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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 001-13539
AMF BOWLING, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3873268
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
</TABLE>
8100 AMF Drive
Richmond, Virginia 23111
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code:
(804) 730-4000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of Each Class Name of Each Exchange on Which Registered
- --------------------------------------------- ------------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 23, 1998, 59,694,244 shares of Registrant's common stock, par
value $.01, were outstanding. Of the total outstanding shares, 16,034,812 shares
were held by non-affiliates at an aggregate market value of $410.9 million on
March 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrant's 1998 Annual Meeting
of Shareholders are incorporated by reference into Part III of this report.
Such Proxy Statement, except for the parts therein that have been specifically
incorporated herein by reference, shall not be deemed "filed" as part of this
report on Form 10-K.
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<PAGE>
PART I
Item 1. Business
General Development of Business
AMF Bowling, Inc. ("AMF Bowling") was incorporated in Delaware in 1996 by
an investor group led by GS Capital Partners II, L.P. (together with affiliated
investment funds, "GSCP"), an affiliate of Goldman, Sachs & Co. AMF Group
Holdings Inc., a wholly owned subsidiary of AMF Bowling, acquired all of the
outstanding stock of the separate U.S. and foreign corporations that
constituted substantially all of the Company's predecessor (the "Predecessor
Company") for a total purchase price of approximately $1.37 billion (the
"Acquisition").
AMF Bowling conducts all of its business through subsidiaries and has no
operations of its own. Unless the context indicates otherwise, the terms the
"Company" or "AMF" as used herein refer to AMF Bowling (the registrant) and its
subsidiaries.
AMF is the largest owner or operator of bowling centers in the United
States and worldwide. In addition, the Company is one of the world's leading
manufacturers of bowling center equipment, accounting for, management believes,
approximately 41% of the world's current installed base of such equipment. AMF
is principally engaged in two business segments: (i) the ownership or operation
of bowling centers, consisting of, as of December 31, 1997, 370 U.S. bowling
centers and 100 international bowling centers ("Bowling Centers") including 14
centers operated by joint ventures with third parties described below and (ii)
the manufacture and sale of bowling equipment such as automatic pinspotters,
automatic scoring equipment, bowling pins, lanes, ball returns, and certain
spare and consumable products, and the resale of allied products such as
bowling balls, bags, shoes and certain other spare and consumable products
("Bowling Products"). The Bowling Products business consists of two categories:
(i) New Center Packages ("NCPs") (all of the equipment necessary to outfit a
new bowling center or expand an existing bowling center); and (ii)
Modernization and Consumer Products (which includes modernization equipment
used to upgrade an existing center, spare parts, supplies and consumable
products essential to maintain operations of an existing center). See "Note 17.
Business Segments" in the Notes to Consolidated Financial Statements.
In 1996, AMF acquired 57 bowling centers from five unrelated sellers,
including 50 bowling centers from Charan Industries, Inc. ("Charan"). The
combined purchase price, net of cash acquired, was approximately $108.0
million, and was funded with approximately $40.0 million from the sale of
equity by AMF Bowling to its institutional stockholders and one of its
directors and approximately $68.0 million from available borrowings under an
acquisition facility (the "Acquisition Facility") under the bank credit
agreement that was in effect from the closing of the Acquisition until October
1997.
In 1997, the Company acquired 122 bowling centers from a number of
unrelated sellers, including 43 centers from American Recreation Centers, Inc.,
and fifteen centers from the Conbow Corporation. The 1997 acquisitions included
seven centers in the United Kingdom and two centers in Australia. The combined
purchase price for the 1997 acquisitions, net of cash acquired, was
approximately $214.8 million, and was funded with borrowings under the
Acquisition Facility and the Working Capital Facility (the "Bank Facility")
under the Third Amended and Restated Credit Agreement described below (the
"Credit Agreement"), from the sale of equity by AMF Bowling to its
institutional stockholders and a portion of the proceeds of the Initial Public
Offering (as hereinafter defined).
From January 1, 1998 through March 13, 1998, the Company acquired 24
centers in the United States, two centers in the United Kingdom and one center
in Australia from unrelated sellers, including fifteen bowling centers in the
U.S. from Active West, Inc. ("Active West"). The aggregate purchase price for
these acquisitions was approximately $36.5 million, including $35.3 million
funded with borrowings under the Bank Facility and, with respect to the Active
West acquisition, 50,000 shares of AMF Bowling common stock valued at the
closing price of $24 3/16 per share on the New York Stock Exchange on the date
of acquisition.
In April 1997, the Company entered into a joint venture with Hong Leong
Corporation Limited, a Singapore-based conglomerate ("Hong Leong"), to build
and operate bowling centers in the Asia Pacific region. The joint venture
("Hong Leong JV") is owned 50% by the Company and 50% by Hong Leong. The Hong
Leong JV opened its first bowling center during November 1997 in Tianjin,
China. Additional sites are being evaluated for future development.
In August 1997, the Company entered into a joint venture with Playcenter
S.A., a Sao Paulo-based amusement and entertainment company ("Playcenter") to
build and operate bowling centers in Brazil and Argentina. The joint venture
("Playcenter JV") is owned 50% by the Company and 50% by Playcenter. As of
December 31, 1997, the Playcenter JV operated eleven centers in Brazil and two
centers in Argentina.
1
<PAGE>
The Company accounts for its investments in Hong Leong JV and Playcenter
JV by the equity method. As of December 31, 1997, the Company's investments in
Hong Leong JV and Playcenter JV were $1.1 million and $8.7 million,
respectively. See "Note 16. Joint Ventures" in the Notes to Consolidated
Financial Statements.
On October 20, 1997, the Company acquired Michael Jordan Golf Company,
Inc. ("Michael Jordan Golf Company"), a company formed to operate golf practice
ranges in the U.S. Michael Jordan Golf Company currently operates one golf
practice range. The Company agreed to build or acquire two additional golf
practice ranges by the end of 1999.
As a result of the foregoing acquisitions and joint ventures and after
giving effect to the construction of one center and the closing of eight U.S.
centers and one center in Japan since the Acquisition, the Company operated 394
U.S. bowling centers and 103 international bowling centers as of March 13,
1998.
In November 1997, AMF Bowling issued 15,525,000 shares of its common stock
at $19.50 per share pursuant to an initial public offering (the "Initial Public
Offering"). See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Capital Resources" and "Note 12. Stockholders'
Equity" in the Notes to Consolidated Financial Statements.
Business Segments
Bowling Centers
In the United States, AMF is the largest operator of bowling centers, with
394 bowling centers (as of March 13, 1998) in 39 states and Puerto Rico.
Outside the United States, AMF is also the largest operator of bowling centers,
with (as of March 13, 1998) 103 bowling centers in eleven countries: Australia
(39), the United Kingdom (24), Mexico (9), Japan (4), China (including Hong
Kong) (7), Argentina (2), Brazil (11), France (3), Spain (2), Switzerland (1),
and Canada (1). Of the U.S. centers, 207 were acquired as part of the
Acquisition (eight of which were subsequently closed), 194 were acquired
thereafter and one was constructed. Of the international centers, 78 were
acquired as part of the Acquisition, twelve were acquired thereafter, including
nine in the United Kingdom and three in Australia, and one in Japan was closed.
The foregoing numbers include one center in China, two centers in Argentina and
eleven centers in Brazil which are operated as part of Hong Leong JV and
Playcenter JV, respectively.
The Company's number of U.S. centers, regional clustering (56 clusters)
and average size (an average of 38 lanes per U.S. center versus an industry
average of 21 lanes per U.S. center) provide both additional revenue
opportunities and economies of scale. These revenue opportunities include (i)
scheduling flexibility, which improves lane utilization, (ii) the ability to
support an expanded food and beverage operation and (iii) more concourse space
for food and beverage offerings, amusement games, billiards and pro shops. Cost
savings resulting from the economies of scale include (a) the ability to
distribute operating and corporate overhead costs (including marketing and
advertising costs) over a larger revenue base and (b) attractive terms from
certain of the Company's suppliers.
Internationally, AMF's centers also are, on average, larger than those of
its competitors. As with its U.S. operations, the number of centers, geographic
clustering and size result in additional revenue opportunities and economies of
scale.
The geographic diversity of AMF's Bowling Centers operations across
different regions of the U.S. and across eleven other countries has
historically provided stability to AMF's annual cash flows. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Seasonality and Market Development Cycles".
The Company has an ongoing modernization program that results in its
bowling centers having more upgraded physical plants and attractive appearances
than those of other operators. Management believes that its historical spending
level of approximately 3.7% of Bowling Centers revenue is adequate to cover
routine capital expenditures. Management estimates that approximately 2% of
Bowling Centers revenue is required for nondiscretionary capital expenditures.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Expenditures".
The Bowling Centers business derives its revenue and profits from three
principal sources: (i) bowling, (ii) food and beverage and (iii) other sources
such as shoe rental, amusement games, billiards and pro shops. In 1997,
bowling, food and beverage and other revenue represented 60.6%, 25.4%, and
14.0% of total Bowling Centers revenue, respectively.
Bowling revenue, the largest portion of a bowling center's revenue and
profitability, is derived from league, recreational and tournament play. Food
and beverage sales occur primarily through snack bars that offer snack foods,
soft drinks and, at many centers, alcoholic beverages. AMF has acquired several
centers with large sports bars that provide a large portion of such centers'
revenue. Other revenue is derived from shoe rental and the operation of
amusement games, billiards and
2
<PAGE>
pro shops. The shoe rental business is driven primarily by recreational bowlers
who usually do not own bowling shoes. Recreational bowlers and non-bowling
customers are also the primary users of amusement games and billiards tables.
Bowling Products
The Company manufactures and sells bowling center equipment, including
automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball
returns, and certain spare and modernization parts, and resale products, such
as bowling balls, bags, shoes and other bowlers' aids, sold primarily through
pro shops. The bowling products business consists of two categories: (i) NCPs
and (ii) Modernization and Consumer Products.
New Center Packages include the bowling equipment necessary to outfit new
or expand existing bowling centers, such as lanes, pinspotters, automatic
scoring, bowler seating, ball returns, masking units and bumpers. AMF is
focused on sales of NCPs into countries with demonstrated strong demand for the
construction of new bowling centers. In addition, AMF believes that certain
markets in South America, Asia Pacific and Eastern Europe hold the potential
for high growth over the next several years, but are currently in the early
stages of the industry's development. As bowling is introduced into a market
and becomes more popular, local developers and entrepreneurs build new bowling
centers which drives demand for NCPs. To stimulate this development cycle, AMF
has entered into the joint ventures with Hong Leong and Playcenter described
under " -- General Development of Business". See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Backlog; Recent
NCP Sales".
The potential customers for Modernization and Consumer Products include
all bowling centers in operation today. The number of potential customers will
continue to grow as the number of centers increases. In order for a bowling
center to remain competitive and to satisfy its customers, the center operator
must periodically make investments in the center's equipment. Some of these
investments, such as replacing pins, must be made on approximately an annual
basis. These annual investments represent relatively modest expenditures
necessary to maintain the center. Other equipment, such as automatic scoring,
replacement lanes and upgraded automated lane maintenance equipment, require
less frequent but more significant investments by center operators. Management
believes that many of these modernizations are necessary for a center to
maintain its existing customer base.
In addition to bowling equipment and supplies, AMF manufactures and sells
billiards tables under the Renaissance and PlayMaster brand names.
Business Strategy
The Company is pursuing a three-part strategy to consolidate the U.S.
bowling center industry, to build a nationally recognized AMF brand of superior
bowling-based family recreation centers, and to capitalize on the demand for
bowling products and centers in certain international markets.
The Company's acquisition program is designed to acquire additional U.S.
bowling centers from single-center and small and medium-sized chain operators.
Following an acquisition, the Company improves the profitability of the
acquired centers by cost reduction initiatives and programs to increase
revenue. The Company often makes capital and other improvements to upgrade the
acquired centers in order to generate increased revenue.
The Company is developing a nationally recognized brand of superior
bowling and entertainment centers. These centers generally offer
state-of-the-art bowling equipment including many of the products manufactured
by its Bowling Products business including the XtremeTM package for
glow-in-the-dark bowling, the AMF 8800 Gold pinspotter, high scoring HPL
synthetic lanes, BOSS NT automatic scoring system with animated computer
graphics, Options furniture package for concourse and settee areas, and
DurabowlTM bumpers that ensure young bowlers knock down pins.
In 1997, the Company launched AMF CARES!, a comprehensive customer
appreciation and rewards system, to deliver a consistent quality, fun
recreational experience to customers of AMF centers throughout the United
States. This program concentrates on customer-focused operating standards,
employee awards and recognition, loyalty-driven marketing programs, enhanced
food and beverage operations and stronger brand identity with new signage and
employee uniforms. To support this program, the Company commits capital
expenditures to modernize its centers and to build new showcase centers such as
Chelsea Piers in 1997, the first new bowling center in Manhattan in thirty
years, and Marina City in Chicago, which is scheduled to open in 1998.
The Company's well-established brand name, high quality product lines, and
global sales and service network position AMF to take advantage of the
international growth in bowling. New Center Packages, which represented 55.2%
of 1997
3
<PAGE>
Bowling Products sales, were primarily sold to international markets such as
China, Malaysia, Japan, United Kingdom, Germany, Brazil and Argentina. The
Company also focuses on development of selected international markets with
large populations which are in the early stage of growth in the construction of
bowling centers such as India, Poland and Russia. The Company will acquire or
build bowling centers to expand its competitive position in certain
international markets and to serve as a showcase for the sale of its bowling
products in these countries.
Modernization and Consumer Products, which represented 44.5% of 1997
Bowling Products sales, were sold primarily to more established bowling markets
including the United States, Japan and Western Europe. Leadership in
introducing innovative new products, combined with its established direct sales
force and distribution, positions the Company to service the large worldwide
installed base of AMF-equipped centers and to grow with the increased
popularity of bowling.
Seasonality and Market Development Cycles
On a consolidated basis, revenue and EBITDA of the Company's businesses
are neither highly seasonal nor highly cyclical. The geographic diversity of
the Company's bowling centers, which operate across different regions of the
U.S. and across eleven other countries, provides stability to the Company's
annual cash flows. Although financial performance of Bowling Centers operations
is seasonal in nature in many countries, with cash flows typically peaking in
the winter months and reaching their lows in the summer months, the geographic
diversity of the Company's bowling centers has helped reduce this seasonality
as bowling centers in certain countries in which AMF operates exhibit different
seasonal sales patterns. As a result of the growing number of U.S. centers
attributable to the Company's acquisition program, however, seasonality may
become more accentuated.
Modernization and Consumer Products sales display seasonality. The U.S.
market, which is the largest market for Modernization and Consumer Products, is
driven by the beginning of league play in the fall of each year. The NCP
category of bowling products experiences significant fluctuations due to
changes in demand for NCPs as certain markets experience high growth followed
by market maturity, at which time sales to that market decline, sometimes
rapidly. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality and Market Development Cycles" and "Note
17. Business Segments" in the Notes to Consolidated Financial Statements.
Industry and Competition
Bowling Centers
Bowling is both a competitive sport and a recreational activity, and faces
competition from numerous alternative activities. The ongoing success of the
Bowling Centers operation is subject to the level of interest in bowling, the
availability and relative cost of other sports, recreational and entertainment
alternatives, the amount of leisure time available to potential players, as
well as various other social and economic factors over which AMF has no
control.
The Company's centers also compete with other bowling centers. The Company
competes primarily through the quality, appearance and location of its
facilities and through the range of amenities and service level offered. See
"Management's Discussion of Financial Condition and Results of Operations --
Bowling Centers."
The U.S. bowling center industry is highly fragmented, and consists of two
relatively large bowling center operators, AMF (which had 370 U.S. centers as
of December 31, 1997) and Brunswick Corporation ("Brunswick") (which had
approximately 111 U.S. centers as of December 31, 1997), four medium-sized
chains, which together account for 70 bowling centers, and over 5,300 bowling
centers owned by single-center and small-chain operators, which typically own
four or fewer centers. The top six operators (including AMF) account for less
than 10% of the total number of U.S. bowling centers.
The international bowling center industry is also highly fragmented. There
are typically few chain operators in any one country and a large number of
single-center operators. AMF generally enjoys a relative size advantage (i.e.,
a larger number of lanes per center), and is competitively well positioned in
countries such as the United Kingdom and Australia.
In the United States, the operation of bowling centers is a mature
industry characterized by slightly decreasing lineage (games per lane per day)
offset by increasing average price per game and revenue from food and beverage
and other ancillary sources. Management believes that AMF's U.S. lineage has
remained relatively stable in recent years due to AMF's ability to better
maintain existing league bowlers and attract new recreational bowlers.
4
<PAGE>
<TABLE>
<CAPTION>
U.S. Bowling Center Industry (a)
- ---------------------------------------------------------------
Number of
Operator Locations % of Total
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
AMF ............................................. 370 6.3%
Brunswick ....................................... 111 1.9
Bowl America .................................... 23 0.4
Active West (b) ................................. 16 0.3
Mark Voight ..................................... 16 0.3
Bowl New England ................................ 15 0.2
--- -----
Subtotal ....................................... 551 9.4
Single-center and small-chain operators ......... 5,302 90.6
----- -----
Total .......................................... 5,853 100.0%
===== =====
</TABLE>
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(a) AMF estimate at December 31, 1997.
(b) On February 13, 1998, the Company acquired fifteen centers from Active
West. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Expenditures" and "Note 15. Acquisitions" in
the Notes to Consolidated Financial Statements.
Bowling Products
AMF and Brunswick are the two largest manufacturers of bowling center
equipment, and are the only full-line manufacturers of bowling equipment and
supplies that compete on a global basis. The Company also competes with
smaller, often regionally focused companies in certain product lines.
Management estimates that AMF accounts for approximately 41% of the worldwide
installed base of bowling center equipment.
Because of bowling equipment's relatively long useful life, used equipment
can be refurbished and sold, often to builders of new centers. The Company
actively purchases and resells its used equipment in order to compete with
refurbishers who often are U.S. based.
NCP sales follow the trends in the growth of bowling. As bowling is
introduced and becomes popular in new markets, the economics of constructing and
operating bowling centers become attractive to local market developers and
entrepreneurs. Consequently, new bowling center construction drives demand for
NCPs. For at least the last 15 years, the majority of NCP sales has been to
international markets. In recent years, this trend has been fueled by the growth
of bowling in several countries, such as China, Taiwan and South Korea.
Sales of Modernization and Consumer Products to bowling center operators
who manage the growing installed base of bowling equipment provide a stable
base of recurring revenue. These products include modernization equipment, both
proprietary and standard spare parts for existing equipment and other products
including pins, shoes and supplies. Some of these products, such as bowling
pins, should be replaced on approximately an annual basis to maintain a center,
while certain less frequent investments in other equipment are necessary to
modernize a center and are often required to maintain a customer base.
International Operations
The Company's international operations are subject to the usual risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive laws and actions by foreign governments
(such as restrictions on transfer of funds, import and export duties and
quotas, foreign customs, tariffs and VATs and unexpected changes in regulatory
environments), difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax laws.
AMF has a history of operating in a number of international markets, in
some cases, for over thirty years. Similar to other U.S.-based manufacturers
with export sales, local currency devaluation increases the cost of the
Company's bowling equipment in that market. As a result, a strengthening U.S.
dollar exchange rate may adversely impact sales volume and profit margins
during such periods.
5
<PAGE>
Current economic difficulties in certain markets of the Asia Pacific
region have resulted in a reduction in the order rate and backlog for NCPs.
Management believes that many Asia Pacific customers are delaying purchases of
NCP and Modernization equipment as they await economic stability in their
regions. As of March 13, 1998, the NCP backlog was 1,765 which is flat compared
to the same period last year.
For the year ended December 31, 1997, NCP sales and backlog to China,
Japan and other Asia Pacific markets represented 72.7% and 70.4% of total NCP
unit sales and backlog, respectively.
Foreign currency exchange rates can also affect the translation of
operating results from international bowling centers, but for the year ended
December 31, 1997, such exchange rates did not materially impact operating
results. For 1997, revenue and EBITDA of international bowling centers
represented 14.6% and 16.0% of consolidated results, respectively.
Over the longer term, management continues to believe that international
markets, including Asia Pacific, represent attractive opportunities for bowling
equipment sales and bowling center operations. Accordingly, management
continues to pursue its strategy in international markets.
Employees
Bowling Centers
As of December 31, 1997, Bowling Centers had approximately 18,415 full-
and part-time employees worldwide. The Company believes that its relations with
its Bowling Centers employees are satisfactory.
<TABLE>
<CAPTION>
Country Number of Employees (a)
- -------------------------------------- ------------------------
<S> <C>
United States 16,226
------
International:
Australia ........................... 1,202
United Kingdom ...................... 440
Mexico .............................. 240
China (including Hong Kong) ......... 120
Japan ............................... 47
France .............................. 75
Spain ............................... 32
Switzerland ......................... 9
Canada .............................. 24
------
Total International ............... 2,189
------
Total Worldwide ................... 18,415
======
</TABLE>
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(a) Numbers vary depending on the time of year.
Bowling Products
As of December 31, 1997, Bowling Products had approximately 1,125
full-time employees worldwide. The Company believes that its relations with its
Bowling Products employees are satisfactory. Employees are divided along
functional lines as shown in the table below.
<TABLE>
<CAPTION>
Segment Number of Employees
- ----------------------------- --------------------
<S> <C>
Manufacturing ............... 760
---
Sales:
Australia .................. 8
Americas ................... 48
Europe ..................... 89
Asia Pacific ............... 123
Japan ...................... 97
---
Total Sales .............. 365
---
Total Worldwide .......... 1,125
=====
</TABLE>
6
<PAGE>
Corporate
As of December 31, 1997, corporate had approximately 170 full-time
employees. The Company believes that its relations with its corporate employees
are satisfactory.
Item 2. Properties
Bowling Centers
As of December 31, 1997, AMF operated 370 bowling centers and related
facilities in the United States and 100 centers in eleven other countries. A
regional list of these facilities is set forth below:
<TABLE>
<CAPTION>
U.S. Centers*
Number of Number of
Region Clusters Locations Owned Leased
- ------------------------------ ----------- ----------- ------- -------
<S> <C> <C> <C> <C>
Texas ........................ 6 34 28 6
Baltimore/Washington ......... 3 24 15 9
Northeast .................... 8 60 34 26
Mid-Atlantic ................. 7 48 31 17
Southern ..................... 11 59 43 16
Great Lakes .................. 7 51 39 12
Midwest ...................... 6 37 27 10
Pacific ...................... 8 55 24 31
-- -- -- --
Total ....................... 56 368 241 127
== === === ===
</TABLE>
* AMF operates two centers for an unrelated party. These centers are neither
owned nor leased by AMF and, therefore, are not included in the foregoing
table. In addition, the Company operates a golf practice range in Aurora,
Illinois.
<TABLE>
<CAPTION>
International Centers *
Number of
Country Locations Owned Leased
- ------------------------------------ ----------- ------- -------
<S> <C> <C> <C>
Australia .......................... 38 23 15
United Kingdom ..................... 22 5 17
Mexico ............................. 9 5 4
China, including Hong Kong ......... 6 0 6
Japan .............................. 4 0 4
France ............................. 3 0 3
Spain .............................. 2 0 2
Switzerland ........................ 1 0 1
Canada ............................. 1 1 0
-- -- --
Total ........................... 86 34 52
== == ==
</TABLE>
* The table excludes one bowling center operated by the Hong Leong JV and
thirteen bowling centers operated by the Playcenter JV. See "Business --
General Development of Business".
AMF's leases are subject to periodic renewal. Sixty of the U.S. centers
have leases which expire during the next three years. Forty-one of such leases
have renewal options. Twenty-two of the international centers have leases which
expire during the next three years. Six of such leases have renewal options.
The Company generally does not have difficulty renewing leases.
7
<PAGE>
Bowling Products
As of December 31, 1997, AMF owned or leased facilities at five locations
in the United States, four of which are used for its Bowling Products business
and one of which is used for its billiards business. AMF also leased the
following facilities at 29 international locations which are used as offices or
warehouses.
<TABLE>
<CAPTION>
U.S. Facilities
Approximate Owned/
Location Products Square Footage Leased
- ------------------------ ----------------------------------------------------- ---------------- -------
<S> <C> <C> <C>
Richmond, VA ......... World headquarters, pinspotters, automatic scoring, 360,000 Owned
synthetic lanes, other capital equipment, consumer 54,000 Leased
products, used pinspotters
Lowville, NY ......... Pins and wood lanes 121,000 Owned
50,000 Owned
Golden, CO ........... Lane maintenance equipment (Century) 50,000 Leased
Bland, MO ............ Billiards tables (AMF Billiards and Games) 37,210 Owned
33,373 Leased
32,000 Owned
24,000 Owned
16,000 Owned
11,000 Leased
Miami, FL ............ Office 200 Leased
</TABLE>
<TABLE>
<CAPTION>
International Facilities
Approximate Owned/
Location Functions Square Footage Leased
- ---------------------------------------- ---------------- ---------------- -------
<S> <C> <C> <C>
Emu Plains, Australia ................. Office 400 Leased
Warehouse 10,100 Leased
Brussels, Belgium ..................... Office 1,000 Leased
Toronto, Canada ....................... Office 2,100 Leased
Warehouse 400 Leased
Beijing, China ........................ Office 390 Leased
Guangzhou, China ...................... Office 380 Leased
Warehouse 1,650 Leased
Hong Kong ............................. Office 2,500 Leased
Office 1,125 Leased
Shanghai, China ....................... Office 400 Leased
Levallois-Perret, France .............. Office 984 Leased
Warehouse 1,470 Leased
Mainz-Kastel, Germany ................. Office 656 Leased
Warehouse 1,650 Leased
Bangalore, India ...................... Office 1,050 Leased
New Delhi, India ...................... Office 2,000 Leased
Yokohama, Japan ....................... Office 4,626 Leased
Warehouse 8,808 Leased
Service Center 1,634 Leased
Seoul, South Korea .................... Office 5,119 Leased
Warehouse 7,472 Leased
Mexico City, Mexico ................... Office 1,300 Leased
Warehouse 11,431 Leased
Warsaw, Poland ........................ Office 209 Leased
Granna, Sweden ........................ Office 4,515 Leased
Warehouse 12,705 Leased
Hemel Hempstead, United Kingdom ....... Office 11,500 Leased
Warehouse 11,770 Leased
</TABLE>
8
<PAGE>
Item 3. Legal Proceedings
The Company currently and from time to time is subject to claims and
actions arising in the ordinary course of its business, including employment
discrimination claims, workers' compensation claims and personal injury claims
from customers of Bowling Centers. In some actions, plaintiffs request punitive
or other damages that may not be covered by insurance. In management's opinion,
the claims and actions in which the Company is involved will not have a
material adverse effect on its financial position or results of operations.
However, it is not possible to assure the outcome of such claims and actions.
On March 5, 1996, the defendant in an action entitled Northland Bowl and
Sports Center, Inc. and Recreation Association, II v. Golden Giant, Inc., d/b/a
Golden Giant Building Systems, Court of Common Pleas, Centre County,
Pennsylvania, asserted a third-party claim against AMF Bowling Products, Inc.,
a wholly-owned, indirect subsidiary of AMF Bowling ("AMF Bowling Products"),
and other parties. The defendant, Golden Giant, Inc. ("Golden Giant"), a
construction company, was originally named as the sole defendant by a bowling
center (not owned or operated by the Company) in connection with the collapse
of the bowling center's roof in 1994. Golden Giant named AMF Bowling Products
as a defendant, and charged AMF with negligence and breach of implied warranty
for installing scoring monitors (four years before the roof collapsed) in a
portion of the building that allegedly could not adequately support the
additional weight of the monitors. The plaintiff claimed damages in excess of
$2.9 million. Golden Giant asserted that, if the plaintiff is entitled to any
recovery, it should come in whole or in part from AMF Bowling Products. On
March 25, 1997, the court dismissed AMF Bowling Products from the lawsuit,
which continues against the other defendants. The plaintiff appealed the order
dismissing AMF Bowling Products. In October 1997, the appellate court dismissed
the plaintiff's appeal as premature.
Regulatory Matters
There are no unique federal or state regulations applicable to bowling
center operations or equipment manufacturing. State and local governments
require establishments to hold permits to sell alcoholic beverages, and,
although regulations vary from state to state, once permits are issued, they
generally remain in place indefinitely (except for routine renewals) without
burdensome reporting or supervision.
Environmental Matters
AMF's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances
and wastes. AMF believes that its operations are in material compliance with
the terms of all applicable environmental laws and regulations as currently
interpreted.
The Company currently and from time to time is subject to environmental
claims. In management's opinion, the claims currently asserted against the
Company are not likely to have a material adverse effect on its financial
position or results of operations. However, it is not possible to assure the
ultimate outcome of such claims. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Environmental Matters".
Item 4. Submission of Matters to a Vote of Security Holders.
None.
9
<PAGE>
Executive Officers of AMF Bowling
The following table sets forth information concerning the individuals who
are the executive officers of AMF Bowling:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ ----- ------------------------------
<S> <C> <C>
Douglas J. Stanard 51 Director; President and Chief
Executive Officer
Stephen E. Hare 44 Director; Executive Vice
President; Chief Financial
Officer and Treasurer
Michael P. Bardaro 47 Vice President; Corporate
Controller and Assistant
Secretary
</TABLE>
DOUGLAS J. STANARD is the President and Chief Executive Officer of AMF
Bowling. He served as President of AMF Worldwide Bowling Centers from 1993 to
1995.
STEPHEN E. HARE is the Executive Vice President, Chief Financial Officer
and Treasurer of AMF Bowling. Prior to joining AMF Bowling in 1996, Mr. Hare
was Senior Vice President and Chief Financial Officer of James River
Corporation of Virginia, beginning in 1992.
MICHAEL P. BARDARO is Vice President, Corporate Controller and Assistant
Secretary of AMF Bowling. He joined AMF after having been Controller at General
Medical Manufacturing Co. in Richmond, Virginia between 1989 and 1994.
10
<PAGE>
PART II
Item 5. Market for AMF Bowling Common Stock and Related Stockholder Matters
AMF Bowling's Common Stock (the "Common Stock"), $.01 par value, is traded
on the New York Stock Exchange under the symbol "PIN". Prior to the Initial
Public Offering on November 7, 1997, there was no market for the Common Stock.
See "Item 1. Business -- General Development of Business", "Note 12.
Stockholders' Equity" in the Notes to Consolidated Financial Statements, and the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders. The
reported high and low sales prices for the Common Stock for the period from
November 7, 1997, through December 31, 1997 were $25 1/8 and $21 1/2,
respectively. As of March 23, 1998, there were 3,193 holders of record of the
Common Stock.
AMF Bowling has not since its inception paid any cash dividends on the
Common Stock and intends to retain all earnings, if any, for use in the
Company's business and does not anticipate paying cash dividends in the
foreseeable future. The Company's Credit Agreement (as hereinafter defined)
restricts the payment of cash dividends on the Common Stock.
Item 6. Selected Financial Data
The selected financial data set forth below for the fiscal years indicated
were derived from AMF Bowling's audited consolidated financial statements for
the year ended December 31, 1997, and the period ended December 31, 1996, and
the audited combined financial statements for the four months ended April 30,
1996, and the years ended December 31, 1995, 1994, and 1993, of the AMF Bowling
Group which represented the Bowling Centers and Bowling Products businesses of
the Predecessor Company. The consolidated pro forma results set forth below are
presented as if the Acquisition had occurred on January 1, 1996, and are based
on the Predecessor Company's statement of operations for the period ended April
30, 1996, AMF Bowling's statement of income from its inception through December
31, 1996 and adjustments giving effect to the Acquisition under the purchase
method of accounting. See "Note 3. Pro Forma Results of Operations" in the
Notes to Consolidated Financial Statements. The data should be read in
conjunction with AMF Bowling's Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
The comparability of the selected financial data is impacted based on the
Company's bowling center acquisition program. In 1996, the Company acquired 57
bowling centers from unrelated sellers. The combined purchase price was $108.0
million. In 1997, the Company acquired 122 bowling centers from a number of
unrelated sellers. The combined purchase price was $214.8 million. See "Item 1.
