Issuance of Capital Stock...................................................................80
10.9. Transactions with Affiliates................................................................80
10.10. Capital Expenditures.......................................................................80
10.11. Operating Leases...........................................................................81
10.12. Certain Contracts..........................................................................81
10.13. Limitation on Dividend Restrictions Affecting Subsidiaries.................................82
10.14. No Amendment of Charter, ByLaws............................................................82
10.15. Acquisition of Margin Securities...........................................................82
10.16. Collateral Locations; Other Names..........................................................82
10.17. Amendments to Certain Documents............................................................83
10.18. Financial Covenants........................................................................83
10.19. Board Observer Rights......................................................................85
11. Events of Default...................................................................................85
11.1. Events of Default; Remedies.................................................................85
11.2. Suits for Enforcement; Remedies Against Collateral..........................................88
11.3. Remedies Cumulative.........................................................................88
11.4. Remedies Not Waived.........................................................................89
12. Registration; Exchange; and Transfer of Notes.......................................................89
13. Lost, Stolen, Damaged and Destroyed Notes...........................................................89
14. Miscellaneous.......................................................................................90
14.1. Amendment and Waiver........................................................................90
14.2. Expenses....................................................................................90
14.3. Survival of Representations and Warranties..................................................91
14.4. Successors and Assigns......................................................................91
14.5. Notices.....................................................................................92
14.6. Indemnification.............................................................................93
14.7. Public Announcements........................................................................94
14.8. No Fiduciary Relationship...................................................................94
14.9. Integration and Severability................................................................94
14.10. Counterparts...............................................................................94
14.11. Governing Law..............................................................................94
14.12. Submission to Jurisdiction: Waiver of Service and Venue....................................94
14.13. Waiver of Right to Trial by Jury...........................................................95
14.14. Dating.....................................................................................96
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SCHEDULES
Schedule 4.4 - Capital Stock
Schedule 4.5B - Certain Changes
Schedule 4.5C - Projections
Schedule 4.5D - Pro Forma Balance Sheet
Schedule 4.5E - Sources and Uses of Funds
Schedule 4.6 - Subsidiaries
Schedule 4.7 - Litigation
Schedule 4.9 - Consents
Schedule 4.10A - Existing Indebtedness
Schedule 4.10B - Existing Investments
Schedule 4.11 - Real Property
Schedule 4.16 - Labor Matters
Schedule 4.17 - Environmental Matters
Schedule 4.19 - ERISA
Schedule 4.20 - Material Contracts
Schedule 4.21 - Insurance
Schedule 4.24 - Intellectual Property
Schedule 4.25 - Depositary Accounts
Schedule 4.29 - Related Party Transactions
Schedule 4.30 - Places of Business
Schedule 4.31 - Other Names
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Schedule 4.36 - Licensing Interests
Schedule 4.37 - Certification
Schedule 4.38 - Franchises
Schedule 4.40 - Advertising
Schedule 10.9 - Transactions with Affiliates
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EXHIBITS
Exhibit A-1 - Form of Revolving Note
Exhibit A-2 - Form of Term Note
Exhibit B - Form of Revolving Note Purchase Request
Exhibit C - Form of Guarantee
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement
Exhibit F-1 - Form of Warrant
Exhibit F-2 - Form of Registration Rights Agreement
Exhibit G - Form of Mortgage
Exhibit H - Form of Blocked Account Agreement
Exhibit I - Form of Estoppel Letter
Exhibit J - Form of Assignment of Representations, Warranties,
Covenants and Indemnities
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The following schedules and exhibits have been omitted from the Notes and
Warrant Purchase Agreement attached to this registration statement as
Exhibit 10.5.1
SCHEDULES
Number Title
------ -----
Schedule 4.4 - Capital Stock
Schedule 4.5B - Certain Changes
Schedule 4.5C - Projections
Schedule 4.5D - Pro Forma Balance Sheet
Schedule 4.5E - Sources and Uses of Funds
Schedule 4.6 - Subsidiaries
Schedule 4.7 - Litigation
Schedule 4.9 - Consents
Schedule 4.10A - Existing Indebtedness
Schedule 4.10B - Existing Investments
Schedule 4.11 - Real Property
Schedule 4.16 - Labor Matters
Schedule 4.17 - Environmental Matters
Schedule 4.19 - ERISA
Schedule 4.20 - Material Contracts
Schedule 4.21 - Insurance
Schedule 4.24 - Intellectual Property
Schedule 4.25 - Depositary Accounts
Schedule 4.29 - Related Party Transactions
Schedule 4.30 - Places of Business
Schedule 4.31 - Other Names
Schedule 4.36 - Licensing Interests
107
Schedule 4.37 - Certification
Schedule 4.38 - Franchises
Schedule 4.40 - Advertising
Schedule 10.9 - Transactions with Affiliates
108
EXHIBITS
Number Title
------ -----
Exhibit A-1 - Form of Revolving Note
Exhibit A-2 - Form of Term Note
Exhibit B - Form of Revolving Note Purchase Request
Exhibit C - Form of Guarantee
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement
Exhibit F-1 - Form of Warrant
Exhibit F-2 - Form of Registration Rights Agreement
Exhibit G - Form of Mortgage
Exhibit H - Form of Blocked Account Agreement
Exhibit I - Form of Estoppel Letter
Exhibit J - Form of Assignment of Representations, Warranties,
Covenants and Indemnities
The Registrant agrees to furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request.
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