Business -- General Development of Business".
The selected financial data include operating results expressed in terms
of EBITDA, which represents earnings before net interest expense, income taxes,
depreciation and amortization, and other income and expenses. EBITDA
information is included because the Company understands that such information
is a standard measure commonly reported and widely used by certain investors
and analysts. EBITDA is not intended to represent and should not be considered
more meaningful than, or an alternative to, other measures of performance
determined in accordance with GAAP.
11
<PAGE>
<TABLE>
<CAPTION>
Four Months
Ended
For the year ended December 31, April 30,
---------------------------------------------------------------------------- ------------
(dollars in millions, except per share data)
Pro Forma
AMF
Bowling, Predecessor
Predecessor Company Inc. AMF Bowling, Inc. Company
----------------------------------- ------------ --------------------------- ------------
1993 1994 1995 1996(a) 1996(b) 1997 1996(c)
----------- ----------- ----------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenue .................... $ 427.6 $ 517.8 $ 564.9 $ 548.9 $ 384.8 $ 713.7 $ 164.9
------- ------- ------- ------- ------- ------- -------
Cost of goods sold ................... 153.2 196.0 184.1 173.6 130.5 212.6 43.1
Bowling center operating
expenses ............................ 108.5 115.2 166.5 178.8 123.7 251.2 80.2
Selling, general and adminis-
trative expenses .................... 41.9 57.1 50.8 51.0 35.1 64.5 35.5
Depreciation and amortization ........ 21.4 24.8 39.1 73.5 49.4 102.5 15.1
------- ------- ------- ------- ------- ------- -------
Operating income (loss) .............. 102.6 124.7 124.4 72.0 46.1 82.9 ( 9.0)
Interest expense, gross .............. 5.0 7.4 15.7 106.2 78.0 118.4 4.5
Other income (expense),
net ................................. ( 0.1) ( 1.5) 0.2 3.8 3.9 ( 8.1) ( 0.1)
-------- -------- ------- ------- ------- -------- -------
Income (loss) before income
taxes ............................... 97.5 115.8 108.9 ( 30.4) ( 28.0) ( 43.6) ( 13.6)
Provision (benefit) for income
taxes ............................... 15.1 16.5 12.1 ( 8.9) ( 8.5) ( 12.8) ( 1.7)
-------- -------- ------- -------- -------- -------- -------
Net income (loss) before equity
in loss of joint ventures and
extraordinary items ................. 82.4 99.3 96.8 ( 21.5) ( 19.5) ( 30.8) ( 11.9)
Equity in loss of joint
ventures ............................ -- -- -- -- -- ( 1.4) --
-------- -------- -------- -------- -------- -------- -------
Net income (loss) before
extraordinary items ................. 82.4 99.3 96.8 ( 21.5) ( 19.5) ( 32.2) ( 11.9)
Extraordinary items, net of tax ...... -- -- -- -- -- ( 23.4) --
-------- -------- -------- -------- -------- -------- -------
Net income (loss) .................... $ 82.4 $ 99.3 $ 96.8 $ (21.5) $ (19.5) $ (55.6) $ (11.9)
======== ======== ======== ======== ======== ======== ========
Net loss per share before
extraordinary items ................. $ (0.55) $ (0.49) $ (0.71)
Per share effect of extraordinary
items ............................... -- -- ( 0.52)
-------- -------- --------
Net loss per share ................... $ (0.55) $ (0.49) $ (1.23)
======== ======== ========
Selected Data:
EBITDA ............................... $ 124.0 $ 149.5 $ 163.5 $ 145.5 $ 95.5 $ 185.4 $ 6.1
EBITDA margin ........................ 29.0% 28.9% 28.9% 26.5 % 24.8 % 26.0 % 3.7%
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------------------------
(dollars in millions)
Predecessor Company AMF Bowling, Inc.
------------------------------------ ------------------------
1993 1994 1995 1996 1997
Balance Sheet Data: ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Working capital (d) .......... $ 18.9 $ 16.9 $ 29.2 $ 7.8 $ 43.9
Goodwill, net ................ -- -- -- 771.1 772.3
Total assets ................. 228.2 410.2 400.4 1,594.0 1,832.1
Total debt ................... 75.7 186.1 167.4 1,091.3 1,060.6
Stockholders' equity ......... 88.6 132.4 161.5 408.8 654.0
Total capital ................ 164.3 318.5 328.9 1,500.1 1,714.6
</TABLE>
- ---------
(a) Represents results of operations from January 1, 1996 through December 31,
1996 on a pro forma basis. See "Note 3. Pro Forma Results of Operations"
in the Notes to Consolidated Financial Statements.
(b) For the period from the inception date of January 12, 1996 through December
31, 1996, which includes the results of operations of the acquired
business from May 1, 1996 through December 31, 1996.
(c) Represents results of operations from January 1, 1996 through April 30,
1996.
(d) Predecessor Company amounts reflect elimination of affiliate receivables
and payables.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information in this report contains forward-looking statements, which are
statements other than historical information or statements of current
condition. Some forward-looking statements may be identified by use of terms
such as "believes", "anticipates", "intends", or "expects". These
forward-looking statements relate to the plans and objectives of the Company
for future operations. In light of the risks and uncertainties inherent in all
future projections, the inclusion of forward-looking statements in this report
should not be regarded as a representation by AMF Bowling or any other person
that the objectives or plans of the Company will be achieved. Many factors
could cause the Company's actual results to differ materially from those in the
forward-looking statements, including, among other things: (i) the Company's
ability to successfully execute acquisition opportunities and to integrate
acquired operations into its business, (ii) the continued development and
growth of new bowling markets and the Company's ability to continue to identify
those markets and to generate sales of products in those markets before market
saturation, (iii) the risk of adverse political acts or developments in the
Company's existing or proposed markets for its products or in which it operates
its bowling centers, (iv) the Company's ability to retain experienced senior
management, (v) the ability of AMF Bowling and its subsidiaries to generate
sufficient cash flow in a timely manner to satisfy principal and interest
payments on their indebtedness and (vi) the popularity of bowling as an
activity in the United States and abroad. In addition, actual results may also
differ materially from forward-looking statements in this report as a result of
factors generally applicable to companies in similar businesses, including,
among other things: (i) a decline in general economic conditions, (ii) an
adverse judgment in pending or future litigation and (iii) increased
competitive pressure from current competitors and future market entrants. The
foregoing review of important factors should not be construed as exhaustive and
should be read in conjunction with other cautionary statements that are
included elsewhere in this report. AMF Bowling undertakes no obligation to
release publicly the results of any future revisions it may make to
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Background
This discussion should be read in conjunction with the information
contained under "Selected Financial Data" and in AMF Bowling's Consolidated
Financial Statements included elsewhere herein.
Management believes that comparisons of the results of operations for the
years ended December 31, 1997 and 1996, on a pro forma basis, and December 31,
1996, on a pro forma basis, and 1995, are more meaningful than comparisons on an
historical basis. This is due primarily to significant changes in depreciation
and amortization that result from the application of the purchase method of
accounting for the Acquisition and from the increased interest expense due to
the debt incurred related to the Acquisition. Discussion of the results of the
Company's operations for the year ended December 31, 1997, is on an historical
basis. Discussion of the results of the Predecessor Company's operations for the
year ended December 31, 1995, is on an historical basis. See "Note 3. Pro Forma
Results of Operations" in the Notes to Consolidated Financial Statements.
To facilitate a meaningful comparison, in addition to discussing the
consolidated results of the Company's operations, certain portions of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss results of Bowling Centers and Bowling Products separately.
The results of operations of Bowling Centers, Bowling Products and the
consolidated group of companies are set forth below. The two European centers
that were not acquired by the Company as part of the Acquisition, as discussed
in "Note 1. Organization" in the Notes to Consolidated Financial Statements,
are included in the 1996 actual Predecessor Company results and excluded from
1996 pro forma results. The two centers have no material impact on the
Company's financial statements or on the information presented in this section.
For 1995, Bowling Centers adopted a calendar year end; accordingly, the
Bowling Centers results of operations for the year ended December 31, 1995
includes the results of U.S. operations for the period from December 26, 1994
through December 31, 1995. Total revenue for the period from December 26, 1994
through December 31, 1994 was approximately $2.0 million.
The business segment results presented below are before intersegment
eliminations since the Company's management believes that this will provide a
more accurate comparison of performance by segment from year to year. The
intersegment eliminations are not material. Interest expense is presented on a
gross basis.
13
<PAGE>
Performance by Business Segment
Bowling Centers
Bowling Centers derives its revenue and profits from three principal
sources: (i) bowling, (ii) food and beverage and (iii) other sources, such as
shoe rental, amusement games, billiards and pro shops. In 1997, bowling, food
and beverage and other revenue represented 60.6%, 25.4% and 14.0% of total
Bowling Centers revenue, respectively.
The results shown below reflect both U.S. and international Bowling
Centers operations.
<TABLE>
<CAPTION>
For the year ended December 31,
------------------------------------
(dollars in millions)
Pro Forma
AMF AMF
Predecessor Bowling, Bowling,
Company Inc. Inc.
------------- ---------- -----------
1995 1996(a) 1997
------------- ---------- -----------
<S> <C> <C> <C>
Bowling Centers (before intersegment eliminations):
Operating revenue ................................. $ 292.3 $ 307.3 $ 429.1
------- ------- -------
Cost of goods sold ................................ 26.3 27.5 39.9
Bowling center operating expenses ................. 168.7 177.2 252.5
Selling, general and administrative expenses ...... 10.5 7.0 6.3
Depreciation and amortization ..................... 36.6 56.2 82.8
------- ------- -------
Operating income .................................. $ 50.2 $ 39.4 $ 47.6
======= ======= =======
Selected Data:
EBITDA ............................................ $ 86.8 $ 95.6 $ 130.4
EBITDA margin ..................................... 29.7% 31.1% 30.4%
Number of centers, end of period .................. 286 341 470
Number of lanes, end of period .................... 9,430 11,782 16,315
</TABLE>
- ---------
(a) Represents pro forma results of operations from January 1, 1996 through
December 31, 1996. See "Note 3. Pro Forma Results of Operations" in the
Notes to Consolidated Financial Statements. The pro forma 1996 amount of
selling, general and administrative expenses has been adjusted to reflect a
reallocation to corporate of certain general and administrative expenses
previously allocated to the Bowling Centers segment. The 1995 amounts have
not been restated to reflect this change.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Bowling Centers operating revenue increased $121.8 million, or 39.6%. An
increase of $125.8 million was attributable to new centers, of which $116.5
million was from U.S. centers, and $9.3 million was from international centers.
An increase of $1.1 million, or 0.4%, in constant centers (centers in operation
for at least one full fiscal year) revenue was primarily a result of an
increase in revenue in the Northeast region of the United States, a region in
which the Company has a large number of centers and which experienced severe
weather conditions during the first quarter of 1996. The increase in constant
centers revenue for the year ended December 31, 1997 compared to the same
period in 1996 was net of $1.0 million additional revenue in 1996 due to leap
year, a $3.0 million decrease in revenue from the Japanese centers in 1997,
which was primarily caused by recent poor economic conditions in Japan, and a
decrease of $1.0 million in operating revenue in the third quarter of 1997
compared to the same period in 1996 which resulted from pricing specials used
in the U.S. and international centers to overcome lower lineage (defined as
games per lane per day) which resulted from the hot, dry weather in these
regions. Excluding these special items, constant center revenue would have
increased $6.1 million, or 2.2%, in the year ended December 31, 1997 compared
to the same period in 1996. A decrease in operating revenue of $5.1 million was
primarily attributable to the closing of eight U.S. centers in May 1996, and
February, May and December 1997, respectively.
Cost of goods sold increased $12.4 million, or 45.1%, primarily as a
result of the net increase in the number of centers.
Operating expenses increased $75.3 million, or 42.5%, of which
approximately $74.6 million was attributable to new centers, including $69.6
million attributable to U.S. centers and $5.0 million attributable to
international centers. As a percentage of its revenue, Bowling Centers
operating expenses were 57.7% for the year ended December 31, 1996, on a pro
forma basis, versus 58.8% for the year ended December 31, 1997.
14
<PAGE>
A decrease of $0.7 million, or 10.0%, in selling, general and
administrative expenses was attributable to cost controls implemented in
international centers in response to lower lineage discussed above and savings
associated with closed centers, partially offset by additional expenses due to
new centers.
An increase of $34.8 million, or 36.4%, in EBITDA was attributable to new
centers. EBITDA margin in 1997 was 30.4% compared to 31.1% in 1996, on a pro
forma basis.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Operating revenue increased $15.0 million, or 5.1%. Increases of $19.0 million
attributable to the addition of 57 new centers purchased during the last two
quarters of 1996 and $0.5 million attributable to increases at constant centers
were offset by decreases of $2.2 million attributable to the two bowling
centers which were not acquired as part of the Acquisition and $2.3 million
attributable to the closure of seven of the 106 bowling centers originally
purchased by the Predecessor Company from Fair Lanes. The constant center
revenue increase was attributable to an increase in international revenue of
$2.4 million, offset by a decrease in U.S. constant centers revenue of $1.9
million. The decrease in U.S. constant centers revenue was largely a result of
a decrease in revenue due to the severe weather conditions in the Northeast, a
region in which the Company has a large number of centers, during the first
quarter of 1996. An increase in bowling prices in the U.S. during 1996 was
partially offset by a decrease in U.S. lineage. The increase in international
revenue was primarily a result of an increase in average price per game and
increased food and beverage revenue.
Cost of goods sold increased $1.2 million, or 4.6%, primarily as a result
of new centers.
Bowling Centers operating expenses increased by $8.5 million, or 5.0%. An
increase of $10.0 million attributable to new centers and a net increase of
$2.2 million attributable to constant centers were offset by a decrease of $3.7
million primarily attributable to the two centers not acquired in the
Acquisition and the closure of seven Fair Lanes centers. The net increase in
constant centers operating expenses was a result of an increase of $4.1 million
in international centers due to increased rents and payroll expenses, and a
decrease of $1.9 million in U.S. centers resulting from the implementation of
cost reduction plans developed by management after assessing the impact of the
severe weather conditions during the first quarter of 1996. As a percentage of
total revenue, Bowling Centers operating expenses remained constant at 57.7%
during 1996 and 1995.
Of the $3.5 million decrease in selling, general and administrative
expenses, $3.6 million is due to a reallocation to corporate of certain
selling, general and administrative expenses previously allocated to the
Bowling Centers segment.
An increase of $8.8 million, or 10.1%, in EBITDA was attributable to new
centers. EBITDA margin in 1996 was 31.1% compared to 29.7% in 1995.
15
<PAGE>
Bowling Products
The results shown below reflect Bowling Products operations.
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------
(dollars in millions)
Pro Forma
AMF AMF
Predecessor Bowling, Bowling,
Company Inc. Inc.
------------- ----------- -----------
1995 1996(a) 1997
------------- ----------- -----------
<S> <C> <C> <C>
Bowling Products (before intersegment eliminations):
Operating revenue ...................................... $ 286.5 $ 252.1 $ 299.3
Cost of goods sold ..................................... 166.9 153.3 185.7
------- ------- -------
Gross profit ........................................... 119.6 98.8 113.6
Selling, general and administrative expenses ........... 40.3 36.2 42.8
Depreciation and amortization .......................... 3.6 18.5 19.8
------- ------- -------
Operating income ....................................... $ 75.7 $ 44.1 $ 51.0
======= ======= =======
Selected Data:
Gross profit margin .................................... 41.7% 39.2% 38.0%
EBITDA ................................................. $ 79.3 $ 62.6 $ 70.8
EBITDA margin .......................................... 27.7% 24.8% 23.7%
New Center Packages sold ............................... 4,437 3,029 4,576
New Center Packages backlog end of period (b) .......... 940 1,426 1,725
</TABLE>
- ---------
(a) Represents results of operations from January 1, 1996 through December
31, 1996 on a pro forma basis. See "Note 3. Pro Forma Results of Operations"
in the Notes to Consolidated Financial Statements. The pro forma 1996 amount
of selling, general and administrative expenses has been adjusted to reflect
a reallocation to corporate of certain overhead expenses previously
allocated to the Bowling Products segment. The 1995 amounts have not been
restated to reflect this change.
(b) NCP orders included in the backlog are sometimes cancelled by customers
in the normal course of business. Accordingly, the Company has experienced,
and expects to continue to experience, the cancellation of a portion of such
orders. The backlog as of March 13, 1998 is 1,765 units, which is flat
compared to the same period last year. See " -- Backlog; Recent NCP Sales".
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Bowling Products operating revenue increased $47.2 million, or 18.7%, primarily
due to an increase of $44.7 million, or 37.1%, in NCP revenue, and an increase
of $1.5 million, or 1.1%, in Modernization and Consumer Products revenue. The
increase in NCP revenue was due to an overall increase in NCP sales of 1,547
units which occurred primarily in Asia Pacific, Europe, South America and the
Middle East. See " -- Seasonality and Market Development Cycles".
Gross profit increased by $14.8 million, or 15.0%. Gross profit margin was
39.2% in 1996, on a pro forma basis, and 38.0% in 1997. Competitive pricing
pressure in certain markets and higher cost of sales, both experienced in the
third and fourth quarter, and unfavorable exchange rates experienced in certain
markets in the fourth quarter, resulted in lower year-to-date margins in 1997.
See " -- International Operations".
Bowling Products selling, general and administrative expenses increased by
$6.6 million, or 18.2%, primarily as a result of a $4.3 million increase
attributable to payroll and facilities expenses related to opening and staffing
certain of the Company's international sales and service offices, and an
increase of $3.7 million attributable to advertising and promotion expenses.
These increases were offset by a $1.4 million decrease in payroll, facilities
and related expenses at U.S. locations.
EBITDA increased $8.2 million, or 13.1%, and EBITDA margin decreased from
24.8% in 1996, to 23.7% in 1997. The margin decline was impacted by the pricing
pressure and unfavorable exchange rates discussed above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Operating revenue decreased by $34.4 million, or 12.0%, primarily due to a
decrease of $35.3 million, or 22.7%, in NCP revenue offset by an increase of
$0.9 million, or 0.7%., in Modernization and Consumer Products revenue. The
decrease in NCP revenue was due to an overall decrease in NCP sales by 1,408
units in 1996 compared to 1995, particularly for maturing markets including
South
16
<PAGE>
Korea and Taiwan, offset in part by an increase in NCP revenue from sales to
China. From 1995 to 1996, total NCP sales to South Korea decreased by 1,165
units and to Taiwan decreased by 1,323 units. Additionally, there was a
moderate increase in NCP units sold in the Americas and southern Europe during
1996. The increase in sales to China occurred during the last six months of
1996. See " -- Seasonality and Market Development Cycles". The increase in
Modernization and Consumer Products revenue was due in part to increased sales
of synthetic lanes and automatic scoring in the United States.
Gross profit decreased by $20.8 million, or 17.4%. Gross profit margin was
41.7% in 1995 and 39.2% in 1996. Of this 2.5% decrease, 0.8% was attributable
to an increase in certain inventory and warranty reserves in the Modernization
and Consumer Products categories of $2.1 million, and 1.7% was attributable to
the lower margins on decreased revenues, particularly in Japan, due to price
cuts implemented by the Company's management in response to stiffer competition
in the Modernization and Consumer Products category.
Of the $4.1 million decrease in selling, general and administrative
expenses, $4.2 million was due to a reallocation to corporate of certain
overhead expenses previously allocated to the Bowling Products segment.
EBITDA decreased $16.7 million, or 21.1%, and EBITDA margin decreased from
27.7% in 1995, to 24.8% in 1996, primarily due to the decreased NCP revenue and
gross profit discussed above.
Consolidated Items
Depreciation and Amortization. For the year ended December 31, 1997,
depreciation and amortization increased by $29.0 million, or 39.5%, over the
same period in 1996, primarily due to depreciation of property and equipment of
centers acquired since May, 1996 and incremental depreciation expense as a
result of capital expenditures.
For the year ended December 31, 1996, depreciation and amortization
increased by $34.4 million, or 88.0%, over the same period in 1995, primarily
as a result of recording fixed assets at fair market value and goodwill in
accordance with the purchase accounting method applied for the Acquisition.
Interest Expense. Gross interest expense increased by $12.2 million, or
11.5%, in the year ended December 31, 1997 compared with the same period in
1996, primarily due to interest paid on increased levels of bank debt as a
result of center acquisitions. See " -- Liquidity" and " -- Capital Resources".
Cash interest paid by the Company for the year ended December 1997 totaled
$83.2 million, while non-cash bond interest amortization totaled $33.6 million.
For the year ended December 31, 1996, gross interest expense increased by
$90.5 million, or 576.4%, compared with the same period in 1995 due to interest
paid on debt incurred to finance the Acquisition and interest on the
Acquisition Facility. Cash interest paid by the Company for the year ended
December 31, 1996 totaled $44.5 million, while non-cash bond interest
amortization totaled $24.7 million.
Net Income (Loss). Net loss increased $34.1 million, or 158.6%, for the
year ended December 31, 1997 compared with the same period in 1996. Increases
of $39.9 million in EBITDA discussed above on a segment basis and income tax
benefit of $3.9 million were offset by increases of $29.0 million in
depreciation and amortization expense, $12.2 million in interest expense, $23.4
million of extraordinary charges recorded in the fourth quarter as described
below, $11.9 million in other expenses and $1.4 million of equity in loss of
joint ventures.
The Company incurred after-tax extraordinary charges totaling $23.4 million
in the fourth quarter of 1997 as a result of entering into the Third Amended and
Restated Credit Agreement (the "Credit Agreement"), the premium paid to redeem a
portion of the senior subordinated discount notes with the proceeds of the
Initial Public Offering and the write-off of the portion of deferred financing
costs attributable to the senior subordinated discount notes redeemed. See "Note
9. Long-Term Debt" in the Notes to Consolidated Financial Statements and
"Selected Quarterly Data" included elsewhere herein.
Of the $11.9 million increase in other expenses, $3.6 million is
attributable to the write down of seven U.S. centers closed in 1997 and three
U.S. centers which the Company will close in 1998, $1.6 million is attributable
to an increase in losses recorded on sales of property and equipment and $3.0
million represents an increase in losses on foreign exchange transactions. In
addition to the increases in these expenses, interest income decreased $3.7
million. Proceeds from the issuance of senior subordinated notes and senior
subordinated discount notes which were used to partially fund the Acquisition
were received by the Company in March 1996, and earned interest income until
May 1, 1996, the date of Acquisition.
The Company accounts for its investments in Hong Leong JV and Playcenter
JV by the equity method. For the year ended December 31, 1997, the Company
incurred a loss of $1.4 million as equity in loss of joint ventures. See "Note
16. Joint Ventures" in the Notes to Consolidated Financial Statements.
17
<PAGE>
The decline of $118.3 million, or 122.2%, in net income from $96.8 million
in 1995 to a net loss of $(21.5) million in 1996, on a pro forma basis, was
primarily attributable to a decrease in Bowling Products EBITDA resulting from
the decline in NCP revenue and higher depreciation and amortization and
interest expense resulting from the Acquisition after allowing for an $8.9
million tax benefit.
Income Taxes. Prior to the Acquisition, certain of the companies within
the Predecessor Company elected S corporation status under the Internal Revenue
Code of 1986, as amended (the "Code"). Upon consummation of the Acquisition,
those companies became taxable corporations under the Code.
In connection with the Acquisition, the two principal subsidiaries of the
Company elected under Section 338(h)(10) of the Code to treat the stock
purchase as a deemed asset acquisition for the purposes of U.S. income taxes.
These elections permitted both of the affiliated companies to revalue their
assets to fair market value and to treat any amortizable goodwill as tax
deductible over fifteen years.
As of December 31, 1997, the Company had net operating losses of
approximately $110.0 million and foreign tax credits of $12.4 million which
will carry over to future years to offset U.S. taxes. The foreign tax credits
will begin to expire in the year 2001 and the net operating losses will begin
to expire in the year 2011. The Company had not recorded a valuation reserve as
of December 31, 1997 because the Company expects to utilize these net operating
losses and foreign tax credits prior to their expiration.
Liquidity
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
The following discussion compares AMF Bowling's results for the year ended
December 31, 1997 with the period ended December 31, 1996, on an historical
basis.
The Company's primary source of liquidity is cash provided by operations
and credit facilities as described below. Working capital on December 31, 1996
was $7.8 million compared with $43.9 million as of December 31, 1997, an
increase of $36.1 million. Accounts receivable increased $31.3 million
primarily as a result of increased NCP revenue, inventory increased $15.6
million in advance of future shipments, deferred taxes and other current assets
increased $5.9 million and the current portion of long-term debt decreased
$15.0 million as a result of principal payments on the Credit Agreement. These
increases in working capital were offset by an increase of $10.0 million in
accounts payable attributable to an increase in production in advance of future
shipments, an increase of $13.9 million caused by changes in other current
liabilities and a decrease in cash of $7.8 million primarily attributable to
payments on debt under the Credit Agreement and internal funding of certain
bowling center acquisitions.
Net cash flows provided by operating activities were $73.8 million for the
period ended December 31, 1996 compared with net cash provided of $47.7 million
for the year ended December 31, 1997, a decrease of $26.1 million. Net cash was
provided from an increase of $53.1 million in depreciation and amortization as
a result of incremental depreciation recorded on bowling center acquisitions
and capital expenditures of the Company, an increase of $8.8 million which
resulted from amortization of the discount related to the bonds used to
partially fund the Acquisition and an increase of $4.0 million attributable to
loss recorded on the sale of property and equipment. In 1997, net cash of $1.4
million was provided by the equity in loss of joint ventures and $23.4 million
was provided by the after-tax extraordinary charges discussed above. Net cash
used resulted from an increase of $36.1 million in net loss, an increase of
$19.6 million in the change in accounts receivable primarily resulting from the
increased levels of NCP sales compared with the same period in 1996, an
increase of $18.8 million in the change in inventory primarily reflecting the
increased backlog of NCP orders to be shipped after December 31, 1997, an
increase in the change in other assets of $8.9 million, an increase in the
change in net deferred income tax assets of $6.2 million and a decrease of
$27.2 million in the change in accounts payable and other liabilities.
Net cash flows used in investing activities were $1,467.1 million for the
period ended December 31, 1996 compared with net cash flows used of $288.6
million for the year ended December 31, 1997. During the period ended December
31, 1996, cash flows used for acquisitions of operating units, net of cash
acquired, including the Acquisition, totaled $1,450.9 million, capital spending
was $16.9 million and other investing cash flows provided were $0.7 million.
During the year ended December 31, 1997, acquisitions of bowling centers
totaled $214.8 million, capital spending was $56.7 million, investments in and
advances to the Hong Leong JV and Playcenter JV totaled $21.3 million, and
other cash flows provided by investing activities were $4.2 million
attributable to proceeds form the sale of property. See "Note 15. Acquisitions"
in the "Notes to Consolidated Financial Statements" and " -- Capital
Expenditures".
18
<PAGE>
Net cash provided by financing activities was $1,438.3 million for the
period ended December 31, 1996 compared with net cash provided of $235.7
million for the year ended December 31, 1997. During the period ended December
31, 1996, the Company had borrowings, net of deferred financing costs, of
$1,059.3 million from debt incurred to finance the Acquisition and from the
Acquisition Facility, and made payments of $38.9 million on this debt.
Additionally, a total of $420.8 million was received as capital contributions
by the institutional stockholders of AMF Bowling and certain of its officers
and directors. Of the total capital contributed, $380.8 million was for the
initial capitalization of the Company and the Acquisition, and $40.0 million
was received as additional capital contributions in connection with the
acquisition of centers from Charan. During 1997, funds were used primarily for
the payment of long-term debt totaling $304.6 million, $14.6 million was
attributable to the premium paid in connection with the redemption of a portion
of the senior subordinated discount notes discussed above, $0.7 million was
attributable to payments on non-compete obligations and $0.5 million was used
for the repurchase of an officer's shares in connection with the termination of
his employment with the Company. Funds were provided in 1997 by borrowings of
long-term debt totaling $240.4 million, $36.6 million of additional capital
contributions used in part to fund acquisitions and for other corporate
purposes and $279.1 million of net proceeds from the Initial Public Offering.
See "Note 12. Stockholders' Equity" and "Note 13. Employee Benefit Plans" in
the Notes to Consolidated Financial Statements.
As a result of the aforementioned, cash increased by $43.6 million for the
period ended December 31, 1996 compared to a decrease of $7.8 million for the
year ended December 31, 1997.
Year Ended December 31, 1996 Compared to year Ended December 31, 1995.
The following discussion compares AMF Bowling's results for the period
ended December 31, 1996, with the Predecessor Company's results for the year
ended December 31, 1995, on an historical basis.
Net cash flows from operating activities decreased $51.0 million from
$124.8 million for the year ended December 31, 1995 to $73.8 million for the
period ended December 31, 1996. This decrease was primarily due to the decrease
in net income from $96.8 million for the year ended December 31, 1995 to a net
loss of $(19.5) million for the period ended December 31, 1996 and higher
depreciation, amortization and interest expenses as a result of the
Acquisition.
Net cash flows used in investing activities were $28.3 million for the
year ended December 31, 1995 compared with net cash flows used of $1,467.1
million for the period ended December 31, 1996. The change was due primarily to
the Acquisition. During the year ended December 31, 1995, capital spending was
$30.0 million and other investing cash flows provided were $1.7 million. During
the period ended December 31, 1996, acquisitions of operating units, net of
cash acquired, including the Acquisition, totaled $1,450.9 million, capital
spending was $16.9 million, and other cash flows provided by investing
activities were $0.7 million.
Net cash used for financing activities was $94.7 million for the year
ended December 31, 1995 compared with net cash provided of $1,438.3 million for
the period ended December 31, 1996. This change primarily resulted from the
issuance of debt and capital contributions related to the Acquisition. During
1995, the Predecessor Company made distributions to its owners of $71.9
million, net payments on notes payable to its owners of $3.8 million, net
payments on credit note agreements and long-term debt of $21.3 million and a
payment for redemption of stock of $4.0 million. Additionally, cash of $8.3
million was received as capital contributions by stockholders.
During the period ended December 31, 1996, the Company had borrowings, net
of deferred financing costs, of $1,059.3 million from debt incurred to finance
the Acquisition and from the Acquisition Facility, and made payments of $38.9
million on this debt. Additionally, a total of $420.8 million was received as
capital contributions by the institutional stockholders of AMF Bowling and
certain of its officers and directors. Of the total capital contributed, $380.8
million was for the initial capitalization of the Company and the Acquisition,
and $40.0 million was received as additional capital contributions in
connection with the acquisition of centers from Charan. See "Business --
General Development of Business".
As a result of the aforementioned, cash increased by $1.6 million for the
year ended December 31, 1995 compared with an increase of $43.6 million for the
period ended December 31, 1996.
Capital Resources
As a result of the Acquisition, the Company's total indebtedness increased
substantially. At December 31, 1997, the Company's debt structure consisted of
$621.3 million of senior debt, $250.0 million of senior subordinated notes and
$189.3 million of senior subordinated discount notes. The Company's senior debt
consisted of $446.2 million of term loans, $173.1 million of revolving credit
advances under the Bank Facility and $2.0 million represented by one mortgage
note. At December 31, 1997, the Company was capitalized with equity of $654.0
million.
19
<PAGE>
The Company has the ability to borrow for general corporate purposes and
for acquisitions pursuant to the $355.0 million Bank Facility, subject to
certain conditions. Between December 31, 1997 and March 13, 1998, additional
borrowings under the Bank Facility totaled $47.0 million and were used to fund
the acquisitions of centers and increases in working capital. At March 13,
1998, $220.1 million was outstanding under the Bank Facility.
In September 1997, certain current stockholders of AMF Bowling purchased
an aggregate of 1,780,000 shares of Common Stock for $20.00 per share. The
aggregate $35.6 million capital contribution was used to fund acquisitions.
In November 1997, AMF Bowling issued 15,525,000 shares of Common Stock at
$19.50 per share pursuant to the Initial Public Offering. The net proceeds of
the Initial Public Offering were approximately $279.1 million after deducting
the underwriting discount and expenses payable by AMF Bowling, and were used to
repay $150.8 million of indebtedness under the Credit Agreement and to redeem
$118.9 million in principal of the senior subordinated discount notes. See
"Note 9. Long-Term Debt" and "Note 12. Stockholders' Equity" in the Notes to
Consolidated Financial Statements.
The Company funds its cash needs through cash flow from operations,
existing cash balances and the Bank Facility. A substantial portion of the
Company's available cash will be applied to service outstanding indebtedness.
For the year ended December 31, 1997, the Company incurred cash interest
expense of $83.0 million, representing 44.8% of EBITDA of $185.4 million for
the year. For the period from the inception date of January 12, 1996 through
December 31, 1996, the Company incurred cash interest expense of $53.0 million,
representing 55.5% of EBITDA of $95.5 million for the period.
The Indentures for the senior subordinated notes and the senior
subordinated discount notes and the provisions of the Credit Agreement contain
financial and operating covenants and significant restrictions on the ability
of the Company to pay dividends, incur indebtedness, make investments and take
certain other corporate actions. See "Note 9. Long-Term Debt" in the Notes to
Consolidated Financial Statements.
The Company's ability to make scheduled payments of principal of, or to
pay interest on, or to refinance its indebtedness depends on its future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the current level of operations and anticipated growth,
management believes that available cash flow, together with available
borrowings under the Credit Agreement and other sources of liquidity, will be
adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures, scheduled payments of principal of, and interest
on, its senior debt, and interest on the senior subordinated notes and senior
subordinated discount notes. There can be no assurance, however, that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness or that any refinancing would be available
on commercially reasonable terms or at all.
On November 7, 1997, the Company's bank credit agreement was amended and
restated as the Third Amended and Restated Credit Agreement, under which the
Acquisition Facility and a portion of the term facilities under the Credit
Agreement were converted into a non-amortizing revolving Bank Facility, the
aggregate size of which was increased to $355.0 million, and a portion of such
revolving credit indebtedness was repaid with proceeds of the Initial Public
Offering. Borrowings under the Bank Facility will provide the Company the
ability to finance acquisitions or new center construction.
Capital Expenditures
For the year ended December 31, 1997, the Company's actual capital
expenditures were $56.7 million (excluding acquisitions) compared with $23.8
million for the year ended December 31, 1996, on a pro forma basis (capital
expenditures of the acquired business from January 1, 1996 through December 31,
1996.) The increase was primarily due to an ongoing modernization program in
Bowling Centers, a new point-of-sale information system in U.S. Bowling
Centers, new Company-wide information systems, and construction of a new 40
lane, state-of-the-art bowling and family entertainment center at Chelsea Piers
in New York City.
For the period ended December 31, 1996, the Company's capital expenditures
were $23.8 million. For the year ended December 31, 1995, the Company's capital
expenditures were $30.0 million, including $9.7 million for the construction of
three new centers. The 1996 expenditures level was lower than the 1995 level in
part because in 1995 three new bowling centers were constructed.
The Company conducts an ongoing modernization and maintenance program that
results in its centers having upgraded physical plants and generally attractive
appearances. Management believes that its historical spending level of
approximately 3.7% of Bowling Centers revenue is fully adequate to cover all
modernization and maintenance capital expenditures. Management estimates that
approximately 2.0% of Bowling Centers revenue is required for nondiscretionary
capital expenditures.
20
<PAGE>
Bowling Products has relatively modest capital investment requirements,
and the Company has followed a relatively conservative approach to capital
investment. Maintenance and replacement investments have been made when clearly
needed, but as close to the end of the useful lives of assets as possible.
Investment in new product development has received the highest investment
priority and has focused on projects with projected payback periods of one to
three years.
The Company has the opportunity to acquire and build additional bowling
centers, both in the U.S. and internationally. The Company is prepared to
acquire or build additional bowling centers as opportunities arise and is
engaged in ongoing evaluations of and discussions with third parties regarding
possible acquisitions. Management plans to acquire centers with funding
provided under the Credit Agreement to the extent available. Under the Bank
Facility, as of December 31, 1997, the Company had the ability to borrow up to
an additional $181.9 million for acquisitions or to finance new center
construction, subject to certain conditions. Management's plans to expand the
Bowling Centers operations are subject to the continuation of favorable
economic and financial conditions, which are generally not within the Company's
control.
Currently, the Company has entered into purchase agreements to acquire 5
U.S. centers from unrelated sellers. The Company has committed to build a
bowling center in Chicago's Marina City development and the Michael Jordan Golf
Center in Charlotte, North Carolina in 1998.
The Company has funded its capital expenditures from cash generated by
operations and, with respect to the construction and acquisition of new
centers, internally generated cash, the Bank Facility, and issuances of common
equity. See "Note 15. Acquisitions" in the Notes to Consolidated Financial
Statements, " -- Liquidity" and " -- Capital Resources."
Seasonality and Market Development Cycles
The U.S. bowling center operations are seasonal. The following table sets
forth AMF's U.S. constant centers revenue for the last four quarters:
<TABLE>
<CAPTION>
Quarter Ending (dollars in millions)
------------------------------------------------------------------------------
March 31, 1997 June 30, 1997 September 30, 1997 December 31, 1997
---------------- --------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Total Revenue ......... $ 58.1 $ 41.1 $ 38.4 $ 50.6
% of Total ............ 30.9% 21.8% 20.4% 26.9%
</TABLE>
On a consolidated basis, however, revenue and EBITDA of the Company's
businesses are neither highly seasonal nor highly cyclical. The geographic
diversity of the Company's bowling centers, which operate across different
regions of the U.S. and across eleven other countries, has provided stability
to the Company's annual cash flows. Although financial performance of Bowling
Centers operations is seasonal in nature in many countries, with cash flows
typically peaking in the winter months and reaching their lows in the summer
months, the geographic diversity of the Company's bowling centers has helped
reduce this seasonality as bowling centers in certain countries in which AMF
operates exhibit different seasonal sales patterns. As a result of the growing
number of U.S. centers attributable to the Company's acquisition program,
however, the seasonality described above may be accentuated. In Australia,
where AMF has its largest number of international centers, the reversal of
seasons relative to the U.S. helps mitigate the seasonality in worldwide
operations. AMF's cash flows are further stabilized by the location of many
centers in regions where the climates have high average temperatures and high
humidity. In the U.S., during the summer months when league bowling is
generally less active, bowling centers in the southern U.S. continue to show
strong performance. Similarly, in regions with warm summer climates such as
Hong Kong and Mexico, where bowling in air-conditioned centers may be more
attractive than outdoor activities, bowling centers show strong performance.
See "Note 17. Business Segments" in the Notes to Consolidated Financial
Statements.
Modernization and Consumer Products sales display seasonality. The U.S.
market, which is the largest market for Modernization and Consumer Products, is
driven by the beginning of league play in the fall of each year. Operators
typically sign purchase orders, particularly for replacement equipment, during
the first four months of the year, after they receive winter league revenue
indications. Equipment is shipped and installed during the summer months, when
leagues are generally less active. Sales of modernization equipment, such as
automatic scoring and synthetic lane overlays, are less predictable and
fluctuate more than the replacement equipment because of the four to ten year
life cycles of these major products.
The NCP category of bowling products experiences significant fluctuations
due to changes in demand for NCPs as certain markets experience high growth
followed by market maturity, at which time sales to that market decline,
sometimes rapidly. Market cycles for individual countries have, in the past,
spanned several years, with periods of high demand for several markets (e.g.,
South Korea and Taiwan) which, in the Company's experience, last five years or
more. These growth patterns do not seem to be closely tied to general economic
cycles.
21
<PAGE>
International Operations
The Company's international operations are subject to the usual risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive laws and actions by foreign governments
(such as restrictions on transfer of funds, import and export duties and
quotas, foreign customs, tariffs and VATs and unexpected changes in regulatory
environments), difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax laws.
AMF has a history of operating in a number of international markets, in
some cases, for over thirty years. Similar to other U.S.-based manufacturers
with export sales, local currency devaluation increases the cost of the
Company's bowling equipment in that market. As a result, a strengthening U.S.
dollar exchange rate may adversely impact sales volume and profit margins
during such periods.
Current economic difficulties in certain markets of the Asia Pacific
region have resulted in a reduction in the order rate and backlog for NCPs.
Management believes that many Asia Pacific customers are delaying purchases of
NCP and Modernization equipment as they await economic stability in their
regions. As of March 13, 1998, the NCP backlog was 1,765 which is flat compared
to the same period last year.
For the year ended December 31, 1997, NCP sales and backlog to China,
Japan and other Asia Pacific markets represented 72.7% and 70.4% of total NCP
unit sales and backlog, respectively.
Foreign currency exchange rates also impact the translation of operating
results from international bowling centers. For the year ended December 31,
1997, revenue and EBITDA of international bowling centers represented 14.6% and
16.0% of consolidated results, respectively.
Over the longer term, management continues to believe that international
markets, including Asia Pacific, represent attractive opportunities for bowling
equipment sales and bowling center operations. Accordingly, management
continues to pursue its strategy in international markets.
Backlog; Recent NCP Sales
The total backlog of NCPs (which include all of the bowling equipment
necessary to outfit one new bowling lane) as of December 31, 1997 was 1,725
units and 1,765 units as of March 13, 1998. The current backlog is flat
compared to the same period last year. NCP orders included in the backlog are
sometimes cancelled by customers in the normal course of business. Accordingly,
the Company has experienced, and expects to continue to experience, the
cancellation of a portion of its NCP orders.
NCP sales for the year ended December 31, 1997 totaled $165.1 million, a
37.1% increase over the same period in 1996. Management believes that the
significant increase was attributable to the market development and sales
programs implemented in mid-1996 which were designed to increase NCP sales
activity in certain markets around the world. While China currently represents
the largest market for NCP sales and backlog, other markets in North and South
America, Asia, Europe and the Middle East are being developed.
The NCP backlog of approximately 1,426 units as of December 31, 1996
represented an increase of 486 units from the backlog of 940 units at December
31, 1995. This increase was primarily composed of increases in the backlogs in
China, the United States and Malaysia, partially offset by decreases in the
backlogs in Korea and Taiwan.
Impact of Inflation
The Company has historically offset the impact of inflation through price
increases and expense reductions. Periods of high inflation could have an
adverse effect on the Company to the extent that increased borrowing costs for
floating rate debt may not be offset by increases in cash flow.
Environmental Matters
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of certain materials, substances and
wastes.
22
<PAGE>
The Company currently and from time to time is subject to environmental
claims. In management's opinion, the various claims in which the Company
currently is involved are not likely to have a material adverse effect on its
financial position or results of operations. However, it is not possible to
ensure the ultimate outcome of such claims.
The Company cannot predict with any certainty whether existing conditions
or future events, such as changes in existing laws and regulations, may give
rise to additional environmental costs. Furthermore, actions by federal, state,
local and foreign governments concerning environmental matters could result in
laws or regulations that could increase the cost of producing the Company's
products, or providing its services, or otherwise adversely affect the demand
for its products or services.
Recent Accounting Pronouncements
Effective for the fiscal year ended December 31, 1998, the Company is
required to adopt Statement of Financial Accounting Standard ("SFAS") No. 130
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information." The Company does not expect that
adoption of these standards will have a material impact on the Company's
financial position or results of operations. The adoption of SFAS No. 130 will
require reporting comprehensive income, which includes the foreign currency
translation adjustment, in an alternative format prescribed by the standard.
Year 2000 Issue
The Company is currently developing and installing new worldwide
financial, information, retail and operational systems. Worldwide system
implementation is expected to be complete by December 31, 1999. In connection
with this implementation, system programs have been designed so that the year
2000 will be recognized as a valid date and will not affect the processing of
date-sensitive information. As of December 31, 1997, the Company spent a total
of $12.6 million on systems installation. The Company expects to spend an
additional $7.6 million to complete the installation. In addition, the Company
sells automatic scoring that is computerized and has developed a software
program for approximately $50 thousand that will address the year 2000 issue in
its automatic scoring. This software will be made available to customers with
service contracts at no cost and will be sold to customers without service
contracts. The Company believes that the year 2000 issue has been appropriately
addressed through the implementation of these new systems and software
development and does not expect the year 2000 issue to have a material adverse
impact on the financial position, results of operations or cash flows in future
periods.
23
<PAGE>
Item 8. Financial Statements and Supplemental Data
INDEX
Financial Statements
<TABLE>
<CAPTION>
Page
-----
<S> <C>
AMF Bowling, Inc. and Subsidiaries
o Report of Independent Public Accountants ............................................... 25
o Consolidated Balance Sheets as of December 31, 1997 and 1996 ........................... 26
o Consolidated Statements of Income for the Year Ended December 31, 1997, and the Period
Ended December 31, 1996 ................................................................ 27
o Consolidated Statements of Cash Flows for the Year Ended December 31, 1997, and the
Period Ended December 31, 1996 ......................................................... 28
o Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1997,
and the Period Ended December 31, 1996 ................................................. 29
o Notes to Consolidated Financial Statements ............................................. 30
AMF Bowling Group (Predecessor Company)
o Report of Independent Accountants ...................................................... 59
o Combined Balance Sheets as of April 30, 1996 and December 31, 1995 ..................... 60
o Combined Statements of Operations for the Four Months Ended April 30, 1996, and the
Year Ended December 31, 1995 ........................................................... 61
o Combined Statements of Cash Flows for the Four Months Ended April 30, 1996, and the
Year Ended December 31, 1995 ........................................................... 62
o Combined Statements of Changes in Stockholders' Equity for the Four Months Ended April
30, 1996, and the Year Ended December 31, 1995 ......................................... 63
o Notes to Combined Financial Statements ................................................. 64
AMF Bowling, Inc. and Subsidiaries
o Selected Quarterly Data (unaudited) .................................................... 92
Financial Statement Schedules
AMF Bowling, Inc.
o Report of Independent Public Accountants on Schedule I ................................. 99
o Schedule I -- Condensed Financial Information of AMF Bowling, Inc. ..................... 100
AMF Bowling Group (Predecessor Company)
o Schedule II -- Valuation and Qualifying Accounts and Reserves .......................... 104
</TABLE>
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
AMF BOWLING, INC.:
We have audited the accompanying consolidated balance sheets of AMF
Bowling, Inc. (a Delaware corporation, formerly named AMF Holdings Inc.) and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1997, and the period from inception (January 12, 1996) through
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMF Bowling, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the year ended December 31, 1997, and the
period from inception (January 12, 1996) through December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Richmond, Virginia
February 20, 1998
25
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
As of December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................................... $ 35,790 $ 43,568
Accounts and notes receivable, net of allowance for
doubtful accounts of $5,012 and $4,492, respectively ............................ 73,991 42,625
Inventories ....................................................................... 56,568 41,001
Deferred taxes and other .......................................................... 17,049 11,178
----------- -----------
TOTAL CURRENT ASSETS ............................................................ 183,398 138,372
Property and equipment, net ........................................................ 750,885 579,308
Leasehold interests, net ........................................................... 47,180 51,488
Deferred financing costs, net ...................................................... 18,911 40,595
Goodwill, net ...................................................................... 772,348 771,146
Investments in and advances to joint ventures ...................................... 19,999 --
Other assets ....................................................................... 39,331 13,101
----------- -----------
TOTAL ASSETS .................................................................... $ 1,832,052 $ 1,594,010
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................................. $ 41,583 $ 31,563
Accrued expenses .................................................................. 64,865 54,357
Income taxes payable .............................................................. 5,644 2,276
Long-term debt, current portion ................................................... 27,376 42,376
----------- -----------
TOTAL CURRENT LIABILITIES ....................................................... 139,468 130,572
Long-term debt, less current portion ............................................... 1,033,223 1,048,877
Other long-term liabilities ........................................................ 5,333 1,851
Deferred income taxes .............................................................. -- 3,895
----------- -----------
TOTAL LIABILITIES ............................................................... 1,178,024 1,185,195
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock (par value $.01 per share, 200,000,000 shares authorized, 59,630,000
issued and outstanding at December 31, 1997, 42,375,000 issued and outstanding at
December 31, 1996) .............................................................. 596 424
Paid-in capital ................................................................... 748,053 429,026
Retained deficit .................................................................. (75,048) (19,484)
Equity adjustment from foreign currency translation ............................... (19,573) (1,151)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ..................................................... 654,028 408,815
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................... $ 1,832,052 $ 1,594,010
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
26
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (a)
-------------- -------------
<S> <C> <C>
Operating revenue ........................................................ $ 713,668 $ 384,809
---------- ----------
OPERATING EXPENSES:
Cost of goods sold ...................................................... 212,544 130,542
Bowling center operating expenses ....................................... 251,206 123,673
Selling, general, and administrative expenses ........................... 64,546 35,070
Depreciation and amortization ........................................... 102,447 49,386
---------- ----------
Total operating expenses .............................................. 630,743 338,671
---------- ----------
Operating income ...................................................... 82,925 46,138
---------- ----------
NONOPERATING EXPENSES (INCOME):
Interest expense ........................................................ 118,385 77,990
Other expenses, net ..................................................... 10,106 1,912
Interest income ......................................................... (1,954) (5,748)
---------- ----------
Total nonoperating expenses ........................................... 126,537 74,154
---------- ----------
Loss before income taxes ................................................ (43,612) (28,016)
Benefit for income taxes ................................................ (12,776) (8,532)
---------- ----------
Net loss before equity in loss of joint ventures and extraordinary items (30,836) (19,484)
Equity in loss of joint ventures ........................................ (1,362) --
---------- ----------
Net loss before extraordinary items ..................................... (32,198) (19,484)
Extraordinary items, net of tax of $12,778 .............................. (23,366) --
---------- ----------
Net loss ................................................................ $ (55,564) $ (19,484)
========== ==========
NET LOSS PER SHARE, BASIC AND DILUTED:
Net loss per share before extraordinary items ........................... $ (0.71) $ (0.49)
Per share effect of extraordinary items ................................. (0.52) --
---------- ----------
Net loss per share ...................................................... $ (1.23) $ (0.49)
========== ==========
Weighted average shares outstanding ..................................... 45,249 39,713
========== ==========
</TABLE>
- ---------
(a) For the period from the inception date of January 12, 1996 through December
31, 1996, which includes results of operations of the acquired business
from May 1, 1996 through December 31, 1996.
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (a)
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $ (55,564) $ (19,484)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization ................................... 102,447 49,386
Equity in loss of joint ventures ................................ 1,362 --
Extraordinary items, net of tax ................................. 23,366 --
Deferred income taxes ........................................... (20,221) (14,040)
Amortization of bond discount ................................... 33,562 24,731
Loss on the sale of property and equipment, net ................. 4,446 408
Changes in assets and liabilities:
Accounts and notes receivable, net ............................. (26,093) (6,504)
Inventories .................................................... (16,971) 1,862
Other assets ................................................... (12,897) (4,010)
Accounts payable and accrued expenses .......................... 17,782 21,930
Income taxes payable ........................................... 602 417
Other long-term liabilities .................................... (4,089) 19,135
---------- ------------
Net cash provided by operating activities ....................... 47,732 73,831
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of operating units, net of cash acquired ............. (214,761) (1,450,928)
Investments in and advances to joint ventures ..................... (21,361) --
Purchases of property and equipment ............................... (56,703) (16,941)
Proceeds from the sale of property and equipment .................. 4,180 754
---------- ------------
Net cash used in investing activities ............................. (288,645) (1,467,115)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt, net of deferred financing costs ..... 240,406 1,059,277
Payments on long-term debt ........................................ (304,621) (38,875)
Prepayment penalty ................................................ (14,571) --
Capital contributions ............................................. 36,600 420,750
Net proceeds from initial public offering of shares ............... 279,071 --
Repurchase of shares .............................................. (500) --
Noncompete obligations ............................................ (647) (2,892)
---------- ------------
Net cash provided by financing activities ......................... 235,738 1,438,260
---------- ------------
Effect of exchange rates on cash .................................. (2,603) (1,408)
---------- ------------
NET (DECREASE) INCREASE IN CASH .................................... (7,778) 43,568
Cash and cash equivalents at beginning of period ................... 43,568 --
---------- ------------
Cash and cash equivalents at end of period ......................... $ 35,790 $ 43,568
========== ============
</TABLE>
- ---------
(a) For the period from the inception date of January 12, 1996, through
December 31, 1996, which includes the cash flows of the acquired business
from May 1, 1996 through December 31, 1996.
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Common
Shares Paid-in
Outstanding Common Stock Capital
------------- -------------- -------------
<S> <C> <C> <C>
BALANCE JANUARY 12, 1996 .................... -- $ -- $ --
Initial capitalization ...................... 38,375,000 384 389,066
Capital contribution by stockholders ........ 4,000,000 40 39,960
Net loss .................................... -- -- --
Equity adjustment from foreign currency
translation ................................ -- -- --
---------- ---- ---------
BALANCE DECEMBER 31, 1996 ................... 42,375,000 424 429,026
---------- ---- ---------
Capital contribution by stockholders ........ 1,780,000 18 35,582
Issuance of stock and stock options
(Note 14) .................................. 100,000 1 5,027
Initial public offering of common stock ..... 15,525,000 155 278,916
Repurchase of common stock .................. (150,000) (2) (498)
Net loss .................................... -- -- --
Equity adjustment from foreign currency
translation ................................ -- -- --
---------- ------ ---------
BALANCE DECEMBER 31, 1997 ................... 59,630,000 $ 596 $ 748,053
========== ====== =========
<CAPTION>
Equity
Adjustment
From Foreign Total
Retained Currency Stockholders'
Deflicit Translation Equity
-------------- -------------- --------------
<S> <C> <C> <C>
BALANCE JANUARY 12, 1996 .................... $ -- $ -- $ --
Initial capitalization ...................... -- -- 389,450
Capital contribution by stockholders ........ -- -- 40,000
Net loss .................................... (19,484) -- (19,484)
Equity adjustment from foreign currency
translation ................................ -- (1,151) (1,151)
---------- ---------- ---------
BALANCE DECEMBER 31, 1996 ................... (19,484) (1,151) 408,815
---------- ---------- ---------
Capital contribution by stockholders ........ -- -- 35,600
Issuance of stock and stock options
(Note 14) .................................. -- -- 5,028
Initial public offering of common stock ..... -- -- 279,071
Repurchase of common stock .................. -- -- (500)
Net loss .................................... (55,564) -- (55,564)
Equity adjustment from foreign currency
translation ................................ -- (18,422) (18,422)
---------- ---------- ---------
BALANCE DECEMBER 31, 1997 ................... $ (75,048) $ (19,573) $ 654,028
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
AMF Bowling, Inc. ("AMF Bowling") changed its name from AMF Holdings Inc.
in 1997. AMF Bowling and its subsidiaries (collectively, the "Company" or
"AMF") are principally engaged in two business segments: (i) the ownership or
operation of bowling centers, consisting of 370 U.S. bowling centers and 100
international bowling centers ("Bowling Centers"), including fourteen joint
venture centers described in "Note 16. Joint Ventures", as of December 31,
1997, and (ii) the manufacture and sale of bowling equipment such as automatic
pinspotters, automatic scoring equipment, bowling pins, lanes, ball returns,
certain spare parts, and the resale of allied products such as bowling balls,
bags, shoes, and certain other spare parts ("Bowling Products"). The principal
markets for bowling equipment are U.S. and international independent bowling
center operators.
AMF Bowling Worldwide, Inc., formerly named AMF Group Inc. ("Bowling
Worldwide"), is a wholly owned subsidiary of AMF Group Holdings Inc. ("AMF
Group Holdings"). AMF Group Holdings is a wholly owned subsidiary of AMF
Bowling. AMF Group Holdings and Bowling Worldwide are Delaware corporations
organized by GS Capital Partners II, L.P., and certain other investment funds
(collectively, "GSCP") affiliated with Goldman, Sachs & Co. ("Goldman Sachs"),
to effect the Acquisition (described below). AMF Bowling and AMF Group Holdings
are holding companies. The principal assets in each are comprised of
investments in subsidiaries.
Pursuant to a Stock Purchase Agreement dated February 16, 1996, between
AMF Group Holdings and the stockholders (the "Prior Owners") of AMF Bowling
Group (the "Predecessor Company"), on May 1, 1996 (the "Closing Date"), AMF
Group Holdings acquired the Predecessor Company through a stock purchase by AMF
Group Holdings' subsidiaries of all the outstanding stock of the separate
domestic and foreign corporations that constituted substantially all of the
Predecessor Company and through the purchase of certain of the assets of the
Predecessor Company's bowling center operations in Spain and Switzerland (the
"Acquisition"). AMF Group Holdings did not acquire the assets of two bowling
centers located in Madrid, Spain, and Geneva, Switzerland (both of which were
retained by the Prior Owners.)
The purchase price for the Acquisition was approximately $1.37 billion,
less approximately $2.0 million representing debt of the Predecessor Company
which remained in place following the closing of the Acquisition. The
Acquisition was accounted for by the purchase method of accounting, pursuant to
which the purchase price was allocated among the acquired assets and
liabilities in accordance with estimates of fair market value on the date of
Acquisition. The purchase included the payment of $1.323 billion to the Prior
Owners. The Acquisition was funded with $380.8 million of contributed capital,
and $1.015 billion of debt, including bank debt and senior subordinated notes
and discount notes. The purchase price included $8.7 million which represents
warrants to purchase 870,000 shares of AMF Bowling common stock, par value $.01
per share ("Common Stock"), which were issued on the Closing Date to The
Goldman Sachs Group, L.P., an affiliate of Goldman Sachs. See "Note 9.
Long-Term Debt". See also "Note 14. Supplemental Disclosures to the
Consolidated Statements of Cash Flows" which presents the components of the
purchase price allocation.
Note 2. Significant Accounting Policies
Basis of Presentation
The results of operations for the year ended December 31, 1997, reflect
the results of the Company from January 1, 1997 ("1997"). The results of
operations for the period ended December 31, 1996, reflect the results of the
Company since the inception date of January 12, 1996, and the subsidiaries
acquired as of May 1, 1996, from the Predecessor Company ("1996"). All
significant intercompany balances and transactions have been eliminated in the
accompanying consolidated financial statements. Certain amounts in the prior
year's financial statements have been reclassified to conform to the current
year presentation. All dollar amounts are in thousands, except where otherwise
indicated.
Joint Ventures
Investments in joint ventures are accounted for under the equity method.
These investments are managed as part of the Company's Bowling Centers segment
operations, and the Company's share of joint venture earnings is included in
earnings for the Bowling Centers segment. (See "Note 16. Joint Venures")
30
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. The more significant estimates made by management include
allowances for obsolete inventory, uncollectible accounts receivable,
realization of goodwill and other deferred assets, litigation and claims,
product warranty costs, and self-insurance costs. Actual results could differ
from those estimates.
Revenue Recognition
For Bowling Products' sales to customers in the United States, revenue is
generally recognized at the time the products are shipped. For larger contract
orders, Bowling Products generally requires that customers submit a deposit as
a condition of accepting the order. Internationally, revenue is generally
recognized when products arrive at the customer's port of entry. For a
significant portion of international sales, Bowling Products generally requires
the customer to obtain a letter of credit prior to shipment.
Warranty Costs
Bowling Products warrants all new products for certain periods up to one
year. Major products are warranted for one year. Bowling Products charges to
income an estimated amount for future warranty obligations, and also offers
customers the option to purchase extended warranties on certain products.
Warranty expense aggregated $3,007 for 1997 and $4,471 for 1996, and is
included in cost of goods sold in the accompanying consolidated statements of
income.
Cash and Cash Equivalents
The Company classifies all highly liquid fixed-income investments
purchased with an original maturity of three months or less as cash
equivalents.
Inventories
Bowling Products' inventory is valued at the lower of cost or market, cost
being determined using the first-in, first-out ("FIFO") method for U.S. and
international inventories. Bowling Centers' inventory is valued at the lower of
cost or market, with the cost being determined using the actual or average cost
method.
Long-Lived Assets
The carrying value of long-lived assets and certain identifiable
intangibles, including goodwill, is reviewed by the Company for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, and an estimate of future undiscounted cash
flows is less than the carrying amount of the asset.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs which do not improve or extend the life of an asset are charged to
expense as incurred; major renewals or betterments are capitalized. Upon
retirement or sale of an asset, its cost and related accumulated depreciation
are removed from property and equipment, and any gain or loss is recognized.
As a result of the Acquisition, the carrying value of property and
equipment was adjusted to fair market value in accordance with the purchase
method of accounting. Property and equipment are depreciated over their
estimated useful lives using the straight-line method. Estimated useful lives
of property and equipment are as follows:
31
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<S> <C>
Buildings and improvement 5 - 40 years
Leasehold improvements lesser of the estimated
useful life or term of the lease
Bowling and related equipment 5 - 10 years
Manufacturing equipment 2 - 7 years
Furniture and fixtures 3 - 8 years
</TABLE>
Goodwill
As a result of the Acquisition and subsequent purchases of bowling centers
discussed in "Note 15. Acquisitions", and in accordance with the purchase
method of accounting used for all acquisitions, the Company recorded goodwill
representing the excess of the purchase price over the allocation among the
acquired assets and liabilities in accordance with estimates of fair market
value on the dates of acquisition. Goodwill is being amortized over 40 years.
Amortization expense was $19,827 in 1997 and $13,070 in 1996.
Income Taxes
Upon consummation of the Acquisition, the U.S. and international
subsidiaries of AMF Bowling became taxable corporations under the Internal
Revenue Code ("IRC"). Income taxes are accounted for using the asset and
liability method under which deferred income taxes are recognized for the tax
consequences on future years of temporary differences between the financial
statement carrying amounts and the tax bases of assets and liabilities.
Research and Development Costs
Expenditures relating to the development of new products, including
significant improvements and refinements to existing products, are expensed as
incurred. Amounts charged against income were approximately $922 in 1997 and
$1,312 in 1996, and are included in cost of goods sold in the accompanying
consolidated statements of income.
Advertising Costs
Costs incurred for producing and communicating advertising are expensed
when incurred. The amounts charged against income were approximately $21,642 in
1997 and $9,299 in 1996, with $12,768 and $5,932, respectively, included in
bowling center operating expenses for Bowling Centers, and $8,856 and $3,367,
respectively, included in selling, general and administrative expenses for
Bowling Products and Corporate in the accompanying consolidated statements of
income.
Earnings Per Share
In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 "Earnings per Share" which requires the calculation and
presentation of basic and diluted earnings per share. Basic and diluted net
loss per share for 1997 and 1996 is calculated based on the actual weighted
average shares outstanding. Outstanding stock options and warrants are not
considered as their effect is antidilutive. See "Note 12. Stockholders' Equity"
and "Note 13. Employee Benefit Plans".
Foreign Currency Translation
All assets and liabilities of AMF Bowling's international operations are
translated from foreign currencies into U.S. dollars at year-end exchange
rates, except those of Mexico which has a highly inflationary economy.
Adjustments resulting from the translation of financial statements of
international operations into U.S. dollars are included in the equity
adjustment from foreign currency translation on the accompanying consolidated
balance sheets. Revenue and expenses of international operations are translated
using average exchange rates that existed during the year and reflect currency
exchange gains and losses resulting from transactions conducted in other than
local currencies. Net losses from transactions in foreign currencies of $3,537
for 1997 and $488 for 1996 are included in other expenses in the accompanying
consolidated statements of income.
32
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Fair Value of Financial Instruments
The carrying value of financial instruments including cash and cash
equivalents and short-term debt approximate fair value at December 31, 1997 and
1996, because of the short maturity of these instruments. At December 31, 1997
and 1996, fair value of the interest rate cap agreements (to reduce the
interest rate risk of its floating rate debt) was approximately zero and $577,
respectively. The interest rate cap agreements are valued using the estimated
amount that the Company would receive to terminate the cap agreements as of
December 31, 1997 and 1996, based on a quote from the counterparty, taking into
account current interest rates and the credit worthiness of the counterparty.
The Company has no intention of terminating the cap agreements. The fair value
of the Term Facilities under the Senior Debt, as defined in "Note 9. Long-Term
Debt," at December 31, 1997 and 1996, was approximately $467,361 and $623,520,
respectively, based on the fair value of debt with similar maturities and
covenants. The fair value of the Notes, as defined in "Note 9. Long-Term Debt,"
at December 31, 1997 and 1996, was approximately $493,551 and $560,315,
respectively, based on the trading value at December 31, 1997 and 1996.
Noncompete Agreements
AMF Bowling, through its subsidiaries, has noncompete agreements with
various individuals. The assets are recorded at cost or at the present value of
payments to be made under these agreements, discounted at annual rates ranging
from 8 percent to 10 percent. The assets are included in other assets on the
accompanying consolidated balance sheets and are amortized on a straight-line
basis over the terms of the agreements. Noncompete obligations at December 31,
1997 and 1996, net of accumulated amortization, totaled approximately $3,171
and $2,498, respectively.
Annual maturities on noncompete obligations as of December 31, 1997, are
as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
- ----------------------
<S> <C>
1998 ............... $ 1,019
1999 ............... 512
2000 ............... 243
2001 ............... 228
2002 ............... 185
Thereafter ......... 984
-------
$ 3,171
=======
</TABLE>
Self-Insurance Programs
The Company is self-insured up to certain levels for general and product
liability, workers' compensation, certain health care coverage, and property
damage. The cost of these self-insurance programs is accrued based upon
estimated settlements for known and anticipated claims. The Company has
recorded an estimated amount to cover known claims and claims incurred but not
reported as of December 31, 1997 and 1996, which is included in accrued
expenses in the accompanying consolidated balance sheets.
Note 3. Pro Forma Results of Operations
Pro forma statements of income are presented on the following pages for
the years ended December 31, 1996 and 1995, as if the Acquisition had occurred
on January 1, 1996 and 1995, respectively. AMF Bowling's pro forma statement of
income for the twelve months ended December 31, 1996 is based on the
Predecessor Company's statement of operations for the four-month period ending
April 30, 1996, reported elsewhere in this report, AMF Bowling's statement of
income for the period ended December 31, 1996, and adjustments giving effect to
the Acquisition under the purchase method of accounting as described in the
notes below. AMF Bowling's pro forma statement of income for the twelve months
ended December 31, 1995, is based on the Predecessor Company's results of
operations reported elsewhere in this report and adjustments giving effect to
the Acquisition under the purchase method of accounting as described in the
notes below. The pro forma results are for illustrative purposes only and do
not purport to be indicative of the actual results which occurred, nor are they
indicative of future results of operations.
33
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro Forma Results of Operations (in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Predecessor AMF
AMF Company Bowling, Inc.
Bowling, Inc. Four Months Twelve Months
Period Ended Ended Pro Forma Ended
12/31/96 (a) 4/30/96 Adjustments 12/31/96
--------------- ------------- ------------------------ --------------
<S> <C> <C> <C> <C>
Operating revenue $ 384.8 $ 164.9 $ (0.8) (b) $ 548.9
-------- -------- ---------- --------
Operating expenses:
Cost of goods sold .......................... 130.5 43.1 -- 173.6
Bowling center operating expenses ........... 123.7 80.2 ( 25.1) (b)(c) 178.8
Selling, general, and administrative
expenses .................................. 35.1 35.5 ( 19.6) (b)(c) 51.0
Depreciation and amortization ............... 49.4 15.1 9.0 (d) 73.5
-------- -------- ---------- --------
Total operating expenses ................... 338.7 173.9 ( 35.7) 476.9
-------- -------- ---------- --------
Operating income (loss) .................... 46.1 ( 9.0) 34.9 72.0
Nonoperating expenses (income):
Interest expense ............................ 78.0 4.5 23.7 (e) 106.2
Other expenses, net ......................... 1.9 0.7 -- 2.6
Interest income ............................. ( 5.8) ( 0.6) -- ( 6.4)
-------- -------- ---------- ---------
Income (loss) before income taxes ............ ( 28.0) ( 13.6) 11.2 ( 30.4)
Provision (benefit) for income taxes ......... ( 8.5) ( 1.7) 1.3 (f) ( 8.9)
-------- -------- ---------- ---------
Net income (loss) ........................... $ (19.5) $ (11.9) $ 9.9 $ (21.5)
========= ========= ========== =========
Net loss per share ........................... $ (0.55)
==========
</TABLE>
- ---------
(a) For the period from the inception date of January 12, 1996 through December
31, 1996, which includes results of operations of the acquired business
from May 1, 1996 through December 31, 1996.
(b) To reflect the impact of AMF Group Holdings not acquiring in the
Acquisition the operations of one bowling center in Switzerland and one
bowling center in Spain.
(c) To eliminate a one-time charge of $44.0 million for special bonuses and
payments made by the Prior Owners in April 1996.
(d) To reflect the increase in depreciation and amortization expense resulting
from the allocation of the purchase price to fixed assets and goodwill and
a change in the method of depreciation of fixed assets. The Predecessor
Company principally used the double declining balance method. The amount
of the pro forma adjustment for depreciation was determined using the
straight-line method over the estimated lives of the assets acquired.
Goodwill is being amortized over 40 years.
(e) To reflect the incremental interest expense associated with the issuance of
debt which partially funded the Acquisition.
(f) To give effect to the change in status of the U.S. and international
subsidiaries of AMF Bowling from S corporations to taxable corporations
under the U.S. federal tax laws upon consummation of the Acquisition.
34
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro Forma Results of Operations (in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Predecessor AMF
Company Bowling, Inc.
Twelve Months Twelve Months
Ended Pro Forma Ended
12/31/95 Adjustments 12/31/95
----------------- ------------------- --------------
<S> <C> <C> <C>
Operating revenue $ 564.9 $ (2.3) (h) $ 562.6
--------- ----------- --------
Operating expenses:
Cost of goods sold ..................................... 184.1 ( 0.3) (h) 183.8
Bowling center operating expenses ........... .......... 166.5 ( 1.5) (h) 165.0
Selling, general, and administrative expenses ......... 50.8 ( 0.3) (i) 50.5
Depreciation and amortization ............... .......... 39.1 27.9 (j) 67.0
--------- ----------- --------
Total operating expenses ................... .......... 440.5 25.8 466.3
--------- ----------- --------
Operating income (loss) .................... .......... 124.4 ( 28.1) 96.3
Nonoperating expenses (income):
Interest expense ............................ .......... 15.7 88.6 (k) 104.3
Other expenses, net ......................... .......... 1.0 -- 1.0
Interest income ............................. .......... ( 2.2) -- ( 2.2)
Foreign currency transaction loss ........... .......... 1.0 -- 1.0
--------- ----------- ---------
Income (loss) before income taxes ....................... 108.9 ( 116.7) ( 7.8)
Provision (benefit) for income taxes .................... 40.6 (g) ( 30.6) (l) 10.0
--------- ----------- ---------
Net income (loss) .......................... .......... $ 68.3 $ (86.1) $ (17.8)
========= =========== =========
Net loss per share ...................................... $ (0.47)
==========
</TABLE>
- ---------
(g) Reflects the pro forma income tax provision that would have been provided
had the Predecessor Company consisted of taxable C corporations, rather
than S corporations.
(h) To reflect the net reduction in revenue and expenses related to the
following:
(i) Certain assets of the Predecessor Company not purchased by AMF Group
Holdings.
(ii) Impact of AMF Group Holdings not acquiring one bowling center in
Switzerland and one bowling center in Spain.
(iii) Concurrent with the Acquisition, amounts due from and payable to the
Prior Owners and other related parties were cancelled.
(i) To reflect the termination of management fees charged by an affiliate of the
Prior Owners.
(j) To reflect the increase in depreciation and amortization expense resulting
from the allocation of the purchase price to fixed assets and goodwill and a
change in the method of depreciation of fixed assets. The Predecessor
Company principally used the double declining balance method. The amount of
the pro forma adjustment for depreciation was determined using the
straight-line method over the estimated lives of the assets acquired.
Goodwill is being amortized over 40 years.
(k) To reflect the incremental interest expense associated with the issuance of
debt which partially funded the Acquisition.
(l) To reflect the pro forma income tax benefit associated with the pro forma
adjustments.
35
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 4. Inventories
Inventories at December 31, 1997 and 1996, consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Bowling Products, at FIFO:
Raw materials ...................... $ 15,283 $ 11,683
Work in progress ................... 2,279 2,335
Finished goods and spare parts ..... 33,082 23,195
Bowling Centers, at average cost:
Merchandise inventory .............. 5,924 3,788
-------- --------
$ 56,568 $ 41,001
======== ========
</TABLE>
Note 5. Deferred Taxes and Other Current Assets
The components of deferred taxes and other current assets at December 31,
1997 and 1996, consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred income taxes ......... $ 5,547 $ 4,847
Advances or deposits .......... 3,288 2,018
Other ......................... 8,214 4,313
-------- --------
$ 17,049 $ 11,178
======== ========
</TABLE>
Note 6. Property and Equipment
Property and equipment, net at December 31, 1997 and 1996, consists of the
following:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Land ........................................... $ 113,629 $ 90,512
Buildings and improvements ..................... 280,046 210,298
Equipment, furniture, and fixtures ............. 444,437 304,067
Other .......................................... 7,282 2,631
--------- ---------
845,394 607,508
Less: accumulated depreciation and amortization (94,509) (28,200)
--------- ---------
$ 750,885 $ 579,308
========= =========
</TABLE>
Depreciation and amortization expense related to property and equipment
was $64,480 for 1997 and $28,200 for 1996.
Note 7. Other Long-Term Assets
Other long-term assets are primarily composed of deferred income taxes,
long-term rent deposits, long-term portion of noncompete assets, and notes
receivable.
36
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 8. Accrued Expenses
Accrued expenses at December 31, 1997 and 1996, consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accrued compensation ........... $ 9,523 $ 9,141
Accrued interest ............... 8,253 8,640
League bowling accounts ........ 14,237 7,676
Accrued installation costs ..... 4,868 4,451
Other .......................... 27,984 24,449
-------- --------
$ 64,865 $ 54,357
======== ========
</TABLE>
Note 9. Long-Term Debt
Long-term debt at December 31, 1997 and 1996, consists of the following:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Bank debt .............................. $ 619,362 $ 564,625
Senior subordinated notes .............. 250,000 250,000
Senior subordinated discount notes ..... 189,261 274,663
Mortgage and equipment note ............ 1,976 1,965
----------- -----------
Total debt ............................ 1,060,599 1,091,253
Current maturities ..................... (27,376) (42,376)
----------- -----------
Total long-term debt .................. $ 1,033,223 $ 1,048,877
=========== ===========
</TABLE>
Bank Debt
The bank debt (the "Senior Debt") was incurred pursuant to a credit
agreement dated as of May 1, 1996, and amended and restated as of November 7,
1997 (the "Credit Agreement"), between Bowling Worldwide and its lenders. The
Credit Agreement provides for (i) senior secured term loan facilities
aggregating $455.3 million (the "Term Facilities") and (ii) a senior secured
revolving credit facility of up to $355.0 million (the "Bank Facility", and
together with the Term Facilities, the "Senior Facilities").
The Term Facilities consist of the following three tranches: (i) a Term
Loan Facility of $130.0 million, (ii) an Amortization Extended Loans ("AXELs
SM") Series A Facility of $187.5 million, and (iii) an AXELsSM Series B
Facility of $137.8 million. Maturity dates of the three tranches and scheduled
amortization payments are included in tables below.
The Term Facilities bear interest, at the Company's option, at Citibank's
customary base rate or at Citibank's Eurodollar rate, in each case, plus a
margin that varies in accordance with a performance pricing grid that is based
on the ratio of total debt to EBITDA (defined as earnings before net interest
expense, income taxes, depreciation and amortization, and other income and
expenses) for the rolling period (defined as the four most recent quarters)
then most recently ended. Until November 7, 1998, the margin applicable to
advances under the Term Loan Facility bearing interest based on Citibank's
customary base rate will range from 0.75% to 0.875%, and the margin applicable
to advances under the Term Loan Facility bearing interest based on Citibank's
Eurodollar rate will range from 1.75% to 1.875%. Thereafter, the margin
applicable to advances under the Term Loan Facility bearing interest based on
Citibank's customary base rate will range from 0.00% to 0.875% and the margin
applicable to advances under the Term Loan Facility bearing interest based on
Citibank's Eurodollar rate will range from 0.75% to 1.875%. At December 31,
1997, the applicable margin for advances under the Term Loan Facility bearing
interest based on Citibank's customary base rate was 0.75% and the applicable
margin for advances under the Term Loan Facility bearing interest based on
Citibank's Eurodollar rate was 1.75%. At December 31, 1997, the interest rate
for advances under the Term Loan Facility was 7.6875%.
Until November 7, 1998, the margin applicable to advances under the AXELs
SMSeries A Facility bearing interest based on Citibank's customary base rate
will range from 1.00% to 1.125% and the margin applicable to advances under the
37
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AXELsSM Series A Facility bearing interest based on Citibank's Eurodollar rate
will range from 2.00% to 2.125%. Thereafter, the margin applicable to advances
under the AXELsSM Series A Facility bearing interest based on Citibank's
customary base rate will range from 0.875% to 1.125% and the margin applicable
to advances under the AXELsSM Series A Facility bearing interest based on
Citibank's Eurodollar rate will range from 1.875% to 2.125%. At December 31,
1997, the applicable margin for advances under the AXELsSM Series A Facility
bearing interest based on Citibank's customary base rate was 1.00% and the
applicable margin for advances under the AXELsSM Series A Facility bearing
interest based on Citibank's Eurodollar rate was 2.00%. At December 31, 1997,
the interest rate for advances under the AXELsSM Series A Facility was 7.9375%.
Until November 7, 1998, the margin applicable to advances under the
AXELsSM Series B Facility bearing interest based on Citibank's customary base
rate will range from 1.25% to 1.375% and the margin applicable to advances
under the AXELsSM Series B Facility bearing interest based on Citibank's
Eurodollar rate will range from 2.25% to 2.375%. Thereafter, the margin
applicable to advances under the AXELsSM Series B Facility bearing interest
based on Citibank's customary base rate will range from 1.125% to 1.375% and
the margin applicable to advances under the AXELsSM Series B Facility bearing
interest based on Citibank's Eurodollar rate will range from 2.125% to 2.375%.
At December 31, 1997, the applicable margin for advances under the AXELsSM
Series B Facility bearing interest based on Citibank's customary base rate was
1.25% and the applicable margin for advances under the AXELsSM Series B
Facility bearing interest based on Citibank's Eurodollar rate was 2.25%. At
December 31, 1997, the interest rate for advances under the AXELsSM Series B
Facility was 8.1875%
The Bank Facility has an aggregate amount available of $355.0 million, and
will mature on March 31, 2002. The Bank Facility is fully revolving until its
final maturity and bears interest, at the Company's option, at Citibank's
customary base rate or at Citibank's Eurodollar rate, in each case, plus a
margin which varies in accordance with a performance pricing grid which is
based on the ratios of total debt to EBITDA (defined above). Until November 7,
1998, the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's customary base rate will range from 0.75% to
0.875% and the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's Eurodollar rate will range from 1.75% to 1.875%.
Thereafter, the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's customary base rate will range from 0.00% to
0.875% and the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's Eurodollar rate will range from 0.75% to 1.875%.
At December 31, 1997, the applicable margin for advances under the Bank
Facility bearing interest based on Citibank's customary base rate was 0.75% and
the applicable margin for advances under the Bank Facility bearing interest
based on Citibank's Eurodollar rate was 1.75%. At December 31, 1997, the
interest rate for advances under the Bank Facility was 7.6875%.
The Credit Agreement contains certain covenants, including, but not
limited to, covenants related to cash interest coverage, fixed charge coverage,
payments on other debt, mergers and acquisitions, sales of assets, guarantees
and investments. The Credit Agreement also contains certain provisions which
limit the amount of funds available for transfer from Bowling Worldwide to AMF
Group Holdings, and from AMF Group Holdings to AMF Bowling. Limits exist on,
among other things, the declaration or payment of dividends, distributions of
assets, amount of debt and issuance or sale of capital stock.
So long as Bowling Worldwide is not in default of the covenants contained
in the Credit Agreement, it may i) declare and pay dividends in common stock;
ii) declare and pay cash dividends to the extent necessary to make payments of
approximately $0.15 million in May 1997 and, to the extent necessary, to make
payments of approximately $0.15 million due in May 1998 under certain noncompete
agreements with the Prior Owners; iii) declare and pay cash dividends for
general administrative expenses not to exceed $0.25 million; and iv) declare and
pay cash dividends not to exceed $2.0 million for the repurchase of Common
Stock. As of December 31, 1997, Bowling Worldwide was in compliance with all of
its covenants.
The lenders (the "Senior Lenders") of the Senior Debt are secured by
collateral described in the Senior Debt security agreement, intellectual
property security agreement, mortgages and any other agreements with the Senior
Lenders that create a lien in favor of the Senior Lenders. The collateral
includes, but is not limited to stock in subsidiaries of AMF Bowling Worldwide,
cash and cash equivalents, equipment, inventory, investments, intellectual
property and mortgages.
38
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Mortgage and Equipment Note
At December 31, 1997 and 1996, a mortgage and equipment note relating to
one U.S. bowling center bore interest at 9.175%.
Notes
The senior subordinated notes will mature on March 15, 2006. Interest
accrues from the date of issuance at an annual rate of 10 7/8% and is payable
in cash semiannually in arrears on March 15 and September 15 of each year which
commenced on September 15, 1996.
Prior to December 15, 1997, the senior subordinated discount notes had a
fully-accreted value of $452.0 million based on a maturity date of March 15,
2006. On December 15, 1997, the Company redeemed $118.9 million in principal
which represented a fully-accreted value of $175.0 million using a portion of
the proceeds received from an initial public offering of AMF Bowling common
stock. See "Note 12. Stockholders' Equity". The remaining balance of senior
subordinated discount notes will mature on March 15, 2006, at a fully-accreted
value of $277.0 million. The senior subordinated discount notes will result in
an effective yield of 12 1/4% per annum, computed on a semiannual bond
equivalent basis. No interest is payable prior to March 15, 2001. Commencing
March 15, 2001, interest will accrue and be payable in cash semiannually in
arrears on March 15 and September 15 of each year beginning with September 15,
2001.
The Company's payment obligations under the senior subordinated notes and
the senior subordinated discount notes (together, the "Notes") are jointly and
severally guaranteed on a senior subordinated basis by AMF Group Holdings and
each of Bowling Worldwide's subsidiaries identified below in "Note 21.
Condensed Consolidating Financial Statements" (collectively, the "Guarantors").
The guarantees of the Notes are subordinated to the guarantees of the
Senior Debt and the mortgage and equipment note outstanding at December 31,
1997, referred to above. The Notes are general, unsecured obligations of
Bowling Worldwide, are subordinated in right of payment to all Senior Debt of
Bowling Worldwide, and rank pari passu with all existing and future
subordinated debt of Bowling Worldwide. The claims of the holders of the Notes
will be effectively subordinated to all other indebtedness and other
liabilities (including trade payables and capital lease obligations) of Bowling
Worldwide's subsidiaries that are not Guarantors and through which Bowling
Worldwide will conduct a portion of its operations. See "Note 21. Condensed
Consolidating Financial Statements."
Prior to March 15, 1999, up to $100 million in aggregate principal amount
of senior subordinated notes will be redeemable at the option of Bowling
Worldwide, on one or more occasions, from the net proceeds of public or private
sales of common stock of, or contributions to the common equity capital of,
Bowling Worldwide, at a price of 110.875% of the principal amount of the senior
subordinated notes, together with accrued and unpaid interest, if any, to the
date of redemption; so long as at least $150 million in aggregate principal
amount of senior subordinated notes remains outstanding after such redemption.
Similarly, prior to March 15, 1999, the senior subordinated discount notes will
be redeemable at the option of Bowling Worldwide, on one or more occasions,
from the net proceeds of public or private sales of common stock of, or
contributions to the common equity capital of, Bowling Worldwide, at a price of
112.25% of the accreted value of the senior subordinated discount notes; so
long as at least $150 million in accreted value of senior subordinated discount
notes remains outstanding after such redemption.
The indenture governing the senior subordinated notes and the indenture
governing the senior subordinated discount notes (the "Note Indentures") contain
certain covenants that, among other things, limit the ability of Bowling
Worldwide and its Restricted Subsidiaries, as defined therein, to incur
additional indebtedness and issue Disqualified Stock, as defined therein, pay
dividends or distributions or make investments or make certain other Restricted
Payments, as defined therein, enter into certain transactions with affiliates,
dispose of certain assets, incur liens securing pari passu and subordinated
indebtedness of Bowling Worldwide and engage in mergers and consolidations. As
of December 31, 1997, Bowling Worldwide was in compliance with all of its
covenants.
39
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Annual maturities of long-term debt, including accretion of the senior
subordinated discount notes, as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
December 31,
- ----------------------
<S> <C>
1998 ............... $ 27,376
1999 ............... 32,376
2000 ............... 34,251
2001 ............... 83,001
2002 ............... 279,110
Thereafter ......... 692,246
----------
$1,148,360
==========
</TABLE>
Interest Rate Cap Agreements
During 1996, Bowling Worldwide entered into an interest rate cap agreement
with Goldman Sachs Capital Markets, L.P., to reduce the interest rate risk of
its Senior Debt. The notional amount of this cap was $300.0 million at December
31, 1997. Under the terms of this agreement, Bowling Worldwide receives payment
if the three-month LIBOR rises above 5.75% through April 1997, above 6.50% from
May 1997 through April 1998 and above 7.5% from May 1998 through October 1998.
No amounts were received under this agreement during 1996 or 1997. During 1997,
Bowling Worldwide entered into a second interest rate cap agreement with
Goldman Sachs Capital Markets, L.P. to further reduce the interest rate risk of
its Senior Debt. The notional amount of this cap was $100.0 million at December
31, 1997. Under the terms of this agreement, Bowling Worldwide receives payment
if the three-month LIBOR rises above 7.00% from July 7, 1997 through March 31,
1998. No amounts were received under this agreement during 1997.
Bowling Worldwide is exposed to credit-related loss in the event of
non-performance by the counterparty. Bowling Worldwide believes its exposure to
potential loss due to counterparty non-performance is minimized primarily due
to the relatively strong credit rating of the counterparty.
Average amounts outstanding and average borrowing rates for 1997 were as
follows:
<TABLE>
<CAPTION>
Outstanding At Average Average
December 31, Amounts Borrowing
Description Maturity Dates 1997 Outstanding Rates
- -------------------------------------- ----------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Term Loan Facility ................... March 31, 2002 $ 122,500 $ 205,587 8.27%
AXELSSM A Facility ................... March 31, 2003 186,750 190,085 8.56
AXELSSM B Facility ................... March 31, 2004 137,000 138,314 8.73
Bank Facility ........................ March 31, 2002 173,112 32,669 8.75
Mortgage and Equipment Notes ......... October 1, 2013 1,976 1,970 9.18
</TABLE>
Prior to the Credit Agreement, the Company had borrowings under an
acquisition facility (the "Acquisition Facility") which was included in the
Senior Debt. Average amounts outstanding under the Acquisition Facility between
January 1, 1997 and November 7, 1997 were $77,197, at an average borrowing rate
of 8.72%.
Deferred Financing Costs
Costs incurred to obtain bank financing and issue bond financing for the
Acquisition, as discussed above, are amortized over the lives of the various
types of debt. Bank financing costs, which were incurred to obtain bank
financing for the Acquisition, have been amortized over eight years and were
entirely written off in the fourth quarter of 1997 in connection with the
Credit Agreement. Bank financing costs associated with the Credit Agreement are
amortized using the effective interest rate method over approximately 6.5
years. Bond financing costs are amortized over ten years using the effective
interest rate method. An interest rate cap agreement included in deferred
financing costs is amortized over the term of the agreement beginning November
1, 1996, and ending October 31, 1998. Amortization expense for financing costs
was $4,856 in 1997 and $3,252 in 1996. Interest expense for interest rate cap
agreements was $1,823 in 1997 and $304 in 1996.
40
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Extraordinary Charges
The Company recorded after-tax extraordinary charges totaling $23,366 in
the fourth quarter of 1997 as a result of entering into the Credit Agreement,
the premium paid to redeem a portion of the senior subordinated discount notes
and the write-off of the portion of bond financing costs attributable to the
senior subordinated discount notes redeemed.
Other
The Company is highly leveraged as a result of indebtedness incurred in
connection with the Acquisition and subsequent acquisitions. Although the
Company believes it will be able to meet its debt obligations, there is no
assurance that the Company will generate sufficient cash flow in a timely
manner to satisfy scheduled principal and interest payments.
Note 10. Income Taxes
Income (loss) before income taxes at December 31, 1997 and 1996, consists
of the following:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
U.S. ................... $ (55,695) $ (28,427)
International .......... 12,083 411
---------- ----------
$ (43,612) $ (28,016)
========== ==========
</TABLE>
The income tax provision (benefit) at December 31, 1997 and 1996, consists
of the following:
<TABLE>
<CAPTION>
1997 1996
-------------- ------------
<S> <C> <C>
Current income tax expense
U.S. Federal ................. $ -- $ --
State and local .............. -- --
International ................ 6,965 5,508
---------- ---------
Total current provision ..... 6,965 5,508
Deferred tax benefit
U.S. Federal ................. (18,039) (12,274)
State and local .............. (1,702) (1,766)
International ................ -- --
---------- ---------
Total deferred benefit ...... (19,741) (14,040)
---------- ---------
Total benefit ............... $ (12,776) $ (8,532)
========== =========
</TABLE>
41
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The tax effects of temporary differences and carryforwards which give rise
to deferred tax assets and liabilities at December 31, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred income tax assets
Current assets
Reserves not deductible for tax purposes ..... $ 5,547 $ 4,847
-------- -------
Noncurrent assets
Net operating losses ......................... 38,460 8,225
Foreign tax credits .......................... 12,417 5,452
Interest expense on high-yield debt .......... 12,266 8,533
Financing costs .............................. 7,549 --
Translation effects .......................... 1,069 --
Other ........................................ 104 --
-------- -------
Total noncurrent deferred tax assets .......... 71,865 22,210
-------- -------
Total deferred tax assets ..................... 77,412 27,057
-------- -------
Deferred income tax liabilities
Goodwill amortization ......................... 14,670 5,840
Depreciation on property and equipment ........ 41,569 20,265
-------- -------
Total noncurrent deferred tax liabilities ..... 56,239 26,105
-------- -------
Net deferred tax assets ....................... $ 21,173 $ 952
======== =======
</TABLE>
In connection with the Acquisition, the Company has made a joint tax
election with the Prior Owners for certain entities under Section 338 (h) (10)
of the IRC. The effect of this election is the revaluation of the assets and
liabilities of the electing entities, with any residual purchase price
allocated to goodwill. The nonelecting entities were acquired by both stock and
asset purchases.
The gross amount of net operating losses ("NOLs") the Company may utilize
on future tax returns is $110,007. The NOLs may be carried forward for fifteen
years until expiration. Foreign tax credits eligible for carry forward total
$12,417, and expire in five years. The Company had no valuation allowance
related to income tax assets as of December 31, 1997 and 1996, and there was no
change in the valuation allowance during 1997. Management believes that it is
more likely than not that the tax benefits will be realized.
The provision for income taxes differs from the amount computed by
applying the statutory rate of 35 percent for 1997 and 1996 to loss before
taxes. The principal reasons for these differences are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
U.S. Federal, at statutory rate .............................. $ (15,264) $ (9,806)
Increase resulting from:
Meals and entertainment ..................................... 275 159
Goodwill relating to acquisition of international bowling
centers ..................................................... 1,658 1,093
Disallowance of certain high yield debt ..................... 260 192
Other, net .................................................. 295 (170)
---------- ---------
Total ........................................................ $ (12,776) $ (8,532)
========== =========
</TABLE>
42
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 11. Commitments and Contingencies
Bowling Centers and Bowling Products lease certain facilities and
equipment under operating leases which expire at various dates through 2012.
Bowling Centers has certain ground leases, associated with several centers,
which expire at various dates through 2058. These leases generally contain
renewal options and require payments of taxes, insurance, maintenance, and
other expenses in addition to the minimum annual rentals. Certain leases
require contingent payments based on usage of equipment above certain specified
levels. Such contingent rentals amounted to $1,200 in 1997 and $912 in 1996.
Total rent expense under operating leases aggregated approximately $24,117 in
1997 and $13,737 in 1996.
Future minimum rental payments under the operating lease agreements as of
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
- ----------------------
<S> <C>
1998 ............... $ 23,845
1999 ............... 19,960
2000 ............... 17,350
2001 ............... 14,904
2002 ............... 12,857
Thereafter ......... 82,721
---------
$ 171,637
=========
</TABLE>
Litigation and Claims
The Company is involved in certain lawsuits arising out of normal business
operations. The majority of these relate to accidents at bowling centers.
Management believes that the ultimate resolution of such matters will not have
a material adverse effect on the Company's results of operations or financial
position. While the ultimate outcome of the litigation and claims against the
Company cannot presently be determined, management believes the Company has
made adequate provision for possible losses.
Note 12. Stockholders' Equity
Stockholders Agreement
On April 30, 1996, AMF Bowling and the institutional stockholders of AMF
Bowling (the "Stockholders") entered into a stockholders agreement (the
"Stockholders Agreement") which regulates the relationship among AMF Bowling
and the Stockholders. The Stockholders Agreement primarily provides for,
subject to certain limitations and exceptions, (a) the establishment and
nomination of the Board of Directors and an Executive Committee; (b) certain of
the Stockholders to purchase additional shares of Common Stock in order to
finance acquisitions, capital expenditures, investments in partnerships or
joint ventures, or any similar transactions or expenditures; (c) Goldman Sachs
to have the exclusive right to perform all consulting, financing, investment
banking and similar services for AMF Bowling and its subsidiaries, for
customary compensation and on terms customary for similar engagements with
unaffiliated third parties; and (d) guidance in the event a Stockholder
determines to sell its shares of Common Stock. The foregoing rights and
obligations will terminate under certain circumstances; and notwithstanding
those circumstances, in the event of any merger, recapitalization,
consolidation, reorganization or other restructuring of AMF Bowling as a result
of which the Stockholders own less than a majority of the outstanding voting
power of the entity surviving such transaction, the Stockholders Agreement will
terminate.
Registration Rights Agreement
On April 30, 1996, AMF Bowling and the Stockholders entered into a
registration rights agreement (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, subject to certain limitations and
exceptions, certain Stockholders may make demands of AMF Bowling to register
shares of Common Stock held by such Stockholders; provided, that AMF Bowling is
not required to so register unless the aggregate offering price is at least $50
million. Upon a demand for registration by certain Stockholders, each of the
other Stockholders is to be given the opportunity to participate on a pro rata
basis in the registration demanded. The Registration Rights Agreement also
provides the Stockholders with
43
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
piggyback registration rights, which allow each of them to include all or a
portion of their shares of Common Stock under a registration statement filed by
AMF Bowling, subject to certain exceptions and limitations.
In September 1997, AMF Bowling's institutional stockholders purchased an
aggregate of 1,780,000 shares of Common Stock for $20.00 per share. The
aggregate proceeds of $35.6 million were used to fund acquisitions and for
other corporate purposes.
On August 21, 1997, AMF Bowling filed a registration statement with the
Securities and Exchange Commission for an initial public offering (the "Initial
Public Offering") of Common Stock. On November 7, 1997, AMF Bowling issued
15,525,000 shares of its common stock at $19.50 per share pursuant to the
Initial Public Offering. The net proceeds of the Initial Public Offering were
approximately $279.1 million after deducting the underwriting discount and
expenses payable by AMF Bowling, and were used to repay $150.8 million of
indebtedness under the Credit Agreement and to redeem $118.9 million in
principal of the senior subordinated discount notes of Bowling Worldwide. See
"Note 9. Long-Term Debt".
Note 13. Employee Benefit Plans
The Company has a defined contribution 401(k) plan to which U.S. employees
may make voluntary contributions based on their compensation. Under the
provisions of the plan, the Company can, at its option, match a discretionary
percentage of employee contributions and make an additional profit-sharing
contribution as determined by the Board of Directors. Employer contributions
vest 100 percent after a five-year period. The amounts charged to expense under
this plan were $1,779 in 1997 and $1,060 in 1996.
Certain of the Company's international operations have employee benefit
plans covering selected employees. These plans vary as to the funding,
including local government, employee, and employer funding. Each international
operation has provided for pension expense and made contributions to these
plans in accordance with the requirements of the plans and local country
practices. The amounts charged to expense under these plans aggregated $814 in
1997 and $506 in 1996.
Bowling Worldwide has entered into employment agreements with two
executives, each for a term ending in May 1999. Each agreement calls for
compensation consisting of a salary and an incentive bonus of up to 50 percent
of the executive's annual salary if the Company meets certain operational and
financial targets. Each employment agreement also calls for a continuation of
certain benefits, under specified circumstances, following termination of
employment.
These two executives were also granted options to purchase a total of
235,000 shares of Common Stock. Unless sooner exercised or forfeited, as
provided, the options expire in May 2006. Twenty percent of the options vest on
each of the first five anniversaries of the Closing Date. The exercise price of
the options is $10.00 per share, which approximated the fair value of the
Common Stock at the date of the grants.
On February 28, 1997, an executive resigned from all positions with the
Company. As part of the severance arrangement, AMF Bowling repurchased all of
the shares of Common Stock owned by the executive and all options held by the
executive were cancelled.
In connection with the Acquisition, AMF Bowling adopted a stock incentive
plan (the "1996 Plan") under which AMF Bowling may grant incentive awards in
the form of shares of Common Stock, options to purchase shares of Common Stock
("Stock Options"), and stock appreciation rights to certain officers,
employees, consultants, and nonemployee directors ("Participants") of AMF
Bowling and its affiliates. The total number of shares of Common Stock reserved
and available for grant under the 1996 Plan is 1,767,151. A committee of AMF
Bowling's Board of Directors (the "Committee") is authorized to make grants and
various other decisions under the 1996 Plan and to make determinations as to a
number of the terms of awards granted under the 1996 Plan. In 1997 and 1996,
the Committee granted Stock Options to Participants to purchase a total of
703,500 and 1,119,000 shares of Common Stock, respectively. All such Stock
Options were granted at an exercise price of $10.00 per share. Twenty percent
of the options vest on each of the first five anniversaries of the grant dates.
Stock Options are nontransferable (except under certain limited circumstances)
and, unless otherwise determined by the Committee, have a term of ten years.
The number of Stock Options outstanding to senior management, other
employees, and directors at December 31, 1997 and 1996, total 1,573,500 and
1,096,500, respectively. In addition to Stock Options outstanding under the
Stock Incentive
44
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Plan, 130,000 Stock Options granted to Douglas J. Stanard on May 1, 1996 were
outstanding at December 31, 1997 and 1996. Of the total Stock Options awarded
under the 1996 Plan, 265,966 were exercisable during 1997. None of these were
exercised. Of the 130,000 Stock Options granted to Mr. Stanard, 26,000 were
exercisable during 1997 and none of these were exercised. None of the Stock
Options awarded under the 1996 Plan and to Mr. Stanard were exercisable during
1996. Forfeited Stock Options totaled 226,500 and 22,500 in 1997 and 1996,
respectively.
The 1996 Plan will terminate ten years after its effective date; however,
awards outstanding as of such date will not be affected or impaired by such
termination. AMF Bowling's Board of Directors and the Committee have authority
to amend the 1996 Plan and awards granted thereunder, subject to the terms of
the 1996 Plan.
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", and elected to account for its stock options under APB Opinion
No. 25, under which no compensation cost has been recognized. Had compensation
cost for these stock options been determined consistent with SFAS No. 123, the
Company's net losses for 1997 and 1996 would have been increased to $56,503 and
$19,858, respectively and the Company's net losses per share for 1997 and 1996
would have been increased to $1.25 and $0.50, respectively.
The weighted-average fair value of options granted during 1997 and 1996 is
$6.78 and $3.05 per option, respectively. The 1,703,500 options outstanding at
December 31, 1997 have a weighted-average exercise price of $10.00 and a
weighted-average remaining contractual life of 9 years.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for grants in 1997: risk-free rate of return of 6.5%;
expected dividend yield of zero; expected time of exercise of five years;
expected volatility of 27.5%. The following weighted-average assumptions were
used for grants in 1996: risk-free rate of return of 6.5%; expected dividend
yield of zero; expected time of exercise of ten years; expected volatility of
zero due to the lack of a public trading market in 1996 for the securities
underlying the options based on the minimum value method.
1998 Stock Incentive Plan
Subject to shareholder approval, AMF Bowling's Board of Directors has
approved the 1998 Stock Incentive Plan (the "1998 Plan") under which AMF
Bowling may grant to employees of the Company and its affiliates incentive
awards ("Awards") in the form of Stock Options, stock appreciation rights and
shares of Common Stock that are subject to certain terms and conditions. Two
million shares of Common Stock will be reserved and available for issuance
under the 1998 Plan. In addition, shares of Common Stock that have been
reserved but not issued under the 1996 Plan, and shares which are subject to
awards under the 1996 Plan that expire or otherwise terminate, may be granted
as Awards pursuant to the 1998 Plan. There are 193,651 shares of Common Stock
under the 1996 Plan that are available for grant of awards under that plan.
Shares allocated to Awards granted under the 1998 Plan which are later
forfeited, expire or otherwise terminate (including shares subject to Stock
Appreciation Rights that are exercised for cash) may again be used for Awards
under the 1998 Plan. No more than two hundred thousand shares of Common Stock
may be allocated to the Awards granted under the 1998 Plan to a Participant in
any one year.
Awards under the 1998 Plan are contingent on Board and shareholder
approval. As of February 20, 1998, no shares of Common Stock were awarded under
the 1998 Plan. Unless the Board sooner terminates it, the 1998 Plan will
terminate ten years after its effective date.
Note 14. Supplemental Disclosures to the Consolidated Statements of Cash Flows
Cash paid for interest and income taxes in 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Interest .............. $83,200 $44,465
Income taxes .......... $ 5,518 $ 7,990
</TABLE>
45
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Net cash used for business acquisitions in 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
Bowling
Center
Acquisitions
-------------
<S> <C>
Year ended December 31, 1997:
Working capital, other than cash acquired ....... $ 6,876
Plant and equipment ............................. (200,178)
Purchase price in excess of the net assets acquired (20,916)
Other assets .................................... (9,106)
Noncurrent liabilities .......................... 8,563
----------
Net cash used for business acquisitions ......... $ (214,761)
==========
</TABLE>
<TABLE>
<CAPTION>
Other
Bowling
Charan Center
Acquisition Acquisition Acquisitions Total
----------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Period ended December 31, 1996:
Working capital, other than cash acquired .......... $ (17,385) $ (5,028) $ -- $ (22,413)
Plant and equipment ................................ (537,827) (97,857) (5,182) (640,866)
Purchase price in excess of the net assets acquired (784,217) -- -- (784,217)
Other assets ....................................... (18,330) -- -- (18,330)
Warrants to purchase shares of Common Stock ........ 8,700 -- -- 8,700
Noncurrent liabilities ............................. 6,198 -- -- 6,198
------------- ----------- --------- -------------
Net cash used for business acquisitions ............ $ (1,342,861) $ (102,885) $ (5,182) $ (1,450,928)
============= =========== ========= =============
</TABLE>
Noncash financing activities in 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Issuance of Common Stock and Stock Options in connection
with a service contract ............................... $ 4,028 --
Warrants to purchase shares of Common Stock ............ -- $ 8,700
Notes receivable from three executive officers for the
purchase of Common Stock .............................. -- 3,000
</TABLE>
Note 15. Acquisitions
On October 10, 1996, AMF Bowling Centers, Inc. ("AMF Bowling Centers"), a
Virginia corporation and an indirect, wholly owned subsidiary of Bowling
Worldwide, completed the acquisition (the "Charan Acquisition") of 50 bowling
centers and certain related assets and liabilities from Charan Industries, Inc.
("Charan"), a Delaware corporation, pursuant to an Asset Purchase Agreement
(the "Asset Purchase Agreement"), dated as of September 10, 1996, by and
between AMF Bowling Centers and Charan.
The purchase price of the Charan Acquisition, net of cash acquired, was
approximately $102.9 million, subject to certain adjustments. The Charan
Acquisition was funded with approximately $40.0 million from the sale of equity
by AMF Bowling to its institutional stockholders and one of its directors, and
with approximately $62.9 million from available borrowings under Bowling
Worldwide's then existing Acquisition Facility.
The following unaudited pro forma information has been prepared assuming
the Charan Acquisition had occurred as of January 1, 1996 and 1995, respectively
and is based on pro forma AMF Bowling results of operations presented in "Note
3. Pro Forma Results of Operations." The pro forma information is presented for
information purposes only and is not necessarily indicative of what would have
occurred if the acquisition had occurred as of those dates. In addition, the pro
forma information is not intended to be a projection of future results of
operations.
46
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro Forma Consolidated Data (unaudited):
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
(in millions, except per
share data)
1996 1995
------------ ------------
<S> <C> <C>
Operating revenue ....................... $ 595.5 $ 622.7
Operating income ........................ $ 80.0 $ 105.2
Loss before income taxes ................ $ (26.9) $ (4.9)
Net loss ................................ $ (19.5) $ (16.1)
Net loss per share ...................... $ (0.50) $ (0.42)
Weighted average shares outstanding ..... 39,293 38,375
</TABLE>
Other Acquisitions
Since the Acquisition and prior to December 31, 1997, AMF Bowling Centers
purchased an aggregate of 179 bowling centers from various unrelated sellers
including Charan. The combined purchase price, net of cash acquired, was
approximately $322.8 million, and was funded with approximately $40.0 million
from the sale of equity by AMF Bowling to its institutional stockholders and one
of its directors, and with $282.8 million from available borrowing under Bowling
Worldwide's then existing Acquisition Facility and current Bank Facility. The
results of operations for acquired bowling centers and certain related assets
and liabilities other than the Charan Acquisition were not material in relation
to the Company's consolidated results of operations or financial position.
Subsequent to December 31, 1997, the Company acquired an additional 24
bowling centers in the United States, two bowling centers in the United Kingdom
and one center in Australia from unrelated sellers, including fifteen bowling
centers in the U.S. from Active West, Inc. ("Active West"). The aggregate
purchase price for these acquisitions was approximately $36.5 million, including
$35.3 million funded with borrowings under the Bank Facility and, with respect
to the Active West acquisition, 50,000 shares of Common Stock valued at the
closing price of $24 3/16 per share on the New York Stock Exchange on the date
of acquisition.
Note 16. Joint Ventures
In April 1997, the Company entered into a joint venture with Hong Leong
Corporation Limited, a Singapore-based conglomerate ("Hong Leong"), to build and
operate bowling centers in the Asia Pacific region. The joint venture ("Hong
Leong JV") is owned 50% by the Company and 50% by Hong Leong. The Hong Leong JV
opened its first bowling center during November 1997 in Tianjin, China.
Additional sites are being evaluated for future development.
In August 1997, the Company entered into a joint venture with Playcenter
S.A., a Sao Paulo-based amusement and entertainment company ("Playcenter"), to
build and operate bowling centers in Brazil and Argentina. The joint venture
("Playcenter JV") is owned 50% by the Company and 50% by Playcenter. As of
December 31, 1997, Playcenter JV operated eleven centers in Brazil and two
centers in Argentina.
The Company accounts for its investments in Hong Leong JV and Playcenter JV
by the equity method. The joint ventures' operations and the Company's equity in
earnings of the joint ventures are presented below (in thousands, unaudited):
<TABLE>
<CAPTION>
Joint venture
-------------------------
Joint Venture Operations Hong Leong Playcenter Total
- ------------------------------------------- ------------ ------------ -----------
<S> <C> <C> <C>
Operating revenue ................... $297 $ 4,894 $ 5,191
Operating income (loss) ............. 15 (1,215) (1,200)
Income (loss) before income taxes ... 15 (1,546) (1,531)
Income (loss) after income taxes .... 1 (1,608) (1,607)
</TABLE>
47
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Joint venture
-------------------------
AMF Equity in Earnings Hong Leong Playcenter Total
- ---------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
AMF equity in income (loss) .................................... $ -- $ (804) $ (804)
Elimination of 50% gross profit on sales to joint ventures ..... (354) (204) (558)
------ -------- --------
Equity in earnings of joint ventures ........................... $ (354) $ (1,008) $ (1,362)
====== ======== ========
</TABLE>
The joint ventures' financial position as of December 31, 1997, and the
Company's investments in the joint ventures and amounts due from Playcenter JV
as of December 31, 1997, are presented below (in thousands, unaudited):
<TABLE>
<CAPTION>
Joint Venture
--------------------------
Joint Venture Financial Position Hong Leong Playcenter
- -------------------------------------- ------------ -----------
<S> <C> <C>
Current assets ................. $ 1,240 $ 4,004
Noncurrent assets .............. 5,946 25,153
Current liabilities ............ 493 2,734
Noncurrent liabilities ......... 2,242 23,238
Stockholders' equity ........... 4.451 3,185
</TABLE>
<TABLE>
<CAPTION>
Joint Venture
-----------------------------------
Investments/Amounts Due From Joint Ventures Hong Leong Playcenter Total
- ---------------------------------------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Investments in joint ventures ................ $1,149 $ 8,669 $ 9,818
Note receivable due from joint venture ....... -- 3,781 3,781
Loan to joint venture ........................ -- 6,400 6,400
------ ------- -------
Total investment/due from joint ventures ..... $1,149 $18,850 $19,999
====== ======= =======
</TABLE>
The Company's investment in Playcenter JV includes the unamortized excess
of the Company's investment over its equity in the joint venture's net assets.
This excess was $7,076 at December 31, 1997, and is being amortized on a
straight-line basis over the estimated life of the joint venture of ten years.
The note receivable due from Playcenter JV represents the balance due for sales
of equipment to the joint venture through a Brazilian distributor. The balance
due on the equipment sales and the loan to Playcenter JV bear interest at 12%
through November 21, 1997, and 8% thereafter. Principal and interest will be
repaid to the Company by the joint venture from its operating cash flow in
excess of capital expenditures required to build additional bowling centers.
Subsequent to December 31, 1997, the Company lent Playcenter JV an additional
$1,600 under the same terms.
48
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 17. Business Segments
The Company operates in two major lines of business: operation of bowling
centers and manufacturing and sale of bowling and related products. Information
concerning operations in these business segments for 1997 and 1996 is presented
below:
<TABLE>
<CAPTION>
AMF Bowling, Inc.
-----------------------------------------------------------------------------
Year Ended December 31, 1997
(in millions)
Bowling Centers Bowling Products
-------------------------------------- --------------------------------------
Inter- Sub- Inter- Sub-
U.S. national Total U.S. national total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers ................. $ 324.7 $ 104.4 $ 429.1 $ 105.7 $ 178.9 $ 284.6
Intersegment sales .......... -- -- -- 9.4 5.3 14.7
Operating income (loss) ..... 36.5 11.1 47.6 36.6 14.4 51.0
Identifiable assets ......... 810.5 309.1 1,119.6 631.1 69.9 701.0
Depreciation and
amortization ................ 64.3 18.5 82.8 18.6 1.2 19.8
Capital expenditures ........ 33.4 6.0 39.4 8.1 1.1 9.2
Research and development
expense ................... -- -- -- 0.9 -- 0.9
<CAPTION>
AMF Bowling, Inc.
-----------------------------------
Year Ended December 31, 1997
(in millions)
Elim-
Corporate inations Total
----------- ---------- ------------
<S> <C> <C> <C>
Revenue from unaffiliated
customers ................. $ -- $ -- $ 713.7
Intersegment sales .......... -- -- 14.7
Operating income (loss) ..... (16.8) 1.1 82.9
Identifiable assets ......... 10.3 1.2 1,832.1
Depreciation and
amortization ................ 1.4 (1.5) 102.5
Capital expenditures ........ 8.6 (0.5) 56.7
Research and development
expense ................... -- -- 0.9
</TABLE>
<TABLE>
<CAPTION>
AMF Bowling, Inc.
--------------------------------------------------------------------------
Period Ended December 31, 1996
(in millions)
Bowling Centers Bowling Products
------------------------------------ -------------------------------------
Inter- Sub- Inter- Sub-
U.S. national Total U.S. national total
------------ ---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers ........................ $ 132.3 $ 67.4 $ 199.7 $ 69.1 $ 116.0 $ 185.1
Intersegment sales ................ -- -- -- 3.7 2.3 6.0
Operating income (loss) ........... 10.8 6.8 17.6 26.1 10.9 37.0
Depreciation and amortization ..... 25.6 12.1 37.7 12.1 0.5 12.6
Capital expenditures .............. 8.1 5.0 13.1 1.5 1.7 3.2
Research and development
expense .......................... -- -- -- 1.3 -- 1.3
<CAPTION>
AMF Bowling, Inc.
-----------------------------------
Period Ended December 31, 1996
(in millions)
Elim-
Corporate inations Total
----------- ---------- ------------
<S> <C> <C> <C>
Revenue from unaffiliated
customers ........................ $ -- $ -- $ 384.8
Intersegment sales ................ -- -- 6.0
Operating income (loss) ........... (8.6) 0.1 46.1
Depreciation and amortization ..... -- (0.9) 49.4
Capital expenditures .............. 1.3 (0.7) 16.9
Research and development
expense .......................... -- -- 1.3
</TABLE>
49
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 18. Geographic Segments
Information about the Company's operations in different geographic areas
for 1997 and 1996, and identifiable assets at December 31, 1997 and 1996, are
presented below:
Operating revenue:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
United States ....................... $ 439,800 $205,800
China, including Hong Kong .......... 82,400 60,700
Japan ............................... 54,700 36,800
Australia ........................... 49,500 33,500
United Kingdom ...................... 44,100 15,900
Sweden .............................. 9,100 7,400
Mexico .............................. 8,800 5,400
Korea ............................... 14,100 14,300
Spain ............................... 3,300 900
Canada .............................. 600 200
Other European countries ............ 21,300 9,900
Middle East ......................... 700 --
Eliminations ........................ (14,700) (6,000)
--------- --------
$ 713,700 $384,800
========= ========
</TABLE>
Operating revenue for the U.S. Bowling Products operation has been reduced
by $104,900 in 1997 and $63,400 in 1996 to reflect the elimination of
intracompany sales between the U.S. Bowling products operation and the Bowling
Products international sales and service branches.
Operating income (loss):
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
United States ....................... $ 56,300 $28,200
China, including Hong Kong .......... 8,300 7,600
Japan ............................... 4,500 4,000
Australia ........................... 6,700 4,900
United Kingdom ...................... 4,400 600
Sweden .............................. 1,300 1,000
Mexico .............................. 1,300 500
Korea ............................... 200 100
Spain ............................... (200) (100)
Canada .............................. (100) (100)
Middle East ......................... -- --
Other European countries ............ (900) (700)
Eliminations ........................ 1,100 100
-------- -------
$ 82,900 $46,100
======== =======
</TABLE>
Operating income for the U.S. Bowling Products operation has been
increased by $2,300 in 1997 and reduced by $1,000 in 1996 to reflect the
elimination of intracompany gross profit between the U.S. Bowling Products
operations and the Bowling Products international sales and service branches.
50
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Identifiable assets:
<TABLE>
<CAPTION>
1997 1996
-------------- ------------
<S> <C> <C>
United States ....................... $ 1,451,900 1,246,700
China, including Hong Kong .......... 36,900 32,700
Japan ............................... 38,300 40,200
Australia ........................... 112,300 138,000
United Kingdom ...................... 115,900 72,300
Sweden .............................. 3,900 3,000
Mexico .............................. 17,200 15,200
Korea ............................... 5,400 4,600
Spain ............................... 6,300 7,300
Canada .............................. 3,400 3,700
Middle East ......................... 200 --
Other European countries ............ 39,200 30,200
Eliminations ........................ 1,200 100
----------- ---------
$ 1,832,100 1,594,000
=========== =========
</TABLE>
Identifiable assets for the international sales and service branches have
been reduced by $3,200 at December 31, 1997, and $5,500 at December 31, 1996 to
reflect the elimination of intracompany gross profit in inventory between the
U.S. Bowling Products operations and the Bowling Products international sales
and service branches.
Note 19. Related Parties
Goldman Sachs and its affiliates have certain interests in the Company in
addition to being the initial purchasers of the Notes of the Company in
connection with the Acquisition. Richard A. Friedman and Terence M. O'Toole,
each of whom is a Managing Director of Goldman Sachs, and Peter M. Sacerdote,
who is a limited partner of The Goldman Sachs Group, L.P., are directors of AMF
Bowling, AMF Group Holdings and Bowling Worldwide. Goldman Sachs and its
affiliates together currently beneficially own a majority of the outstanding
voting equity of AMF Bowling; thus Goldman Sachs will be deemed to be an
"affiliate" of the Company. Goldman Sachs received an underwriting discount of
approximately $19.0 million in connection with the purchase and resale of the
Notes. Goldman Sachs also served as financial advisor to the Prior Owners in
connection with the Acquisition and received a fee in the form of 10-year
warrants to purchase 870,000 shares of Common Stock. The warrants were valued
for accounting purposes at approximately $8.7 million. In addition, Goldman
Sachs is entitled to the reimbursement of its expenses and is indemnified in
connection with its services.
In connection with the bank credit agreement which partially funded the
Acquisition, Goldman Sachs Credit Partners, L.P., acted as Syndication Agent;
Goldman Sachs Credit Partners, L.P., and Citicorp Securities, Inc. acted as
Arrangers; and Citibank, N.A. is acting as Administrative Agent. Goldman Sachs
Credit Partners, L.P., was also a lender under the bank credit agreement.
Goldman Sachs received a fee of approximately $9.5 million and was reimbursed
for expenses in connection with such services. Goldman Sachs also received a
cash fee of $5.0 million from the Company in connection with the Acquisition
and was reimbursed for related expenses.
Under the Credit Agreement, Goldman Sachs Credit Partners, L.P., acted as
Syndication Agent; Goldman Sachs Credit Partners, L.P., and Citicorp
Securities, Inc., acted as Arrangers; Citibank, N.A. is acting as
Administrative Agent and Citicorp USA, Inc. is acting as Collateral Agent.
Total fees payable to Goldman Sachs Credit Partners, L.P. in connection with
its services under the Credit Agreement aggregated approximately $900, and such
entity was reimbursed for expenses in connection with such services.
Goldman Sachs acted as the Company's lead underwriter in connection with
the Initial Public Offering. Underwriting discounts paid to the entire
underwriting syndicate in the Initial Public Offering totaled $18,941.
In 1997, the Company paid a fee of $300 to Goldman Sachs for its
representation of the Company in connection with the Company's lease of its new
bowling center at Chelsea Piers in New York.
51
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pursuant to the two employment agreements with executives of the Company
discussed in "Note 13. Employee Benefit Plans,"AMF Bowling issued to each
executive 150,000 shares of Common Stock at a purchase price of $10.00 per
share. One executive was granted an initial employment bonus of $166,667 which
he used to partially fund his purchase of shares of Common Stock. Each
executive has borrowed $1.0 million from AMF Bowling in order to fund the
portion of his purchase of Common Stock. These notes are due in May 2003 and
accrue interest, compounded annually, on the unpaid principal amount at 7
percent per annum.
Pursuant to the Stock Subscription Agreement dated April 30, 1996, Charles
M. Diker, a director of AMF Bowling, AMF Group Holdings, and Bowling Worldwide,
purchased 125,000 shares of Common Stock, at a purchase price of $10.00 per
share. Pursuant to an option agreement (the "Diker Option Agreement") dated May
1, 1996, Mr. Diker was granted, pursuant to the 1996 Plan, non-qualified Stock
Options to purchase 100,000 shares of Common Stock at an exercise price of
$10.00 per share. One third of such options vested on May 1, 1996, one-third
vested on May 1, 1997, and the remaining options vest on May 1, 1998. The Diker
Option Agreement also provides, among other things, for repurchase of all of
the shares held by him for fair market value as of a specified date upon
certain conditions. Mr. Diker is a party to the Stockholders Agreement and any
shares of Common Stock held by Mr. Diker will be subject to the terms of that
agreement.
Note 20. Recent Accounting Pronouncements
Effective for the fiscal year ended December 31, 1998, the Company is
required to adopt SFAS No. 130 "Reporting Comprehensive Income" and SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information." The
Company does not expect that adoption of these standards will have a material
impact on the Company's financial position or results of operations. The
adoption of SFAS No. 130 by the Company will require reporting comprehensive
income, which includes the foreign currency translation adjustment, in an
alternative format prescribed by the standard.
Note 21. Condensed Consolidating Financial Statements
The following condensed consolidating information presents:
o Condensed consolidating balance sheets as of December 31, 1997 and 1996,
and condensed consolidating statements of income and cash flows for 1997
and 1996.
o Elimination entries necessary to combine the entities comprising AMF
Bowling.
The Notes are jointly and severally guaranteed on a full and unconditional
basis by AMF Group Holdings and by the first- and second-tier subsidiaries of
Bowling Worldwide (the "Guarantors"). Third-tier subsidiaries of Bowling
Worldwide, all of which are wholly owned subsidiaries of AMF Worldwide Bowling
Centers Holdings Inc., a second-tier subsidiary of Bowling Worldwide, have not
provided guarantees (the "Non-Guarantors").
52
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUBIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1997
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 33,451 $ 2,339 $ -- $ 35,790
Accounts and notes receivable, net of allowance for doubtful
accounts .................................................. 71,652 2,339 -- 73,991
Accounts receivable - intercompany .......................... 6,682 1,963 (8,645) --
Inventories ................................................. 54,765 1,803 -- 56,568
Deferred taxes and other .................................... 14,345 2,704 -- 17,049
---------- --------- ----------- ----------
Total current assets ....................................... 180,895 11,148 (8,645) 183,398
Notes receivable - intercompany .............................. 15,482 1,663 (17,145) --
Property and equipment, net .................................. 712,032 37,845 1,008 750,885
Investment in subsidiaries ................................... 24,499 628,355 (652,854) --
Goodwill and other assets .................................... 891,011 6,758 -- 897,769
---------- --------- ----------- ----------
Total assets ................................................ $1,823,919 $ 685,769 $ (677,636) $1,832,052
========== ========= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 38,513 $ 3,070 $ -- $ 41,583
Accounts payable - intercompany ............................. 1,934 6,711 (8,645) --
Accrued expenses ............................................ 59,495 5,370 -- 64,865
Income taxes payable ........................................ 3,237 2,407 -- 5,644
Long-term debt, current portion ............................. 27,376 -- -- 27,376
---------- --------- ----------- ----------
Total current liabilities .................................. 130,555 17,558 (8,645) 139,468
Long-term debt ............................................... 1,033,223 -- -- 1,033,223
Notes payable - intercompany ................................. 2,990 14,155 (17,145) --
Other long-term liabilities .................................. 5,333 -- -- 5,333
Deferred income taxes ........................................ (1,036) 1,036 -- --
---------- --------- ----------- ----------
Total liabilities ........................................... 1,171,065 32,749 (25,790) 1,178,024
---------- --------- ----------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock ................................................ -- 596 -- 596
Paid-in capital ............................................. 747,145 746,049 (745,141) 748,053
Retained earnings (deficit) ................................. (74,718) (74,052) 73,722 (75,048)
Equity adjustment from foreign currency translation ......... (19,573) (19,573) 19,573 (19,573)
---------- --------- ----------- ----------
Total stockholders' equity .................................. 652,854 653,020 (651,846) 654,028
---------- --------- ----------- ----------
Total liabilities and stockholders' equity .................. $1,823,919 $ 685,769 $ (677,636) $1,832,052
========== ========= =========== ==========
</TABLE>
53
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1996
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 39,660 $ 3,908 $ -- $ 43,568
Accounts and notes receivable, net of allowance
for doubtful accounts ....................................... 41,266 1,359 -- 42,625
Accounts receivable - intercompany ............................ 3,365 1,259 (4,624) --
Inventories ................................................... 39,609 1,392 -- 41,001
Deferred taxes and other ...................................... 9,491 1,687 -- 11,178
----------- --------- ----------- -----------
Total current assets .......................................... 133,391 9,605 (4,624) 138,372
Notes receivable - intercompany ................................ 1,998 1,663 (3,661) --
Property and equipment, net .................................... 548,218 30,139 951 579,308
Investment in subsidiaries ..................................... 29,628 378,074 (407,702) --
Goodwill and other assets ...................................... 875,250 1,080 -- 876,330
----------- --------- ----------- -----------
Total assets .................................................. $ 1,588,485 $ 420,561 $ (415,036) $ 1,594,010
=========== ========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................. $ 30,198 $ 1,365 $ -- $ 31,563
Accounts payable - intercompany ............................... 773 3,851 (4,624) --
Accrued expenses .............................................. 50,460 3,897 -- 54,357
Income taxes payable .......................................... 1,676 600 -- 2,276
Long-term debt, current portion ............................... 42,376 -- -- 42,376
----------- --------- ----------- -----------
Total current liabilities ................................... 125,483 9,713 (4,624) 130,572
Long-term debt ................................................ 1,048,877 -- -- 1,048,877
Notes payable - intercompany .................................. 1,663 1,998 (3,661) --
Other long-term liabilities ................................... 1,851 -- -- 1,851
Deferred income taxes ......................................... 2,828 1,067 -- 3,895
----------- --------- ----------- -----------
Total liabilities ............................................ 1,180,702 12,778 (8,285) 1,185,195
----------- --------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock ................................................ -- 424 -- 424
Paid-in capital ............................................. 427,446 427,022 (425,442) 429,026
Retained earnings (deficit) ................................. (18,512) (18,512) 17,540 (19,484)
Equity adjustment from foreign currency translation ......... (1,151) (1,151) 1,151 (1,151)
----------- --------- ----------- -----------
Total stockholders' equity .................................. 407,783 407,783 (406,751) 408,815
----------- --------- ----------- -----------
Total liabilities and stockholders' equity .................. $ 1,588,485 $ 420,561 $ (415,036) $ 1,594,010
=========== ========= =========== ===========
</TABLE>
54
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 1997
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Operating revenue ...................................... $ 673,714 $ 42,205 $ (2,251) $ 713,668
---------- ---------- --------- ----------
Operating expenses:
Cost of goods sold .................................... 207,820 6,230 (1,506) 212,544
Bowling center operating expenses ..................... 229,629 22,188 (611) 251,206
Selling, general, and administrative expenses ......... 61,421 3,125 -- 64,546
Depreciation and amortization ......................... 96,812 5,826 (191) 102,447
---------- ---------- --------- ----------
Total operating expenses ............................. 595,682 37,369 (2,308) 630,743
---------- ---------- --------- ----------
Operating income ..................................... 78,032 4,836 57 82,925
---------- ---------- --------- ----------
Nonoperating expenses (income):
Interest expense ...................................... 117,804 581 -- 118,385
Other expenses, net ................................... 6,054 2,225 1,827 10,106
Interest income ....................................... (1,631) (323) -- (1,954)
Equity in loss of subsidiaries ........................ 1,043 53,336 (54,379) --
---------- ---------- --------- ----------
Total nonoperating expenses ......................... 123,270 55,819 (52,552) 126,537
---------- ---------- --------- ----------
Income (loss) before income taxes ................... (45,238) (50,983) 52,609 (43,612)
Provision (benefit) for income taxes ................ (15,587) 2,811 -- (12,776)
---------- ---------- --------- ----------
Net loss before equity in loss of joint ventures and
extraordinary items ................................ (29,651) (53,794) 52,609 (30,836)
Equity in loss of joint ventures .................... (1,362) -- -- (1,362)
---------- ---------- --------- ----------
Net loss before extraordinary items ................. (31,013) (53,794) 52,609 (32,198)
Extraordinary items, net of tax ..................... (23,366) -- -- (23,366)
---------- ---------- --------- ----------
Net loss ............................................ $ (54,379) $ (53,794) $ 52,609 $ (55,564)
========== ========== ========= ==========
</TABLE>
55
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Period Ended December 31, 1996
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Operating revenue ...................................... $ 364,095 $ 21,768 $ (1,054) $ 384,809
---------- ---------- --------- ----------
Operating expenses:
Cost of goods sold .................................... 127,623 3,566 (647) 130,542
Bowling center operating expenses ..................... 112,318 11,780 (425) 123,673
Selling, general, and administrative expenses ......... 33,444 1,626 -- 35,070
Depreciation and amortization ......................... 46,198 3,260 (72) 49,386
---------- ---------- --------- ----------
Total operating expenses ............................. 319,583 20,232 (1,144) 338,671
---------- ---------- --------- ----------
Operating income ..................................... 44,512 1,536 90 46,138
---------- ---------- --------- ----------
Nonoperating expenses:
Interest expense ...................................... 77,968 22 -- 77,990
Other (income) expense, net ........................... (39) 1,029 922 1,912
Interest income ....................................... (5,480) (268) -- (5,748)
Equity in loss of subsidiaries ........................ 499 18,234 (18,733) --
---------- ---------- --------- ----------
Total nonoperating expenses ......................... 72,948 19,017 (17,811) 74,154
---------- ---------- --------- ----------
Income (loss) before income taxes ................... (28,436) (17,481) 17,901 (28,016)
Provision (benefit) for income taxes ................ (9,703) 1,171 -- (8,532)
---------- ---------- --------- ----------
Net loss ............................................ $ (18,733) $ (18,652) $ 17,901 $ (19,484)
========== ========== ========= ==========
</TABLE>
56
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Guarantor
Companies
--------------
<S> <C>
Cash flows from operating activities:
Net loss .............................................................. $ (54,379)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 96,812
Equity in loss of joint ventures .................................... 1,362
Extraordinary items, net of tax ..................................... 23,366
Deferred income taxes ............................................... (20,227)
Amortization of bond discount ....................................... 33,562
Equity in loss of subsidiaries ...................................... 1,043
Dividends from guarantor companies .................................. (500)
Dividends from non-guarantor companies .............................. 1,327
Loss on the sale of property and equipment, net ..................... 4,417
Changes in assets and liabilities:
Accounts and notes receivable, net ................................. (25,218)
Receivables and payables - affiliates .............................. (12,745)
Inventories ........................................................ (16,570)
Other assets ....................................................... (13,375)
Accounts payable and accrued expenses .............................. 14,522
Income taxes payable ............................................... (1,152)
Other long-term liabilities ........................................ (4,089)
----------
Net cash provided by (used in) operating activities ................. 28,156
----------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired ................. (197,271)
Investment in subsidiary .............................................. --
Investments in and advances to joint ventures ......................... (21,361)
Purchases of property and equipment ................................... (53,911)
Proceeds from sale of property and equipment .......................... 4,123
----------
Net cash provided by (used in) investing activities .................. (268,420)
----------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs ......... 231,406
Payments on long-term debt ............................................ (295,621)
Prepayment penalty .................................................... (14,571)
Capital contribution .................................................. 315,671
Net proceeds from initial public offering of shares ................... --
Repurchase of shares .................................................. --
Noncompete obligations ................................................ (647)
----------
Net cash provided by (used in) financing activities ................. 236,238
----------
Effect of exchange rates on cash .................................... (2,183)
----------
Net decrease in cash ................................................ (6,209)
Cash and cash equivalents at beginning of period .................... 39,660
----------
Cash and cash equivalents at end of period .......................... $ 33,451
==========
<CAPTION>
(in thousands)
Non-
Guarantor
Companies Eliminations Consolidated
-------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .............................................................. $ (53,794) $ 52,609 $ (55,564)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 5,826 (191) 102,447
Equity in loss of joint ventures .................................... -- -- 1,362
Extraordinary items, net of tax ..................................... -- -- 23,366
Deferred income taxes ............................................... 6 -- (20,221)
Amortization of bond discount ....................................... -- -- 33,562
Equity in loss of subsidiaries ...................................... 53,336 (54,379) --
Dividends from guarantor companies .................................. 500 -- --
Dividends from non-guarantor companies .............................. (1,327) -- --
Loss on the sale of property and equipment, net ..................... 29 -- 4,446
Changes in assets and liabilities:
Accounts and notes receivable, net ................................. (875) -- (26,093)
Receivables and payables - affiliates .............................. 12,745 -- --
Inventories ........................................................ (401) -- (16,971)
Other assets ....................................................... (1,797) 2,275 (12,897)
Accounts payable and accrued expenses .............................. 3,260 -- 17,782
Income taxes payable ............................................... 1,754 -- 602
Other long-term liabilities ........................................ -- -- (4,089)
---------- ----------- ----------
Net cash provided by (used in) operating activities ................. 19,262 314 47,732
---------- ----------- ----------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired ................. (17,490) -- (214,761)
Investment in subsidiary .............................................. (315,671) 315,671 --
Investments in and advances to joint ventures ......................... -- -- (21,361)
Purchases of property and equipment ................................... (2,926) 134 (56,703)
Proceeds from sale of property and equipment .......................... 57 -- 4,180
---------- ----------- ----------
Net cash provided by (used in) investing activities .................. (336,030) 315,805 (288,645)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs ......... 9,000 -- 240,406
Payments on long-term debt ............................................ (9,000) -- (304,621)
Prepayment penalty .................................................... -- -- (14,571)
Capital contribution .................................................. 37,048 (316,119) 36,600
Net proceeds from initial public offering of shares ................... 279,071 -- 279,071
Repurchase of shares .................................................. (500) -- (500)
Noncompete obligations ................................................ -- -- (647)
---------- ----------- ----------
Net cash provided by (used in) financing activities ................. 315,619 (316,119) 235,738
---------- ----------- ----------
Effect of exchange rates on cash .................................... (420) -- (2,603)
---------- ----------- ----------
Net decrease in cash ................................................ (1,569) -- (7,778)
Cash and cash equivalents at beginning of period .................... 3,908 -- 43,568
---------- ----------- ----------
Cash and cash equivalents at end of period .......................... $ 2,339 $ -- $ 35,790
========== =========== ==========
</TABLE>
57
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Period Ended December 31, 1996
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $ (18,733) $ (18,652) $ 17,901 $ (19,484)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ................................... 46,198 3,260 (72) 49,386
Deferred income taxes ........................................... (14,040) -- -- (14,040)
Amortization of bond discount ................................... 24,731 -- -- 24,731
Equity in loss of subsidiaries .................................. 499 18,234 (18,733) --
Dividends from non-guarantor companies .......................... 922 (922) -- --
Loss on the sale of property and equipment, net ................. 390 18 -- 408
Changes in assets and liabilities:
Accounts and notes receivable, net ............................. (6,663) 159 -- (6,504)
Receivables and payables - affiliates .......................... 399 (399) -- --
Inventories .................................................... 1,830 32 -- 1,862
Other assets ................................................... (4,332) (582) 904 (4,010)
Accounts payable and accrued expenses .......................... 21,631 299 -- 21,930
Income taxes payable ........................................... 662 (245) -- 417
Other long-term liabilities .................................... 18,918 217 -- 19,135
------------ ---------- --------- ------------
Net cash provided by operating activities ....................... 72,412 1,419 -- 73,831
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired ............. (1,454,213) 3,285 -- (1,450,928)
Purchases of property and equipment ............................... (15,930) (1,011) -- (16,941)
Proceeds from sales of property and equipment ..................... 584 170 -- 754
------------ ---------- --------- ------------
Net cash provided by (used in) investing activities ............... (1,469,559) 2,444 -- (1,467,115)
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs ..... 1,059,277 -- -- 1,059,277
Payments on long-term debt ........................................ (38,875) -- -- (38,875)
Capital contribution .............................................. 420,750 -- -- 420,750
Noncompete obligations ............................................ (2,892) -- -- (2,892)
------------ ---------- --------- ------------
Net cash provided by financing activities ....................... 1,438,260 -- -- 1,438,260
------------ ---------- --------- ------------
Effect of exchange rates on cash ................................ (1,453) 45 -- (1,408)
------------ ---------- --------- ------------
Net increase in cash ............................................ 39,660 3,908 -- 43,568
Cash and cash equivalents at beginning of period ................ -- -- -- --
------------ ---------- --------- ------------
Cash and cash equivalents at end of period ...................... $ 39,660 $ 3,908 $ -- $ 43,568
============ ========== ========= ============
</TABLE>
58
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and the Stockholders
AMF Bowling Group
In our opinion, the combined financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of AMF Bowling Group at April 30, 1996 and December 31, 1995, and the
results of its operations and its cash flow for the four months ended April 30,
1996 and for the year ended December 31, 1995, in conformity with generally
accepted accounting principles. These finanical statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Norfolk, Virginia
June 28, 1996
59
<PAGE>
AMF BOWLING GROUP
COMBINED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
ASSETS
Currents assets:
Cash and cash equivalents ......................................................... $ 21,913 $ 9,732
Accounts and notes receivable, net of allowance for doubtful accounts of $3,110 and
$3,373, respectively ............................................................ 33,887 39,026
Accounts and notes receivable-affiliates .......................................... 166 3,979
Inventories ....................................................................... 43,296 39,821
Prepaid expenses and other ........................................................ 6,113 5,182
-------- --------
Total current assets ........................................................... 105,375 97,740
Notes receivable -- affiliates ..................................................... -- 22,941
Property and equipment, net ........................................................ 251,544 259,724
Other assets ....................................................................... 18,330 19,973
-------- --------
Total assets ................................................................... $375,249 $400,378
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liablities:
Accounts payable .................................................................. $ 23,670 $ 23,641
Book overdrafts ................................................................... 5,724 2,362
Accrued expenses and deposits ..................................................... 34,916 30,328
Accounts and notes payable -- affiliates .......................................... -- 1,989
Long-term debt, current portion ................................................... 10 1,084
Income taxes payable .............................................................. 1,757 7,129
-------- --------
Total current liabilities ...................................................... 66,077 66,533
Long-term debt ..................................................................... 1,958 19,550
Notes payable -- affiliates ........................................................ -- 146,727
Other liabilities .................................................................. 2,811 5,856
Deferred income taxes .............................................................. 1,429 174
-------- --------
Total liabilities .............................................................. 72,275 238,840
======== ========
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock ...................................................................... 454 1,538
Paid-in capital ................................................................... 251,770 63,781
Retained earnings ................................................................. 52,302 101,080
Equity adjustment from foreign currency translation ............................... (1,552) (3,400)
Notes receivable stock subscription ............................................... -- (1,461)
-------- --------
Total stockholders' equity ..................................................... 302,974 161,538
-------- --------
Total liabilities and stockholders' equity ..................................... $375,249 $400,378
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
AMF BOWLING GROUP
COMBINED STATEMENTS OF OPERATIONS
(in thousands of dollars)
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Operating revenues:
Sales of products and services ........................................ $ 164,371 $ 563,998
Revenue from operating lease activities ............................... 573 926
--------- ---------
Total operating revenues ............................................ 164,944 564,924
--------- ---------
Operating expenses:
Cost of sales, excluding depreciation of $791 and $2,531, respectively 43,118 184,129
Bowling center operations ............................................. 80,156 166,465
Selling, general and administrative ................................... 35,557 50,778
Depreciation and amortization ......................................... 15,097 39,139
--------- ---------
Total operating expenses ............................................ 173,928 440,511
--------- ---------
Operating (loss) income ............................................. (8,984) 124,413
Nonoperating income (expenses):
Interest expense ...................................................... (4,504) (15,711)
Other expenses, net ................................................... (692) (1,043)
Interest income ....................................................... 611 2,184
Foreign currency transaction loss ..................................... (29) (979)
--------- ---------
(Loss) income before income taxes ....................................... (13,598) 108,864
Income tax benefit (expense) ............................................ 1,731 (12,098)
--------- ---------
Net (loss) income ................................................... $ (11,867) $ 96,766
========= =========
</TABLE>
Pro Forma Financial Information (unaudited):
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Net (loss) income before income taxes and pro forma adjustments ......... $ (13,598) $ 108,864
Pro forma C Corporation -- tax benefit (provision) ...................... 5,065 (40,616)
--------- ---------
Pro forma net (loss) income ............................................. $ (8,533) $ 68,248
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
AMF BOWLING GROUP
COMBINED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income .......................................................... $ (11,867) $ 96,766
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization ............................................ 15,097 39,139
Deferred income taxes .................................................... 414 (830)
Loss on sale of property and equipment, net .............................. -- 567
Changes in assets and liabilities, net of effects from companies acquired:
Accounts and notes receivable, net ...................................... 4,784 10,630
Receivables and payables -- affiliates .................................. 1,535 6,147
Inventories ............................................................. (3,631) (5,996)
Other assets and liabilities ............................................ (2,673) (101)
Accounts payable and accrued expenses ................................... 8,713 (18,741)
Income taxes payable .................................................... (5,745) (2,830)
--------- ---------
Net cash provided by operating activities ............................... 6,627 124,751
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment ......................................... (6,874) (29,965)
Proceeds from sales of property and equipment .............................. -- 1,410
Other ...................................................................... 2,989 229
--------- ---------
Net cash used for investing activities .................................. (3,885) (28,326)
--------- ---------
Cash flows from financing activities:
Payments on credit note agreements, net .................................... -- (11,057)
Distributions to stockholders .............................................. (36,721) (71,851)
Payment of long-term debt .................................................. (3,812) (10,285)
Payment for redemption of stock ............................................ -- (3,960)
Proceeds (payments) on notes payable -- stockholders, net ................. 1,236 (3,793)
Capital contributions by stockholders ...................................... 24,805 8,329
Collection of notes receivable -- affiliates ............................... 19,408 --
Other ...................................................................... 3,988 (2,056)
--------- ---------
Net cash provided by (used for) financing activities .................... 8,904 (94,673)
Effect of exchange rates on cash ........................................ 535 (194)
--------- ---------
Net increase in cash ........................................................ 12,181 1,558
Cash at beginning of period ................................................. 9,732 8,174
--------- ---------
Cash at end of period ....................................................... $ 21,913 $ 9,732
========= =========
</TABLE>
See Note 11 for supplemental disclosures to the Combined Statements of Cash
Flows.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
AMF BOWLING GROUP
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands of dollars)
<TABLE>
<CAPTION>
Equity
Adjustment
From Foreign Total
Common Paid-in Retained Currency Stockholders'
Stock Capital Earnings Translation Other Equity
----------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 ............ $ 1,536 $ 57,975 $ 76,165 $ (3,302) $ -- $ 132,374
Net income ................... -- -- 96,766 -- -- 96,766
Distribution to
stockholders ............... -- -- (71,851) -- -- (71,851)
Redemption of stock .......... -- (3,960) -- -- -- (3,960)
Decrease in equity
adjustment from foreign
currency translation ....... -- -- -- (98) -- (98)
Sale of stock ................ 2 1,479 -- -- (1,479) 2
Capital contributions ........ -- 8,329 -- -- -- 8,329
Other ........................ -- (42) -- -- 18 (24)
-------- -------- --------- -------- -------- ---------
Balance,
December 31, 1995 ............ 1,538 63,781 101,080 (3,400) (1,461) 161,538
Net loss ..................... -- -- (11,867) -- -- (11,867)
Distribution to
stockholders ............... -- -- (36,721) -- -- (36,721)
Increase in equity
adjustment from foreign
currency translation ....... -- -- -- 1,665 -- 1,665
Payment of notes
receivable
officer/stockholder ........ -- -- -- -- 1,461 1,461
Capital contributions ........ 102 187,989 -- -- -- 188,091
Other ........................ (1,186) -- (190) 183 -- (1,193)
-------- -------- --------- -------- -------- ---------
Balance, April 30, 1996 ....... $ 454 $251,770 $ 52,302 $ (1,552) $ -- $ 302,974
======== ======== ========= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of dollars, except share data)
Note 1. Organization
AMF Bowling Group ("the Combined Companies") consisted of the following
entities:
S Corporations
o AMF Bowling, Inc. ("AMF Bowling")
o AMF Bowling Centers, Inc. ("AMF Bowling Centers")
o AMF Beverage Company of Oregon, Inc.
o King Louie Lenexa, Inc.
o AMF Bowling Centers (Aust) International Inc.
o AMF Bowling Centers (Canada) International Inc.
o AMF BCO-France One, Inc.
o AMF BCO-France Two, Inc.
o AMF Bowling Centers (Hong Kong) International Inc.
o AMF Bowling Centers International Inc.-Japan
o AMF Bowling Mexico Holding, Inc.
o Boliches AMF, Inc.
o AMF Bowling Centers II Inc.-Switzerland
o AMF BCO-U.K. One, Inc.
o AMF BCO-U.K. Two, Inc.
o AMF BCO-China, Inc.
o AMF Bowling Centers China, Inc.
Other
o AMF Catering Services Pty, Ltd.
o Bush River Corporation
Pursuant to a Stock Purchase Agreement dated February 16, 1996 between AMF
Group Holdings, Inc. and the stockholders of AMF Bowling Group (the "Combined
Companies"), on May 1, 1996, AMF Group Holdings, Inc. (the "Company"), through
its subsidiaries, acquired the Combined Companies in a stock purchase of all
the outstanding stock of the separate domestic and foreign corporations that
constitute substantially all of the Combined Companies and through the purchase
of certain assets of the Combined Companies' bowling center operations in Spain
and Switzerland. Prior to the acquisition, the Combined Companies were
controlled by the Virginia Investment Trust.
The Combined Companies operated bowling centers in the United States and
in 9 foreign countries and manufactured and distributed a full line of bowling
and leisure related products. The principal markets for bowling and leisure
related equipment are domestic and foreign independent bowling center
operators. The accompanying combined financial statements have been prepared
for the purpose of presenting the financial position and results of operations
of the bowling related operations of the various entities.
The Company did not acquire the assets of two bowling centers located in
Madrid, Spain and Geneva, Switzerland (both of which were retained by the
sellers) and, accordingly, the April 30, 1996 combined financial statements
exclude the assets of these centers. As a result of the acquisition, the
Company, at May 1, 1996, owns or operates 205 of the Combined
64
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Companies' domestic bowling centers and 78 international bowling centers (205
domestic bowling centers and 80 international bowling centers at December 31,
1995). The purchase price for the acquisition was approximately $1,300,000,
subject to certain postclosing adjustments, less approximately $2,000
representing debt of the Combined Companies which remained in place following
the closing of the acquisition (the "Closing").
The revaluation, in accordance with Accounting Principles Board Opinion
No. 16, of the Combined Companies' assets and liabilities as a result of the
Stock Purchase Agreement has not been reflected in the accompanying combined
financial statements. In addition, no adjustments have been recorded to reflect
any tax liability resulting from the stock purchase and the related Section 338
(h) (10) election.
Note 2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying combined financial statements have been prepared on the
accrual basis of accounting and conform in all material respects to accounting
principles generally accepted in the United States. The accompanying combined
financial statements are stated in U.S. dollars. All significant intercompany
and intracompany balances and transactions have been eliminated in the
accompanying combined financial statements.
Use of estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The more significant estimates made by management include
allowances for obsolete inventory, uncollectable accounts receivable, product
warranty costs and litigation and claims. Actual results could differ from
those estimates.
Fiscal year
The entities included in the accompanying combined financial statements
operate on fiscal years ending on December 31, except for AMF Bowling Centers,
which operated on a 52-week period ended on the the last Sunday in December
during 1994, and the Fair Lanes operation which operated on a fiscal period
ended on December 29, 1994. For 1995, AMF Bowling Centers, including the
acquired Fair Lanes operation, adopted a calendar month-end; accordingly, the
results of operations for the period ended December 31, 1995 include AMF
Bowling Centers' operations for the period December 26, 1994 (December 30, 1994
with respect to Fair Lanes operations) through December 31, 1995.
Revenue recognition
Revenue is generally recognized from the sale of products at the time the
products are shipped. For larger contract orders, the Combined Companies
generally require that customers submit a deposit as a condition of accepting
the order. For nonaffiliate international sales, the Combined Companies
generally require the customer to obtain a letter of credit prior to shipment.
Warranty costs
AMF Bowling offers warranties for its various products and provides, by a
current charge to income, an amount it estimates will be needed to cover future
warranty obligations for products sold. Warranty expense aggregated
approximately $1,313 for the four months ended April 30, 1996 and $2,748 for
the year ended December 31, 1995.
Cash and cash equivalents
For the purpose of the statement of cash flows, the Combined Companies
consider all highly liquid debt instruments purchased with an original maturity
of three months or less at the date of purchase to be cash equivalents.
65
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Inventories
Manufacturing inventory is valued at the lower of cost or market, cost
being determined using the last-in, first-out ("LIFO") method for domestic
inventories and the first-in, first-out ("FIFO") method for foreign
inventories.
Bowling center inventory is valued at the lower of cost or market with the
cost being determined using the actual or average cost method.
Property and equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs which do not improve or extend the life of an asset are charged to
expense as incurred; major renewals or betterments are capitalized to the
property accounts. Upon retirement or sale of an asset, its cost and related
accumulated depreciation are removed from the property accounts, and any gain
or loss is recognized.
Property and equipment are depreciated over their estimated useful lives
using straight-line and accelerated methods. Estimated useful lives of property
and equipment for financial reporting purposes are as follows:
<TABLE>
<S> <C>
Buildings and improvements . 5 - 40 years
Bowling and related
equipment.................. 5 - 10 years
Manufacturing equipment .... 2 - 7 years
Furniture and fixtures ..... 3 - 8 years
</TABLE>
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," ("SFAS No.
121"). SFAS No. 121 is effective for fiscal year 1996 for the Company. This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets.
The adoption of SFAS No. 121 did not have a material effect on the financial
position or results of operations of the Company.
Income taxes
Certain of the Combined Companies included in the accompanying combined
financial statements have elected S Corporation status under the Internal
Revenue Code (see Note 1). As an S Corporation, the companies may be liable for
U.S. federal income taxes under certain circumstances and liable for state
income taxes in certain jurisdictions; all other domestic income taxes are the
responsibility of the Combined Companies' stockholders.
The foreign branches of the S Corporations and other foreign entities file
income tax returns and pay taxes in their respective countries. The
stockholders receive a tax credit, subject to certain limitations, in their
U.S. federal income tax returns for foreign taxes paid by the foreign branches
of the U.S. Corporation and certain other foreign entities.
The Combined Companies account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," ("SFAS No. 109"). SFAS No. 109 mandates the liability method for
computing deferred income taxes. Because the Combined Companies have elected S
Corporation status, deferred income taxes are only provided with respect to
state and foreign income taxes.
Research and development costs
Expenditures relating to the development of new products, including
significant improvements and refinements to existing products, are expensed as
incurred. The amounts charged against income were approximately $875 for the
four months ended April 30, 1996 and $3,600 for the year ended December 31,
1995.
Advertising costs
Costs incurred for producing and communicating advertising are expensed
when incurred. The amounts charged against income were approximately $3,575 for
the four months ended April 30, 1996 and $12,250 for the year ended December
31, 1995.
66
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Foreign currency
In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," all assets and liabilities of the Combined
Companies' foreign operations are translated from foreign currencies into U.S.
dollars at year-end exchange rates. Revenues and expenses of foreign operations
are translated using average exchange rates that existed during the year and
reflect currency exchange gains and losses resulting from transactions
conducted in nonlocal currencies. Adjustments resulting from the translation of
financial statements of foreign operations into U.S. dollars are included in
the equity adjustment from foreign currency translation on the accompanying
combined balance sheets. Gains and losses arising from transactions in foreign
currencies are included as a separate item in the accompanying combined
statement of operations.
Fair value of financial instruments
The carrying value of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and short-term debt
approximated fair value at April 30, 1996 and December 31, 1995 because of the
short maturity of these instruments. The carrying value of long-term
receivables and payables approximated fair value as of April 30, 1996 and
December 31, 1995 based upon market rates for similar instruments.
Noncompete agreements
The Combined Companies have certain noncompete agreements with
individuals. The assets are recorded at cost or at the present value of
payments to be made under these agreements, discounted at annual rates ranging
from 8%-10%. The assets are included in other current and noncurrent assets and
are amortized on a straight-line basis over the terms of the agreements.
Noncompete obligations were $3,095 at April 30, 1996 and $3,300 at December 31,
1995.
Common stock
The common stock account represents the aggregate number of shares
outstanding for all the Combined Companies multiplied by the respective par
value at each of the Combined Companies.
Note 3. Related Party Transactions
The Combined Companies had related party transactions with several
companies which are affiliated through common ownership and with certain of its
officers, directors and stockholders. The majority of balances with affiliated
companies were liquidated on or prior to April 30, 1996. Interest income and
expense during the four months ended April 30, 1996 were not significant to the
operating results of the Combined Companies. A summary of the significant
balances and transactions with related parties follows.
Accounts and notes receivable -- affiliates, including accrued interest, at
April 30, 1996 and December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Accounts receivable -- affiliates ........................ $166 $ 2,084
==== ========
Notes receivable -- AMF Reece ............................ $ -- $ 12,910
Notes receivable -- stockholders ......................... -- 11,130
Note receivable -- AMF Machinery Systems ("AMS") ......... -- 796
---- --------
-- 24,836
Current maturities ....................................... -- (1,895)
---- --------
$ -- $ 22,941
==== ========
</TABLE>
Notes receivable -- AMF Reece represented various notes, plus accrued and
unpaid interest income, between AMF Bowling and AMF Reece, and affiliated
company. The notes earned interest monthly based on the LIBOR rate plus .75%,
which was 6.48% at December 31, 1995. Interest income was $762 for the year
ended December 31, 1995.
67
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Notes receivable -- stockholders represented notes of $9,394 plus accrued
and unpaid interest income, between the Combined Companies and its
stockholders. Interest on the notes was at the LIBOR rate plus .75%, which was
6.48% at December 31, 1995. Interest income for the year ended December 31,
1995 was $602.
Accounts and notes payable -- affiliates at April 30, 1996 and December
31, 1995 consisted of the following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Accounts payable -- stockholders ........... $ -- $ 322
Accounts payable -- AMS .................... -- 1,619
Accounts payable -- CCA Industries ......... -- 48
---- --------
$ -- $ 1,989
==== ========
Notes payable -- stockholders .............. $ -- $117,022
Note payable -- Fair Lanes, Inc. ........... -- 24,096
Notes payable -- AMS ....................... -- 5,609
Capital lease obligations -- Commonwealth
Leasing Corporation ("CLC") .............. -- --
---- --------
-- 146,727
---- --------
Current maturities ......................... -- --
Long-term portion .......................... $ -- $146,727
==== ========
</TABLE>
Notes payable -- stockholders included $88,323, plus accrued and unpaid
interest, at December 31, 1995 of 9.5% of Fair Lanes, Inc. ("Fair Lanes") notes
which were acquired by certain stockholders in conjunction with the acquisition
of Fair Lanes. A portion of the notes were acquired by the stockholders as a
result of the plan of reorganization (Note 14). The note balance included
interest from the period July 15, 1994 through January 15, 1995 which was paid
through the issuance of additional notes. The notes were assumed by AMF Bowling
Centers in connection with the acquisition of the assets of Fair Lanes on July
2, 1995. The notes, originally payable in 2001, were paid prior to April 30,
1996, pursuant to the purchase of the Combined Companies. Interest expense for
the year ended December 31, 1995 was approximately $8,053.
Notes payable -- stockholders included $16,773, plus accrued and unpaid
interest, on a $60,000 revolving line of credit between AMF Bowling Centers and
its stockholders which originally matured on December 31, 1998. The notes were
repaid on or prior to April 30, 1996, pursuant to the purchase of the Combined
Companies. Interest on the notes was at the lesser of the prime rate or the
LIBOR rate plus 0.50% (6.23% at December 31, 1995). The note was repaid on or
prior to April 30, 1996, pursuant to the purchase of the Combined Companies.
Interest expense on these notes was $562 for the year ended December 31, 1995.
Also, included in notes payable -- stockholders was a $1,943 note, plus
accrued and unpaid interest, which represented the balance outstanding on a
$16,000 revolving line of credit between AMF Bowling and its stockholders.
Interest on the note was at the prime rate (8.50% at December 31, 1995). The
note was repaid on or prior to April 30, 1996, pursuant to the purchase of the
Combined Companies. Interest expense on this note was $179 for the year ended
December 31, 1995.
The average amount outstanding under the various lines of credit was
$7,865 during fiscal 1995. The maximum amount outstanding under these
agreements was $21,246 during fiscal 1995. The average interest rate on the
outstanding debt was 7.5% during fiscal 1995.
Note payable -- Fair Lanes related to the acquisition of Fair Lanes net
assets by AMF Bowling Centers from the AMF stockholders. Interest on the note
was at prime (8.50% at December 31, 1995). The note, originally payable on
December 31, 1998, was repaid on or prior to April 30, 1996, pursuant to the
purchase of the Combined Companies. Interest expense for the year ended
December 31, 1995 was $1,187.
The notes payable of $5,609 to AMS consisted of various notes plus accrued
and unpaid interest (at 8.5%-11%) and were payable on demand. The notes were
repaid on or prior to April 30, 1996, pursuant to the purchase of the Combined
Companies. Interest expense on these notes was $417 for the year ended December
31, 1995.
68
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Other related party transactions
The Combined Companies were charged $512 for the four months ended April
30, 1996 and $1,622 for the year ended December 31, 1995 in management fees for
certain consulting and administrative services performed by affiliated
companies.
In May 1995, the Combined Companies began purchasing health insurance from
CCA Industries, an affiliated company, on a fully insured basis. Total premiums
for the four months ended April 30, 1996 were $411 and for the period from May
1995 to December 31, 1995 aggregated $889.
During the year ended December 31, 1995, Fair Lanes acquired equipment
which was leased from Commonwealth Leasing Corporation ("CLC"), an affiliated
company, for $1,367. The difference between the capitalized lease obligation
and the purchase price was treated as an adjustment of the notes payable --
Fair Lanes.
The Combined Companies purchased used bowling equipment from CLC for
$1,429 during the year ended 1995.
The Combined Companies charged service fees and sales commissions of $53
for the year ended December 31, 1995 to CLC. These charges have been treated as
reductions in selling, general and administrative expenses.
The Combined Companies lease equipment from CCA Financial, an affiliated
company. Rent expense was $203 for the four months ended April 30, 1996 and
$444 for the year ended December 31, 1995.
Note 4. Inventories
Inventories at April 30, 1996 and December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Raw materials .......................... $10,325 $ 10,590
Work-in-progress ....................... 2,084 1,522
Finished goods and spare parts ......... 28,661 24,920
Merchandise inventory .................. 3,033 4,045
------- --------
44,103 41,077
Inventory valuation reserves ........... (807) (1,256)
------- --------
$43,296 $ 39,821
======= ========
</TABLE>
Inventories were determined using the following methods at April 30, 1996
and December 31, 1995:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
LIFO (Domestic manufacturing) ......... $27,128 $24,389
FIFO (Foreign manufacturing) .......... 13,135 11,387
Other (Merchandise inventory) ......... 3,033 4,045
------- -------
$43,296 $39,821
======= =======
</TABLE>
If LIFO inventories had been valued at current costs, they would have been
greater by $2,527 at April 30, 1996 and $2,496 at December 31, 1995.
69
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Note 5. Property and Equipment
Property and equipment at April 30, 1996 and December 31, 1995 consist of
the following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Land ...................................... $ 25,891 $ 25,692
Buildings and improvements ................ 143,147 138,448
Equipment, furniture and fixtures ......... 256,308 251,936
Construction in progress .................. 110 1,925
---------- ----------
425,456 418,001
Less: accumulated depreciation and
amortization ............................ (173,912) (158,277)
---------- ----------
$ 251,544 $ 259,724
========== ==========
</TABLE>
Depreciation expense was $14,523 for the four months ended April 30, 1996
and $37,889 for the year ended December 31, 1995.
Note 6. Accrued Expenses and Deposits
Accrued expenses and deposits at April 30, 1996 and December 31, 1995
consist of the following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Accrued compensation ............ $ 9,714 $ 7,152
League bowling accounts ......... 3,776 6,368
Other ........................... 21,426 16,808
------- -------
$34,916 $30,328
======= =======
</TABLE>
Note 7. Long-term Debt
Long-term debt at April 30, 1996 and December 31, 1995 consists of the
following:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Notes payable to bank -- guaranteed......... $ -- $ 3,764
Mortgage and equipment notes ............... 1,968 14,469
Industrial development bond ................ -- 1,354
Other ...................................... -- 1,047
------ --------
1,968 20,634
Current Maturities ......................... (10) (1,084)
------ --------
Long-term portion .......................... $1,958 $ 19,550
====== ========
</TABLE>
Notes payable to bank -- guaranteed represented a credit agreement entered
into between AMF Bowling Centers and a bank under which up to $32,750 could be
borrowed. An additional $25,000 could be borrowed from one or more additional
financial institutions. Interest was payable at a rate equal to the lesser of
the prime rate or the LIBOR rate plus .50% (6.23% at December 31, 1995). The
notes were secured by certain tangible personal property of AMF Bowling Centers
and were guaranteed by certain stockholders. The agreement also required AMF
Bowling Centers to meet certain financial covenants, including maximum debt to
equity ratios, minimum tangible net worth requirements and minimum earnings to
charge ratios. At December 31, 1995, AMF Bowling Centers was in violation of
certain requirements which were subsequently
70
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
waived by the bank through March 31, 1997. The notes payable were repaid on or
prior to April 30, 1996, pursuant to the purchase of the Combined Companies.
The mortgage and equipment notes were secured by first deeds of trust on
various bowling centers. The notes generally required monthly payments and
matured at various times through October 2008. Interest rates on these notes
were generally fixed and ranged from 3% to 12%. The notes were repaid on or
prior to April 30, 1996, except for one.
The Industrial Development Bond was secured by a first deed of trust on one
of the bowling centers. Interest on the bond was at a fluctuating rate based on
the prime rate of the lending bank (6.947% at December 31, 1995). Monthly
principal and interest payments were originally due through August 2001. The
bond was repaid on or prior to April 30, 1996, pursuant to the purchase of the
Combined Companies.
AMF Bowling had an agreement with a bank under which up to $15,000 could be
borrowed. This arrangement expired on April 30, 1996. There were no borrowings
at December 31, 1995 under the agreement. Interest was payable monthly at the
lower of the bank's prime rate or the adjusted LIBOR rate plus 0.50% (6.23% at
December 31, 1995). This agreement required certain financial covenants to be
met, including maximum debt to equity ratios, minimum tangible net worth
requirements and minimum earnings to charge ratios.
AMF Bowling had a $3,500 revolving credit line with a bank which was due
to expire on June 30, 1996. No balance was outstanding at December 31, 1995.
Interest on outstanding borrowings was payable quarterly at the lower of the
bank's prime rate or the adjusted LIBOR rate plus 0.50% (6.23% at December 31,
1995). Under this line were two standby letters of credit with amounts
outstanding at December 31, 1995 of $1,138, expiring on December 1, 1996, and
of $12 expiring on August 19, 1996.
The average amount outstanding under the various lines of credit was
$21,807 during fiscal 1995. The maximum amount outstanding under these credit
arrangements was $39,454 during fiscal 1995. The average interest rate on these
credit arrangements was 6.43% during fiscal 1995.
AMF Bowling had available a foreign exchange line of $5,000 and a letter
of credit line of $1,000. No balances were outstanding at December 31, 1995.
One standby letter of credit with an amount at December 31, 1995 of $535, which
expired on January 18, 1996, and four import letters of credit totaling $142
were outstanding under these lines.
Note 8. Income Taxes
Income (loss) before income taxes consists of the following:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
United States ......... $ (7,757) $ 77,931
Foreign ............... (5,841) 30,933
--------- --------
$ (13,598) $108,864
========= ========
</TABLE>
71
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
The income tax benefit (provision) consists of the following:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Current tax benefit (provision)
U.S. federal ................... $ -- $ --
State and local ................ 205 (1,065)
Foreign ........................ 1,940 (11,961)
------ ---------
Total current .................. 2,145 (13,026)
------ ---------
Deferred tax benefit (provision)
U.S. federal ................... -- --
State and local ................ -- 32
Foreign ........................ (414) 896
------ ---------
Total deferred ................. (414) 928
------ ---------
Total benefit .................. $1,731 $ (12,098)
====== =========
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Deferred tax assets
Current assets ................................ $ 815 $ 1,198
Noncurrent assets ............................. 799 799
-------- --------
Total deferred tax assets ..................... 1,614 1,997
-------- --------
Deferred tax liabilities
Noncurrent liabilities ........................ (1,429) (1,998)
-------- --------
Total deferred tax liabilities ................ (1,429) (1,998)
-------- --------
Net deferred tax assets (liabilities) ......... $ 185 $ (1)
======== ========
</TABLE>
The primary determination of the deferred tax assets are book accruals not
deductible for tax purposes, such as the allowance for bad debts, inventory
reserves and various other accruals. Deferred tax liabilities are a result of
accelerated depreciation methods used for tax purposes.
The benefit (provision) for income taxes differs from the amount computed
by applying the statutory rate of 35% for the four months ended April 30, 1996
and the year ended December 31, 1995 to income (loss) before income taxes. The
principal reasons for this difference are follows:
<TABLE>
<CAPTION>
Four Months
Ended
April 30, Year Ended
1996 December 31, 1995
------------ ------------------
<S> <C> <C>
Tax benefit (provision) at
federal statutory rate .................... $ 4,759 $ (38,102)
(Increase) decrease in rates resulting from:
S Corporation election for U.S. federal tax
purposes ................................. (4,759) 38,102
State and local taxes ..................... 205 (1,033)
Foreign income taxes ...................... 1,526 (11,065)
-------- ---------
Total ..................................... $ 1,731 $ (12,098)
======== =========
</TABLE>
72
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Pro forma provision for income taxes (unaudited)
As a result of the Stock Purchase Agreement, the Combined Companies will
no longer be treated as an S Corporation for income tax purposes in the United
States and in certain state jurisdictions.
Accordingly, the combined statements of operations include a pro forma
adjustment for income taxes which would have been recorded if the Combined
Companies had not been an S Corporation based on tax laws in effect during
these periods. The pro forma adjustment was computed separately for each entity
and then combined, except for purposes of computing the utilization of foreign
tax credits related to the worldwide bowling center operations, the domestic
and worldwide bowling center operations were considered in the aggregate.
Pro forma tax benefit (provision) is as follows:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
(unaudited) (unaudited)
Current
U.S. federal ...................... $ 3,222 $ (26,404)
State and local ................... 329 (3,491)
Foreign ........................... 1,940 (11,961)
------------ ------------
Total current ..................... 5,491 (41,856)
------------ ------------
Deferred
U.S. federal ...................... (85) 317
State and local ................... 73 27
Foreign ........................... (414) 896
------------ ------------
Total deferred .................... (426) 1,240
------------ ------------
Total provision (benefit) ......... $ 5,065 $ (40,616)
============ ============
</TABLE>
Temporary differences and carryforwards which give rise to pro forma
deferred tax assets and liabilities at April 30, 1996 and December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
(unaudited) (unaudited)
Deferred tax assets
Current assets ................................ $ 3,851 $ 6,178
Noncurrent assets ............................. 192 7,124
------------ ------------
Total deferred tax assets ..................... 4,043 13,302
------------ ------------
Deferred tax liabilities
Noncurrent liabilities ........................ (6,170) (2,707)
------------ ------------
Total deferred tax liabilities ................ (6,170) (2,707)
------------ ------------
Net deferred tax (liabilities) assets ......... $ (2,127) $ 10,595
============ ============
</TABLE>
Pro forma deferred income taxes relate primarily to timing differences
between financial and income tax reporting for depreciation and certain
accruals which are not currently deductible for income tax purposes.
73
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
A reconciliation of the Combined Companies' pro forma United States Income
tax benefit (provision) computed by applying the statutory United States
federal income tax rate of 35% to the Combined Companies' income (loss) before
income taxes is presented in the following table:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
----------------- ---------------
<S> <C> <C>
(unaudited) (unaudited)
Tax benefit (provision) at federal
statutory rate ..................... $ 4,759 $ (38,102)
(Increase) decrease in rates resulting
from:
State and local taxes, net ......... 402 (2,272)
Foreign income taxes ............... 1,526 (11,065)
Foreign tax credits ................ (1,526) 11,065
Other business credits ............. -- --
Nondeductible items ................ (91) (171)
Environmental tax .................. -- (102)
Other .............................. (5) 31
-------------- ------------
$ 5,065 $ (40,616)
============= ============
</TABLE>
Note 9. Commitments and Contingencies
Leases
The Combined Companies lease certain facilities and equipment under
operating leases which expire at various dates through 2011. These leases
generally contain renewal options and require the Combined Companies to pay
taxes, insurance, maintenance and other expenses in addition to the minimum
annual rentals. Certain leases require contingent payments based on usage of
equipment above certain specified levels. Such contingent rentals amounted to
$293 for the four months ended April 30, 1996 and $1,517 for the year ended
December 31, 1995.
Future minimum rental payments under the operating lease agreements are as
follows:
<TABLE>
<CAPTION>
Period ending
December 31,
- -------------------------------
<S> <C>
1996 (eight months) ......... $ 15,200
1997 ........................ 14,900
1998 ........................ 12,800
1999 ........................ 10,900
2000 ........................ 8,900
Thereafter .................. 49,600
--------
$112,300
========
</TABLE>
Total rent expense under operating leases aggregated approximately $7,487
for the four months ended April 30, 1996 and $19,250 for the year ended
December 31, 1995.
74
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Litigation and claims
AMF Bowling's Pins and Lanes division was the defendant in an
administrative proceeding related to a labor dispute. This claim was resolved
in favor of the division during 1995 and the related reserve of approximately
$1,100 was reversed.
AMF Bowling terminated its Korean distributorship agreement. The Korean
distributor filed suit against the company in Korea seeking an injunction
against AMF Bowling's Seoul Korea branch to prevent AMF Bowling from selling
bowling and bowling related products in Korea. The Korean Court dismissed the
suit on jurisdiction grounds subsequent to year-end. Such a decision is subject
to an appeal.
On January 10, 1996, the Korean distributor filed a second suit in the
Supreme Court of the State of New York against AMF Bowling and AMF Bowling
Centers. The suit alleges a number of complaints related to the conduct and
termination of the Korean distributorship agreement and alleges that the
defendants caused the Korean distributor's insolvency. The Korean distributor
is seeking compensatory damages of at least $41,759 and punitive damages of at
least $100,000 or ten times the amount of compensatory damages awarded,
whichever is greater, under each of seven causes of action set forth in the
suit.
Management believes that the Korean distributorship agreement was properly
terminated. Management intends to vigorously defend against this claim and
believes the resolution of such claim will not have a significant effect on the
Combined Companies' combined financial position or results of operations. Under
terms of the sale agreement (Note 1), the current AMF shareholders have agreed
to indemnify the buyers for any loss related to this litigation.
On March 5, 1996, the defendant in an action entitled Northland Bowl and
Sports Center, Inc. and Recreation Associates, II v. Golden Giant, Inc., d/b/a
Golden Giant Building System, Court of Common Pleas, Centre County, Pa. (Index
No. 96-75), asserted a third-party claim against AMF Bowling and other parties.
Defendant, Golden Giant, a construction company, was previously named as
defendant by a bowling center (not owned or operated by the Combined Companies)
in connection with the collapse of the center's roof in early 1994. Golden Giant
has now named AMF Bowling, charging it with negligence and breach of implied
warranty for installing scoring monitors (four years before the roof collapsed)
on a portion of the building that allegedly could not adequately support the
additional weight of the equipment. The bowling center plaintiff claims total
damages in amounts exceeding $3,500, and Golden Giant asserts that, if plaintiff
is entitled to any recovery, it should be in whole or part against AMF Bowling.
AMF Bowling is involved in two patent infringement suits. The plaintiff in
the first case, a competitor of AMF Bowling's Century division, obtained a
summary judgment on the issue of liability in December 1994. The court recently
issued an order which will permit AMF to appeal. The plaintiff claims damages in
the range of $3,000 to $9,000. A trial on damages will not occur unless and
until the liability issue is resolved against AMF Bowling. Management intends to
vigorously contest the claim and believes the resolution of such claim will not
have a significant effect on the Combined Companies' combined financial position
or results of operations.
The second patent infringement suit relates to AMF Bowling's Pins and Lanes
division. Management has settled this claim for $250 during the four months
ended April 30, 1996.
AMF Bowling Centers and AMF Bowling are defendants in a wrongful death suit
related to an employee. The employee's estate is seeking compensatory damages up
to $3,000 plus $3,000 in punitive damages. However, the plaintiff's counsel has
verbally offered to settle the case for $350. Management expects to vigorously
contest the claim and believes the resolution of such claim will not have a
significant effect on the Combined Companies' combined financial position or
results of operations.
In addition, the Combined Companies are involved in certain other lawsuits
and claims arising out of normal business operations. The majority of these
relate to accidents at the Combined Companies' bowling centers. Management
believes that the ultimate resolution of such matters will not materially affect
the Combined Companies' results of operations or financial position.
While the ultimate outcome of the litigation and claims against the
Combined Companies cannot presently be determined, management believes the
Combined Companies have made adequate provision for possible losses. At April
30, 1996
75
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
and December 31, 1995, the Combined Companies had recorded reserves aggregating
approximately $2,900 and $2,800, respectively for litigation and claims.
Note 10. Employee Benefit Plans and Bonus
The Combined Companies have a defined contribution 401(k) plan to which
domestic employees may make voluntary contributions based on their
compensation. Under the provisions of the plan, the Combined Companies can, at
their option, match a discretionary percentage of employee contributions and
make an additional contribution as determined by their Board of Directors.
Contributions vest 100% after a five-year period. The amounts charged to
expense under this plan were approximately $410 for the four months ended April
30, 1996 and $1,122 for the year ended December 31, 1995.
One of the Combined Companies has a Stock Performance Plan (the "Plan")
for certain key employees. Under the terms of the Plan, eligible employees earn
Stock Performance Units as a result of the Company meeting certain operating
performance conditions, as defined by the Plan, relating to (1) sales, (2) cash
flow and (3) operating results. Benefits under the Plan vest over a five-year
period and will be paid in installments over a ten-year period without interest
(or less if specified by the Company's Board of Directors) upon the termination
of an eligible employee. The Plan can be terminated or amended at any time by
the Company's Board of Directors. The amount charged to expense under this plan
was approximately $1,479 for the four months ended April 30, 1996 and $622 for
the year ended December 31, 1995. The agreement contains a provision which
would accelerate the payout of the benefits from ten years to five years upon a
change-of-control event and would require that interest be paid on the unpaid
balance. On April 30, 1996, the Combined Companies made payments of $3,085
related to these plans and the plans were terminated.
Certain of the Combined Companies' foreign operations have employee
benefit plans covering selected employees. These plans vary as to the funding,
including local government, employee and employer funding. Each company has
provided pension expense and made contributions to these plans in accordance
with the requirements of the plans and local country practices. The amounts
charged to expense under these plans aggregated $291 for the four months ended
April 30, 1996 and $806 for the year ended December 31, 1995.
On April 30, 1996, the Combined Companies paid bonuses and special
payments to employees, former employees and former directors of $43,760 in
recognition of their services.
Note 11. Supplemental Disclosures to the Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Cash paid during the year for:
Interest ...................................... $ 12,862 $ 5,909
Income taxes .................................. $ 5,359 $16,922
Noncash capital contribution by the stockholders:
Debt forgiveness .............................. $163,184 $ --
</TABLE>
76
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Note 12. Business Segments
The Combined Companies operate in two major lines of business: operation
of bowling centers and manufacturing of bowling and related products.
Information concerning operations in these business segments for the four
months ended April 30, 1996 and the year ended December 31, 1995 and
identifiable assets at April 30, 1996 and December 31, 1995 are presented
below:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Revenues from unaffiliated customers
Bowling centers
Domestic ........................ $ 75,000 $ 192,400
International ................... 33,500 99,900
Manufacturing .................... 56,400 272,600
--------- ---------
$ 164,900 $ 564,900
========= =========
Intersegment sales
Bowling centers
Domestic ........................ $ -- $ --
International ................... -- --
Manufacturing .................... 4,600 13,900
--------- ---------
$ 4,600 $ 13,900
========= =========
Operating (loss) income
Intersegment sales
Bowling centers
Domestic ........................ $ 3,600 $ 26,500
International ................... (2,500) 23,700
Manufacturing .................... (9,600) 75,700
--------- ---------
Eliminations ..................... (500) (1,500)
--------- ---------
$ (9,000) $ 124,400
========= =========
</TABLE>
77
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
-------------- -------------
<S> <C> <C>
Identifiable assets
Bowling centers
Domestic ......................... $ 218,300 $ 224,500
International .................... 65,400 64,600
Manufacturing ..................... 101,500 119,800
Eliminations ...................... $ (10,000) $ (8,500)
---------- ---------
$ 375,200 $ 400,400
========== =========
Depreciation and amortization expense
Bowling centers
Domestic ......................... $ 11,800 $ 29,100
International .................... 2,500 7,500
Manufacturing ..................... 1,200 3,600
Eliminations ...................... (400) (1,000)
---------- ---------
$ 15,100 $ 39,200
========== =========
Capital expenditures
Bowling centers
Domestic ......................... $ 5,100 $ 17,800
International .................... 2,300 10,200
Manufacturing ..................... 400 4,500
Eliminations ...................... (900) (2,500)
---------- ---------
$ 6,900 $ 30,000
========== =========
</TABLE>
78
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Note 13. Geographic Segments
Information about the Combined Companies' operations in different
geographic areas for the four months ended April 30, 1996 and the year ended
December 31, 1995 and identifiable assets at April 30, 1996 and December 31,
1995 are presented below:
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Net operating revenue:
United States .................... $103,800 $ 371,400
Japan ............................ 13,700 50,300
Hong Kong ........................ 14,000 40,800
Korea ............................ 5,800 6,000
Australia ........................ 14,700 47,100
United Kingdom ................... 7,300 26,100
Mexico ........................... 2,100 7,800
Sweden ........................... 1,200 10,000
Canada ........................... 300 600
Spain ............................ 1,000 2,700
Other European countries ......... 5,200 16,000
China ............................ 400 --
Eliminations ..................... (4,600) (13,900)
-------- ---------
$164,900 $ 564,900
======== =========
</TABLE>
Net operating revenues for the United States manufacturing operation has
been reduced by approximately $21,500 for the four months ended April 30, 1996
and $61,000 for the year ended December 31, 1995 to reflect the elimination of
intercompany sales between the domestic manufacturing operation and the
manufacturing foreign sales and service branches.
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Operating (loss) income:
United States .................... $ (2,900) $ 92,200
Japan ............................ (1,400) 8,800
Hong Kong ........................ 800 6,200
Korea ............................ (300) (1,200)
Australia ........................ (1,300) 13,300
United Kingdom ................... (1,100) 2,400
Mexico ........................... (200) 1,500
Sweden ........................... (500) 1,500
Canada ........................... -- --
Spain ............................ (100) (100)
Other European countries ......... (1,300) 1,300
China ............................ (200) --
Eliminations ..................... (500) (1,500)
-------- --------
$ (9,000) $124,400
======== ========
</TABLE>
79
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Operating (loss) income for the United States manufacturing operation has
been reduced by approximately $1,300 for the four months ended April 30, 1996
and $900 for the year ended December 31, 1995 to reflect the elimination of
intercompany gross profit between the domestic manufacturing operation and the
manufacturing foreign sales and service branches.
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
----------- -------------
<S> <C> <C>
Identifiable assets:
United States .................... $ 290,400 $311,300
Japan ............................ 17,200 22,100
Hong Kong ........................ 7,700 8,500
Korea ............................ 4,500 2,900
Australia ........................ 34,800 31,600
United Kingdom ................... 12,200 11,800
Mexico ........................... 5,100 4,500
Sweden ........................... 2,200 2,600
Canada ........................... 900 1,200
Spain ............................ 200 2,000
Other European countries ......... 7,700 8,400
China ............................ 2,300 2,000
Eliminations ..................... (10,000) (8,500)
--------- --------
$ 375,200 $400,400
========= ========
</TABLE>
Identifiable assets for the foreign sales and service branches have been
reduced by approximately $5,700 at April 30, 1996 and $4,400 at December 31,
1995 to reflect the elimination of intercompany gross profit in inventory
between the domestic manufacturing operations and the manufacturing foreign
sales and service branches.
Note 14. Business Combinations
Fair Lanes, Inc. ("Fair Lanes") operated 106 bowling centers in the United
States and Puerto Rico. On June 22, 1994, Fair Lanes and its parent Fair Lanes
Entertainment, Inc. ("FLE"), each filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Code ("Chapter 11"). Fair Lanes'
operating subsidiaries did not file for Chapter 11 protection. At the time of
filing, liabilities subject to compromise consisted of Fair Lanes' $138,000
senior secured notes, which were publicly traded, and FLE's debt in the form of
$48,000 variable rate and zero coupon notes (these notes were also publicly
traded). The Bankruptcy Court approved the plan of reorganization effective
September 29, 1994 whereby the holders of FLE's $48,000 of notes received
approximately 6% of Fair Lanes' equity and the holders of Fair Lanes' $138,000
of notes received approximatey 94% of Fair Lanes' equity and $90,350 of new
9.5% notes. The former Fair Lanes' equityholders' interests were eliminated as
a result of the reorganization. Through September 29, 1994, AMF's shareholders
had purchased old Fair Lanes' and FLE's notes which resulted in the AMF
shareholders obtaining approximately 56% of the voting shares of Fair Lanes.
One other shareholder held approximately 35% of the new stock and the remaining
9% was held by other shareholders. The AMF shareholders were able to acquire
the shares held by the 35% shareholder on January 7, 1996 and an additional 2%
of the shares from other shareholders in open market purchases. On February 7,
1996, the AMF shareholders affected a cash merger and bought out the remaining
shareholders.
The Fair Lanes' acquisition was accounted for as a purchase. As a result
of the relatively short acquisition period and the fact that the minority
shareholders' interest was not affected for losses during the acquisition
period, the combined financial statements include the results of operations for
period subsequent to September 29, 1994.
80
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
The assets acquired and liabilities assumed were recorded at their
estimated fair value as follows:
<TABLE>
<S> <C>
Current assets ................. $ 3,059
Property and equipment ......... 141,785
Other assets ................... 12,643
Current liabilities ............ (22,672)
Long-term liabilities .......... (116,174)
----------
Purchase price ................. $ 18,641
==========
</TABLE>
Note 15. Stockholders' Equity
<TABLE>
<CAPTION>
April 30, 1996
--------------------------------------
Issued and Common
Authorized Outstanding Stock
------------ ---------------- --------
<S> <C> <C> <C>
AMF Bowling, Inc ........................ 10,000 950.6689 $ 1
AMF Bowling Centers, Inc. ............... 15,000 9,485.1000 9
AMF Beverage Company of
Oregon, Inc. ........................... 10,000 94.8510 --
King Louie Lenexa, Inc. ................. 30,000 94.8510 --
AMF Catering Services Pty Ltd. .......... 100,000 100,000.0000 82
AMF Bowling Centers (Aust)
International, Inc. .................... 10,000 948.5100 1
AMF Bowling Centers (Canada)
International, Inc. .................... 10,000 948.5100 1
AMF BCO -- France One, Inc. ............. 10,000 1,000.0000 1
AMF BCO -- France Two, Inc. ............. 10,000 1,000.0000 1
AMF Bowling Centers (Hong Kong)
International, Inc. .................... 10,000 948.5100 1
AMF Bowling Centers International,
Inc. -- Japan ......................... 10,000 9,485.1000 10
AMF Bowling Mexico Holding, Inc. 1,000 75.6972 322
Boliches AMF Inc. ....................... 10,000 100.0000 1
AMF Bowling Centers II
Inc. -- Switzerland .................... --
AMF BCO -- U.K. One, Inc. ............... 10,000 100.0000 1
AMF BCO -- U.K. Two, Inc. ............... 10,000 100.0000 1
AMF BCO -- China, Inc. .................. 10,000 1,000.0000 1
AMF Bowling Centers China, Inc. ......... 10,000 1,000.0000 1
Bush River Corporation .................. 100,000 18,895.1919 20
Eliminations ............................ -- -- --
----
Totals .................................. $454
====
<CAPTION>
April 30, 1996
------------------------------------------------------------
Equity
Adjustment
from Foreign Total
Paid in Retained Currency Stockholders'
Capital Earnings Translation Other Equity
----------- ---------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
AMF Bowling, Inc ........................ $ 51,778 $ 15,639 $ 593 $-- $ 68,011
AMF Bowling Centers, Inc. ............... 183,780 8,825 -- -- 192,614
AMF Beverage Company of
Oregon, Inc. ........................... -- -- -- -- --
King Louie Lenexa, Inc. ................. -- -- -- -- --
AMF Catering Services Pty Ltd. .......... -- -- -- -- 82
AMF Bowling Centers (Aust)
International, Inc. .................... 492 24,327 1,645 -- 26,465
AMF Bowling Centers (Canada)
International, Inc. .................... 2,109 (1,238) 85 -- 957
AMF BCO -- France One, Inc. ............. 220 533 (93) -- 661
AMF BCO -- France Two, Inc. ............. 595 1,440 (250) -- 1,786
AMF Bowling Centers (Hong Kong)
International, Inc. .................... 532 2,175 -- -- 2,708
AMF Bowling Centers International,
Inc. -- Japan ......................... 1,210 4,446 505 -- 6,171
AMF Bowling Mexico Holding, Inc. 1,856 2,563 (3,056) -- 1,685
Boliches AMF Inc. ....................... 493 682 (814) -- 362
AMF Bowling Centers II
Inc. -- Switzerland .................... -- 205 171 -- 376
AMF BCO -- U.K. One, Inc. ............... 1,597 (350) (86) -- 1,162
AMF BCO -- U.K. Two, Inc. ............... 4,357 (956) (235) -- 3,167
AMF BCO -- China, Inc. .................. 577 (159) (4) -- 415
AMF Bowling Centers China, Inc. ......... 2,174 (600) (13) -- 1,562
Bush River Corporation .................. -- -- -- -- 20
Eliminations ............................ -- (5,230) -- -- (5,230)
-------- -------- --------- --- --------
Totals .................................. $251,770 $ 52,302 $(1,552) $-- $302,974
======== ======== ========= === ========
</TABLE>
81
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------
Issued and Common Paid in
Authorized Outstanding Stock Capital
------------ --------------- -------- ---------
<S> <C> <C> <C> <C>
AMF Bowling, Inc ............. 10,000 950.6689 $ 1 $28,213
AMF Bowling Centers,
Inc. ........................ 15,000 9,485.1000 9 29,122
AMF Beverage Company
of Oregon, Inc. ............. 10,000 94.8510 -- --
King Louie Lenexa, Inc. ...... 30,000 94.8510 -- --
AMF Bowling Centers
(Aust) International, Inc. 10,000 948.5100 1 492
AMF Bowling Centers
(Canada) International,
Inc. ........................ 10,000 948.5100 1 2,109
AMF BCO -- France One,
Inc. ........................ 10,000 1,000.0000 1 31
AMF BCO -- France Two,
Inc. ........................ 10,000 1,000.0000 1 83
AMF Bowling Centers
(Hong Kong)
International, Inc. ......... 10,000 948.5100 1 57
AMF Bowling Centers
International, Inc. --
Japan ....................... 10,000 9,485.1000 10 156
AMF Bowling Mexico
Holding, Inc. ............... 1,000 75.6972 1,507 226
Boliches AMF Inc. ............ 10,000 100.0000 1 60
AMF Bowling Centers II
Inc. -- Switzerland ......... 1,000 100.0000 1 --
AMF BCO -- U.K. One,
Inc. ........................ 10,000 100.0000 1 129
AMF BCO -- U.K. Two,
Inc. ........................ 10,000 100.0000 1 352
AMF BCO -- China, Inc. ....... 10,000 1,000.0000 1 577
AMF Bowling Centers
China, Inc. ................. 10,000 1,000.0000 1 2,174
Bush River Corporation ....... 100,000 18,895.1919 -- --
Eliminations ................. -- -- -- --
------ -------
Totals ....................... $1,538 $63,781
====== =======
<CAPTION>
December 31, 1995
--------------------------------------------------------
Notes
Receivable Total
Retained Deferred Stock Stockholders'
Earnings Translation Subscription Equity
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
AMF Bowling, Inc ............. $ 54,463 $ 593 $ -- $ 83,270
AMF Bowling Centers,
Inc. ........................ 13,436 -- (726) 41,841
AMF Beverage Company
of Oregon, Inc. ............. 382 -- -- 382
King Louie Lenexa, Inc. ...... 859 -- -- 859
AMF Bowling Centers
(Aust) International, Inc. 25,251 (74) (503) 25,167
AMF Bowling Centers
(Canada) International,
Inc. ........................ (1,286) 85 -- 909
AMF BCO -- France One,
Inc. ........................ 681 (44) -- 669
AMF BCO -- France Two,
Inc. ........................ 1,842 (119) -- 1,807
AMF Bowling Centers
(Hong Kong)
International, Inc. ......... 2,420 -- (62) 2,416
AMF Bowling Centers
International, Inc. --
Japan ....................... 4,285 611 (170) 4,892
AMF Bowling Mexico
Holding, Inc. ............... 2,753 (3,258) -- 1,228
Boliches AMF Inc. ............ 814 (815) -- 60
AMF Bowling Centers II
Inc. -- Switzerland ......... 617 61 -- 679
AMF BCO -- U.K. One,
Inc. ........................ (186) (113) -- (169)
AMF BCO -- U.K. Two,
Inc. ........................ (509) (310) -- (466)
AMF BCO -- China, Inc. ....... (97) (4) -- 477
AMF Bowling Centers
China, Inc. ................. (367) (13) -- 1,795
Bush River Corporation ....... 230 -- -- 230
Eliminations ................. (4,508) -- -- (4,508)
-------- ------- ------- --------
Totals ....................... $101,080 $(3,400) $(1,461) $161,538
======== ======= ======= ========
</TABLE>
82
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Note 16. Condensed Consolidated Financial Statements
On February 16, 1996, the stockholders of the Combined Companies executed
a Stock Purchase Agreement, subject to certain closing conditions, to sell the
stock and certain assets of the individual companies to AMF Group Holdings,
Inc., through its subsidiaries. On May 1, 1996, the sale transaction was
completed.
In conjunction with the acquisition of the Combined Companies, AMF Bowling
Worldwide, Inc. (formerly AMF Group Inc.), a subsidiary of AMF Group Holdings,
Inc., issued Senior Subordinated Notes and Senior Subordinated Discount Notes
on March 21, 1996. On May 1, 1996, AMF Bowling Worldwide, Inc. executed a bank
credit agreement and certain additional subsidiaries of AMF Bowling Worldwide,
Inc. became guarantors of the Senior Subordinated Notes and the Senior
Subordinated Discount Notes. These financing arrangements provide for
guarantees by the following companies which became indirect subsidiaries of AMF
Bowling Worldwide, Inc., which is the borrower and issuer of the notes
evidencing such indebtedness. Guarantor companies include the following:
o AMF Bowling Centers, Inc.
o Bush River Corporation
o King Louie Lenexa, Inc.
o AMF Beverage Company of Oregon, Inc.
o AMF Bowling, Inc.
o AMF Bowling Centers (Aust) International Inc.
o AMF Bowling Centers (Canada) International Inc.
o AMF BCO -- France One, Inc.
o AMF BCO -- France Two, Inc.
o AMF Bowling Centers (Hong Kong) International Inc.
o AMF Bowling Centers International Inc. -- Japan
o AMF Bowling Mexico Holding, Inc.
o Boliches AMF, Inc.
o AMF BCO -- U.K. One, Inc.
o AMF BCO -- U.K. Two, Inc.
o AMF BCO -- China, Inc.
o AMF Bowling Centers China, Inc.
Included with the guarantor companies at April 30, 1996 are AMF Bowling
Centers Switzerland Inc. and AMF Bowling Centers Spain Inc., newly formed
subsidiaries of AMF Bowling Worldwide, Inc., which, respectively, purchased
assets of one bowling center and two bowling centers from AMF Bowling Centers
II, Inc. (Switzerland) and AMF Bowling S.A., former Subsidiary of AMF Bowling
Mexico Holdings, Inc.
83
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Included with the guarantor companies at December 31, 1995 is AMF Bowling
Centers II, Inc. (Switzerland) which sold assets of one bowling center, as
discussed above, to a newly formed subsidiary of AMF Bowling Worldwide, Inc.,
which became a guarantor.
Non-guarantor companies at April 30, 1996 include the following foreign
subsidiaries of certain guarantor companies:
o AMF Bowling (Unlimited)
o Worthington North Properties Limited
o AMF Bowling France SNC
o AMF Bowling de Paris SNC
o AMF Bowling de Lyon La Part Dieu SNC
o Boliches y Compania
o Operadora Mexicana de Boliches, S.A.
o Promotora de Boliches, S.A. de C.V.
o Immeubles Obispado, S.A.
o Immeubles Minerva, S.A.
o Boliches Mexicano, S.A.
o AMF Bowling Centers (China) Company
o AMF Garden Hotel Bowling Center Company
Included in the non-guarantor companies at December 31, 1995 is AMF
Bowling S.A. which sold assets of two bowling centers in Spain to a newly
formed subsidiary of AMF Bowling Worldwide, Inc., which became a guarantor
company.
The following condensed combining information presents:
o Condensed combining balance sheets as of April 30, 1996 and December 31,
1995 and the related condensed combining statements of operations and of
cash flows for the four months ended April 30, 1996 and the year ended
December 31, 1995.
o Elimination entries necessary to combine the entities comprising the
Combined Companies.
84
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Balance Sheets
Four Months Ended April 30, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
----------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 18,628 $ 3,285 $ -- $ 21,913
Accounts and notes receivable, net of allowance for
doubtful accounts ................................... 32,316 1,571 -- 33,887
Accounts and notes receivable -- affiliates ........... 2,463 380 (2,677) 166
Inventories ........................................... 41,831 1,465 -- 43,296
Prepaid expenses and other ............................ 4,856 1,257 -- 6,113
-------- -------- --------- --------
Total current assets ............................... 100,094 7,958 (2,677) 105,375
Property and equipment, net ............................ 241,968 10,518 (942) 251,544
Investment in subsidiaries ............................. 10,643 -- (10,643) --
Other assets ........................................... 17,399 931 -- 18,330
-------- -------- --------- --------
Total assets ....................................... $370,104 $ 19,407 $ (14,262) $375,249
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 21,760 $ 1,910 $ -- $ 23,670
Book overdrafts ....................................... 5,724 -- -- 5,724
Accrued expenses and deposits ......................... 32,185 2,731 -- 34,916
Accounts and notes payable -- affiliates .............. 14 2,663 (2,677) --
Long-term debt, current portion ....................... 10 -- -- 10
Income taxes payable .................................. 1,078 679 -- 1,757
-------- -------- --------- --------
Total current liabilities .......................... 60,771 7,983 (2,677) 66,077
Long-term debt ......................................... 1,958 -- -- 1,958
Other liabilities ...................................... 2,811 -- -- 2,811
Deferred income taxes .................................. 648 781 -- 1,429
-------- -------- --------- --------
Total liabilities .................................. 66,188 8,764 (2,677) 72,275
-------- -------- --------- --------
Commitments and contingencies
Stockholders' equity:
Common stock .......................................... 454 3,940 (3,940) 454
Paid-in capital ....................................... 251,770 5,003 (5,003) 251,770
Retained earnings ..................................... 53,244 6,247 (7,189) 52,302
Equity adjustment from foreign currency
translation ........................................... (1,552) (4,547) 4,547 (1,552)
-------- -------- --------- --------
Total stockholders' equity ......................... 303,916 10,643 (11,585) 302,974
-------- -------- --------- --------
Total liabilities and stockholders' equity ......... $370,104 $ 19,407 $ (14,262) $375,249
======== ======== ========= ========
</TABLE>
85
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Balance Sheets
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
----------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 8,843 $ 889 $ -- $ 9,732
Accounts and notes receivable, net of allowance for
doubtful accounts ......................................... 37,499 1,527 -- 39,026
Accounts and notes receivable -- affiliates ................. 4,477 7,465 (7,963) 3,979
Inventories ................................................. 38,042 1,779 -- 39,821
Prepaid expenses and other .................................. 3,944 1,238 -- 5,182
-------- -------- --------- --------
Total current assets ..................................... 92,805 12,898 (7,963) 97,740
Notes receivable -- affiliates ............................... 22,941 -- -- 22,941
Property and equipment, net .................................. 250,637 10,582 (1,495) 259,724
Other assets ................................................. 29,869 822 (10,718) 19,973
-------- -------- --------- --------
Total assets ............................................. $396,252 $ 24,302 $ (20,176) $400,378
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 22,313 $ 1,403 $ (75) $ 23,641
Book overdrafts ............................................. 2,362 -- -- 2,362
Accrued expenses and deposits ............................... 28,203 2,125 -- 30,328
Accounts and notes payable -- affiliates .................... 1,821 7,033 (6,865) 1,989
Long-term debt, current portion ............................. 1,084 -- -- 1,084
Income taxes payable ........................................ 5,930 1,199 -- 7,129
-------- -------- --------- --------
Total current liabilities ................................ 61,713 11,760 (6,940) 66,533
Long-term debt ............................................... 19,550 -- -- 19,550
Notes payable -- affiliates .................................. 146,639 1,076 (988) 146,727
Other liabilities ............................................ 5,282 748 -- 6,030
-------- -------- --------- --------
Total liabilities ........................................ 233,184 13,584 (7,928) 238,840
-------- -------- --------- --------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock ................................................ 1,538 3,941 (3,941) 1,538
Paid-in capital ............................................. 63,781 4,153 (4,153) 63,781
Retained earnings ........................................... 102,610 7,300 (8,830) 101,080
Equity adjustment from foreign currency translation ......... (3,400) (4,676) 4,676 (3,400)
Notes receivable stock subscription ......................... (1,461) -- -- (1,461)
-------- -------- --------- --------
Total stockholders' equity ............................... 163,068 10,718 (12,248) 161,538
-------- -------- --------- --------
Total liabilities and stockholders' equity ............... $396,252 $ 24,302 $ (20,176) $400,378
======== ======== ========= ========
</TABLE>
86
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Statements of Operations
Four Months Ended April 30, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Operating revenue:
Sales of products and services ............................ $ 154,500 $10,731 $ (860) $ 164,371
Revenue from operating lease activities ................... 323 250 -- 573
--------- ------- ------ ---------
Total operating revenues ............................... 154,823 10,981 (860) 164,944
--------- ------- ------ ---------
Operating expenses:
Cost of goods sold, excluding depreciation of $791......... 42,242 1,445 (569) 43,118
Bowling center operations ................................. 71,289 8,985 (118) 80,156
Selling, general and administrative ....................... 34,875 682 -- 35,557
Depreciation and amortization ............................. 14,380 802 (85) 15,097
--------- ------- ------ ---------
Total operating expenses ............................... 162,786 11,914 (772) 173,928
--------- ------- ------ ---------
Operating loss ......................................... (7,963) (933) (88) (8,984)
Nonoperating income (expenses):
Interest expense .......................................... (4,501) (3) -- (4,504)
Other expenses, net ....................................... (634) (58) -- (692)
Interest income ........................................... 574 37 -- 611
Equity in earnings of subsidiaries ........................ (707) -- 707 --
Foreign currency transaction gain (loss) .................. (179) 150 -- (29)
--------- -------- ------ ---------
Loss before income taxes ................................... (13,410) (807) 619 (13,598)
Income tax benefit ......................................... 1,631 100 -- 1,731
--------- -------- ------ ---------
Net loss ............................................... $ (11,779) $ (707) $ 619 $ (11,867)
========= ======== ====== =========
</TABLE>
87
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Statements of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
----------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Operating revenues:
Sales of products and services ......................... $ 532,349 $34,197 $ (2,548) $ 563,998
Revenue from operating lease activities ................ 926 -- -- 926
--------- ------- -------- ---------
Total operating revenues ............................ 533,275 34,197 (2,548) 564,924
--------- ------- -------- ---------
Operating expenses:
Cost of sales, excluding depreciation of $2,531......... 180,980 4,730 (1,581) 184,129
Bowling center operations .............................. 149,535 16,930 -- 166,465
Selling, general and administrative .................... 47,218 4,046 (486) 50,778
Depreciation and amortization .......................... 36,723 2,650 (234) 39,139
--------- ------- -------- ---------
Total operating expenses ............................ 414,456 28,356 (2,301) 440,511
--------- ------- -------- ---------
Operating income .................................... 118,819 5,841 (247) 124,413
Nonoperating income (expenses):
Interest expense ....................................... (15,569) (142) -- (15,711)
Other expenses, net .................................... (600) (443) -- (1,043)
Interest income ........................................ 1,837 347 -- 2,184
Equity in earnings of subsidiaries ..................... 3,444 -- (3,444) --
Foreign currency transaction loss ...................... (465) (514) -- (979)
--------- ------- -------- ---------
Income before income taxes .............................. 107,466 5,089 (3,691) 108,864
Income tax expense ...................................... 10,453 1,645 -- 12,098
--------- ------- -------- ---------
Net income .......................................... $ 97,013 $ 3,444 $ (3,691) $ 96,766
========= ======= ======== =========
</TABLE>
88
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Statements of Cash Flows
Four Months Ended April 30, 1996
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $ (11,072) $ (707) $ (88) $ (11,867)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .......................... 14,380 802 (85) 15,097
Deferred income taxes .................................. 435 (21) -- 414
Equity in earnings of subsidiaries ..................... (707) -- 707 --
Change in assets and liabilities:
Accounts and notes receivable, net .................... 4,821 (37) -- 4,784
Receivables and payables -- affiliates ................ 593 942 -- 1,535
Inventories ........................................... (3,655) 24 -- (3,631)
Other assets and liabilities .......................... (3,476) (34) 837 (2,673)
Accounts payable and accrued expenses ................. 7,634 1,079 -- 8,713
Income taxes payable .................................. (5,442) (303) -- (5,745)
--------- -------- -------- ---------
Net cash provided by operating activities ............. 3,511 1,745 1,371 6,627
--------- -------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment ....................... (6,046) (1,001) 173 (6,874)
Other .................................................... 2,989 -- -- 2,989
--------- -------- -------- ---------
Net cash used for investing activities ................ (3,057) (1,001) 173 (3,885)
--------- -------- -------- ---------
Cash flows from financing activities:
Distributions to stockholders ............................ (36,721) (622) 622 (36,721)
Payment of long-term debt ................................ (3,812) -- -- (3,812)
Proceeds from notes payable -- stockholders, net ......... 1,236 -- -- 1,236
Capital contributions by stockholders .................... 24,805 2,252 (2,252) 24,805
Collection of notes receivable -- affiliates ............. 19,408 -- -- 19,408
Other .................................................... 3,902 -- 86 3,988
--------- -------- -------- ---------
Net cash provided by financing activities ............. 8,818 1,630 (1,544) 8,904
Effect of exchange rates on cash and cash
equivalents .......................................... 330 205 -- 535
--------- -------- -------- ---------
Net increase in cash and cash equivalents ................. 9,602 2,579 -- 12,181
Cash and cash equivalents at beginning of period .......... 9,026 706 -- 9,732
--------- -------- -------- ---------
Cash and cash equivalents at end of period ................ $ 18,628 $ 3,285 $ -- $ 21,913
========= ======== ======== =========
</TABLE>
89
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Condensed Combining Statements of Cash Flows
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Combined
Companies Companies Eliminations Companies
-------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 97,013 $ 3,444 $ (3,691) $ 96,766
Adjustments to reconcile net income to net cash
provided by operating activities: .........................
Equity in earnings of subsidiaries ........................ (3,444) -- 3,444 --
Dividends from non-guarantor companies .................... 3,133 -- (3,133) --
Depreciation and amortization ............................. 36,661 2,682 (204) 39,139
Deferred income taxes ....................................... 215 (1,045) -- (830)
Loss on sale of property and equipment, net ................. 567 -- -- 567
Change in assets and liabilities, net of effects from
companies acquired:
Accounts and notes receivable, net ...................... 11,864 (1,234) -- 10,630
Receivables and payables--affiliates .................... 7,262 (1,115) -- 6,147
Inventories ............................................. (5,596) (400) -- (5,996)
Other assets and liabilities ............................ (2,484) (369) 2,752 (101)
Accounts payable and accrued expenses ................... (19,187) 446 -- (18,741)
Income taxes payable .................................... (2,039) (791) -- (2,830)
-------- -------- -------- ---------
Net cash provided by operating activities ............... 123,965 1,618 (832) 124,751
-------- -------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment .......................... (26,411) (4,005) 451 (29,965)
Proceeds from sales of property and equipment ............... 494 916 -- 1,410
Other ....................................................... 229 -- -- 229
-------- -------- -------- ---------
Net cash used for investing activities .................. (25,688) (3,089) 451 (28,326)
-------- -------- -------- ---------
Cash flows from financing activities:
Dividends to guarantor companies ............................ -- (3,133) 3,133 --
Payments on credit note agreements, net ..................... (11,057) -- -- (11,057)
Distributions to stockholders ............................... (71,851) -- -- (71,851)
Payment of long-term debt ................................... (10,605) 320 -- (10,285)
Payment for redemption of stock -- .......................... (3,960) -- -- (3,960)
stockholders, net ......................................... (4,882) 1,089 -- (3,793)
Capital contributions by stockholders ....................... 8,329 -- -- 8,329
Capital contributions from guarantor ........................ -- 2,752 (2,752) --
Other ....................................................... (2,056) -- -- (2,056)
-------- -------- -------- ---------
Net cash (used for) provided by financing
activities .............................................. (96,082) 1,028 381 (94,673)
Effect of exchange rates on cash and cash
equivalents ............................................. (5) (189) -- (194)
----------- -------- -------- ---------
Net increase (decrease) in cash and cash equivalents ......... 2,190 (632) -- 1,558
Cash and cash equivalents at beginning of year ............... 6,653 1,521 -- 8,174
---------- -------- -------- ---------
Cash and cash equivalents at end of year ..................... $ 8,843 $ 889 $ -- $ 9,732
========== ======== ======== =========
</TABLE>
90
<PAGE>
AMF BOWLING GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
(in thousands of dollars, except share data)
Note 17. Subsequent Event (Unaudited)
On October 10, 1996, AMF Bowling Centers, Inc., completed the acquisition
of 50 bowling centers and certain related assets and liabilities from Charan
Industries, Inc. pursuant to an Asset Purchase Agreement, dated as of September
10, 1996.
The purchase was approximately $106,500, including certain adjustments and
transaction costs. It was funded with approximately $40,000 from the sale of
equity by AMF Group Holdings Inc., a wholly-owned subsidiary of AMF Holdings
Inc., to its institutional stockholders and one of its directors and with
$66,500 from available borrowing under the Company's Acquisition Facility.
The April 30, 1996 combined financial statements do not reflect any
adjustments or cost associated with the acquisition.
91
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
Selected Quarterly Data (unaudited)
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
AMF Bowling, Inc.
-----------------------------------------------------
1997 Quarters Ended March 31 June 30 September 30 December 31
- -------------------------------------------------------------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Net sales .......................................................... $ 157.6 $ 160.5 $ 187.5 $ 208.1
Operating income ................................................... 29.7 12.7 17.5 23.0
Net income (loss) before extraordinary items ....................... 0.1 ( 12.3) (10.2) (9.8)
Extraordinary items, net of tax (b) ................................ -- -- -- (23.4)
Net income (loss) .................................................. 0.1 ( 12.3) (10.2) (33.2)
Net income (loss) per share before extraordinary items (a) ......... $ 0.00 $ (0.29) $ (0.24) $ (0.18)
Per share effect of extraordinary items (a) (b) .................... -- -- -- (0.44)
--------- ---------- ---------- ----------
Net income (loss) per share (a) .................................... $ 0.00 $ (0.29) $ (0.24) $ (0.62)
========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company AMF Bowling, Inc.
--------------------- --------------------------------------------------
One Two Pro Forma
Month Months Quarter
1996 Quarters Ended March 31 April 30 June 30 June 30 September 30 December 31
- ------------------------------------- ---------- ---------- ----------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales ........................... $ 123.3 $ 41.6 $ 73.4 $ 114.8 $ 131.8 $ 179.6
Operating income (loss) ............. 27.9 (36.9) 4.0 5.3 14.3 27.8
Net income (loss) ................... 21.6 (33.4) (11.9) (13.6) (5.3) (2.1)
Net income (loss) per share (a) ..... N/A N/A ( 0.31) (0.36) (0.14) (0.05)
</TABLE>
- ---------
(a) Basic and diluted. Outstanding stock options and warrants are not
considered as their effect is antidilutive.
(b) Costs incurred in connection with the use of proceeds of the Initial
Public Offering. See "Note 9. Long-Term Debt" and "Note 12. Stockholders'
Equity" in the Notes to Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Arthur Andersen LLP has served as the Company's independent public
accountants since 1996. Results for 1997 and 1996 have been audited by Arthur
Andersen LLP.
The Predecessor Company engaged Price Waterhouse LLP as its independent
accountants. Results for the four months ended April 30, 1996 and the year
ended December 31, 1995 have been audited by Price Waterhouse LLP.
92
<PAGE>
PART III
Item 10. Directors and Executive Officers
The information required by this item is incorporated by reference to the
sections entitled "Item 1 -- Election of Board of Directors -- General," " --
Nominees for Election as Directors" and "Meetings and Committees of the Board
- -- Section 16(a) Beneficial Ownership Reporting Compliance" on pages 2, 3 and 4
of the proxy statement filed since the close of the fiscal year ended December
31, 1997 (the "Proxy Statement") pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended. Pursuant to Item 401(b) of Regulation S-K,
certain information regarding the executive officers of the Registrant is
reported in Part I, of this report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the
sections entitled "Executive Compensation -- Summary Compensation Table," " --
Stock Option Grants in Last Fiscal Year," " -- Aggregated Stock Option Exercises
and Fiscal Year-End Option Value," " -- Employment Agreements," "Meetings and
Committees of the Board -- Compensation of Directors" and " -- Compensation
Committee Interlocks and Insider Participation" on pages 3, 4, 5, 6 and 7 of the
Proxy Statement. The information contained in "Executive Compensation -- Report
of the Compensation Committee" and "Performance Graph" shall not be deemed
"filed" as part of this report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
section entitled "Securities Owned by Management and Certain Beneficial Owners"
on pages 10 and 11 of the Proxy Statement.
Item 13. Certain Relationships and Related Transaction
The information required by this item is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" on pages
12-14 of the Proxy Statement.
93
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules
See "Item 8. Financial Statements and Supplemental Data".
(b) Reports on Form 8-K
None
(c) Exhibits
<TABLE>
<S> <C>
2.1 Stock Purchase Agreement, dated as of February 16, 1996, by and among AMF Group Holdings Inc.
and the owners of the Predecessor Company. (1)
2.2 Agreement, dated as of April 11, 1996, by and among AMF Group Holdings Inc. and the owners of
the Predecessor Company amending certain terms of the Stock Purchase Agreement. (2)
3.1 Restated Certificate of Incorporation of the Company. (3)
3.2 By-Laws of the Company. (4)
3.3 Certificate of Incorporation, as amended, of American Recreation Centers, Inc.
3.4 By-Laws of American Recreation Centers, Inc.
3.5 Certificate of Incorporation of Burleigh Recreation, Inc.
3.6 Amended and Restated By-Laws of Burleigh Recreation, Inc.
3.7 Certificate of Incorporation of 300, Inc.
3.8 By-Laws of 300, Inc.
3.9 Certificate of Incorporation, as amended, of Michael Jordan Golf Company, Inc.
3.10 By-Laws of Michael Jordan Golf Company, Inc.
3.11 Certificate of Incorporation of Michael Jordan Golf-Water Tower, Inc.
3.12 By-Laws of Michael Jordan Golf-Water Tower, Inc.
3.13 Certificate of Incorporation of MJG -- O'Hare, Inc.
3.14 By-Laws of MJG -- O'Hare, Inc.
3.15 Certificate of Incorporation of Lake Grove Centers, Inc.
3.16 By-Laws of Lake Grove Centers, Inc.
3.17 Certificate of Limited Liability Company of MBI No. 1, LLC.
3.18 Limited Liability Company Agreement of MBI No. 1, LLC.
3.19 Certificate of Limited Liability Company of AWI No. 1, LLC.
3.20 Limited Liability Company Agreement of AWI No. 1, LLC.
3.21 Certificate of Incorporation of AMF Bowling India Private LTD.
3.22 Articles of Association of AMF Bowling India Private LTD.
3.23 Articles of Association of AMF Bowling Poland Sp.zo.o
3.24 R.Q.P. Partnership Agreement
3.25 Joint Venture Agreement of Broadway Grand Properties
4.1 Specimen of Common Stock Certificate.
4.2 Indenture, dated as of March 21, 1996, as supplemented, by and among AMF Group Inc., the parties
listed on Exhibit C thereto, as guarantors, and IBJ Schroder Bank & Trust Company with respect to
the Senior Subordinated Notes. (5)
4.3 Indenture, dated as of March 21, 1996, as supplemented, by and among AMF Group Inc., the parties
listed on Exhibit C thereto, as guarantors, and American Bank National Association with respect to the
Senior Subordinated Discount Notes. (6)
4.4 Form of Senior Subordinated Note. (7)
4.5 Form of Senior Subordinated Discount Note. (8)
10.1 Registration Rights Agreement, dated as of March 21, 1996, by and among the Company, the
Guarantors and Goldman, Sachs & Co. (9)
10.2 Third Amended and Restated Credit Agreement among AMF Group Inc. and the Initial Lenders and
Initial Issuing Banks and Goldman, Sachs & Co., as Syndication Agent, and Citibank, N.A., as
Administrative Agent.
10.3 AMF Holdings Inc. 1996 Stock Incentive Plan. (10)
10.4 Stockholders Agreement, dated as of April 30, 1996, by and among the Company and the
Stockholders. (11)
10.5 Amendment No. 1, dated as of May 28, 1996, to the Stockholders Agreement. (12)
10.6 Amendment No. 2, dated as of May 31, 1996, to the Stockholders Agreement. (13)
10.7 Amendment No. 3, dated as of January 17, 1997, to the Stockholders Agreement. (14)
10.8 Amendment No. 4, dated as of January 17, 1997, to the Stockholders Agreement. (15)
10.9 Amendment No. 5, dated as of July 31, 1997, to the Stockholders Agreement. (16)
10.10 Amendment No. 6, dated as of December 31, 1997, to the Stockholders Agreement.
10.11 Amendment No. 7, dated as of January 1, 1998, to the Stockholders Agreement.
10.12 Registration Rights Agreement, dated as of April 30, 1996, by and among the Company and the
Stockholders. (17)
10.13 Amendment No. 1, dated as of May 28, 1996, to the Registration Rights Agreement. (18)
10.14 Amendment No. 2, dated as of January 17, 1997, to the Registration Rights Agreement. (19)
</TABLE>
94
<PAGE>
<TABLE>
<S> <C>
10.15 Amendment No. 3, dated as of January 17, 1997, to the Registration Rights Agreement. (20)
10.16 Amendment No. 4, dated as of July 31, 1997, to the Registration Rights Agreement. (21)
10.17 Amendment No. 5, dated as of September 30, 1997, to the Registration Rights Agreement.
10.18 Warrant Agreement, dated as of May 1, 1996, between the Company and The Goldman Sachs Group,
L.P. (22)
10.19 Employment Agreement, dated as of May 1, 1996, by and among the Company, AMF Bowling, Inc.
and Robert L. Morin. (23)
10.20 Employment Agreement, dated as of May 1, 1996, between the Company and Douglas J. Stanard. (24)
10.21 Stock Option Agreement, dated as of May 1, 1996, between the Company and Charles M. Diker. (25)
10.22 Employment Agreement, dated as of May 28, 1996, by and among the Company, AMF Group Inc. and
Stephen E. Hare. (26)
10.23 Asset Purchase Agreement, dated as of September 10, 1996, by and between AMF Bowling Centers,
Inc. and Charan Industries, Inc. (27)
10.24 Termination Agreement, dated as of February 28, 1997, by and among the Company, AMF Bowling,
Inc. and Robert L. Morin. (28)
10.25 Stock Subscription Agreement, dated as of October 9, 1996, by and among the Company and the
Purchasers (as defined therein). (29)
10.26 Agreement and Plan of Merger, dated as of January 17, 1997, by and among AMF Bowling Centers,
Inc., Noah Acquisition and American Recreation Centers, Inc. (30)
10.27 Waiver and Amendment No. 1, dated as of March 24, 1997, to Amended and Restated Credit
Agreement dated as of December 20, 1996. (31)
10.28 Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of June 30, 1997. (32)
10.29 Interest Rate Cap Agreement, dated July 2, 1997. (33)
10.30 AMF Bowling, Inc. 1998 Stock Incentive Plan.
11.1 Computation of earnings per share.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Price Waterhouse LLP.
27.1 Financial Data Schedule.
</TABLE>
95
<PAGE>
Notes to Exhibits:
<TABLE>
<S> <C>
(1) Incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(2) Incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(3) Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(4) Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(5) Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(6) Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(7) Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(8) Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-4 of AMF Group Inc.
(File No. 333-4877).
(9) Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(10) Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(11) Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(12) Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(13) Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(14) Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(15) Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(16) Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1 of AMF Bowling,
Inc. (File No. 333-34099).
(17) Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(18) Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 of AMF
Bowling, Inc. (File No. 333-34099).
(19) Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of AMF
Bowling, Inc. (File No. 333-34099).
(20) Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 of AMF
Bowling, Inc. (File No. 333-34099).
(21) Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 of AMF
Bowling, Inc. (File No. 333-34099).
(22) Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(23) Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(24) Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(25) Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(26) Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-4 of AMF Group
Inc. (File No. 333-4877).
(27) Incorporated by reference to Exhibit 1 to the Current report on Form 8-K of AMF Group Inc., dated
October 24, 1996 (File No. 001-12131).
(28) Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K of AMF Group Inc. for
the fiscal year ended December 31, 1996 (File No. 001-12131).
(29) Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K of AMF Group Inc. for
the fiscal year ended December 31, 1996 (File No. 001-12131).
</TABLE>
96
<PAGE>
<TABLE>
<S> <C>
(30) Incorporated by reference to Exhibit 1 to the Current report on Form 8-K of AMF Group Inc., dated
January 17, 1997 (File No. 001-12131).
(31) Incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to the Registration
Statement on Form S-4 of AMF Group Inc. (File No. 333-4877).
(32) Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of AMF Group Inc.
for the quarterly period ended June 30, 1997 (File No. 001-12131).
(33) Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of AMF Group Inc.
for the quarterly period ended June 30, 1997 (File No. 001-12131).
</TABLE>
97
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, as of the 27th day of March, 1998.
AMF BOWLING, INC.
/s/ DOUGLAS J. STANARD
----------------------------------------
Douglas J. Stanard
Director
President/Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of the 27th day of March, 1998.
<TABLE>
<CAPTION>
Signatures Title
- --------------------------------------- -----------------------------------------------------------
<S> <C>
/s/ RICHARD A. FRIEDMAN Chairman of the Board
----------------------------------
Richard A. Friedman
/s/ TERENCE M. O'TOOLE Director
----------------------------------
Terence M. O'Toole
/s/ PETER M. SACERDOTE Director
----------------------------------
Peter M. Sacerdote
/s/ CHARLES M. DIKER Director
----------------------------------
Charles M. Diker
/s/ PAUL B. EDGERLEY Director
----------------------------------
Paul B. Edgerley
/s/ HOWARD A. LIPSON Director
----------------------------------
Howard A. Lipson
/s/ THOMAS R. WALL, IV Director
----------------------------------
Thomas R. Wall, IV
/s/ DOUGLAS J. STANARD Director/President/Chief Executive Officer
----------------------------------
Douglas J. Stanard
/s/ STEPHEN E. HARE Director/Executive Vice President/Chief Financial Officer/
---------------------------------- Treasurer
Stephen E. Hare
/s/ MICHAEL P. BARDARO Vice President/Corporate Controller/
----------------------------------
Michael P. Bardaro Assistant Secretary/Chief Accounting Officer
</TABLE>
98
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE I
AMF BOWLING, INC.
To the Stockholders and Board of Directors of
AMF Bowling, Inc.:
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements included in the Form 10-K Annual Report
of AMF Bowling, Inc. and subsidiaries for the year ended December 31, 1997, and
for the period from inception (January 12, 1996) through December 31, 1996, and
have issued our report thereon dated February 20, 1998. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. Schedule I filed as part of the Company's Form 10-K Annual Report
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. The schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Richmond, Virginia
February 20, 1998
99
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.
CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
As of December 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Investment in subsidiary ......... $ 653,862 $ 408,734
Other noncurrent assets .......... 239 137
--------- ---------
Total assets .................... $ 654,101 $ 408,871
========= =========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities ........................... $ 73 $ 56
Stockholders' equity ................................ 654,028 408,815
--------- ---------
Total liabilities and stockholders' equity ......... $ 654,101 $ 408,871
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
100
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (Note 3)
-------------- --------------
<S> <C> <C>
Interest income .................................... $ 102 $ 137
Provision for income taxes ......................... 17 56
---------- ----------
Income before equity in loss of subsidiary ......... 85 81
Equity in loss of subsidiary ....................... (55,649) (19,565)
---------- ----------
Net loss ........................................... $ (55,564) $ (19,484)
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
101
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (Note 3)
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss .......................................................... $ (55,564) $ (19,484)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Interest income, net ............................................ (102) (137)
Equity in loss of subsidiary .................................... 55,649 19,565
Change in current liabilities ................................... 17 56
---------- ----------
Net cash provided by operating activities ....................... -- --
Net cash used in investing activities:
Investment in subsidiary ........................................ (315,671) (420,750)
---------- ----------
Net cash provided by financing activities:
Capital contributions ........................................... 36,600 420,750
Net proceeds from initial public offering of shares ............. 279,071 --
---------- ----------
Net cash provided by financing activities ....................... 315,671 420,750
---------- ----------
Net change in cash and cash equivalents ......................... -- --
Cash and cash equivalents at beginning of period ................ -- --
---------- ----------
Cash and cash equivalents at end of period ...................... $ -- $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
102
<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.
NOTES TO AMF BOWLING, INC. CONDENSED FINANCIAL STATEMENTS
1. These notes to the AMF Bowling, Inc. ("AMF Bowling") condensed financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements of AMF Bowling and subsidiaries included in Part II,
Item 8 of the Form 10-K Annual Report (the "Notes"). AMF Bowling Worldwide,
Inc., formerly named AMF Group Inc. ("Bowling Worldwide") is a wholly owned
subsidiary of AMF Group Holdings Inc. ("AMF Group Holdings"). AMF Group
Holdings is a wholly owned subsidiary of AMF Bowling. All dollar amounts
are in thousands, except where otherwise indicated.
2. The senior subordinated notes and senior subordinated discount notes are
jointly and severally guaranteed on a full and unconditional basis by AMF
Group Holdings and by the first and second-tier subsidiaries of Bowling
Worldwide, as discussed in "Note 21. Condensed Consolidating Financial
Statements" in the Notes.
3. The results of operations for the period ended December 31, 1996, reflect
the results of AMF Bowling since its inception date of January 12, 1996.
4. Restricted assets of AMF Group Holding and Bowling Worldwide:
The Credit Agreement and AMF Group Holdings' guarantee contain certain
covenants, including, but not limited to, covenants related to cash interest
coverage, fixed charge coverage, payments on other debt, mergers and
acquisitions, sales of assets, guarantees and investments. The Credit
Agreement also contains certain provisions which limit the amount of funds
available for transfer from Bowling Worldwide to AMF Group Holdings, and
from AMF Group Holdings to AMF Bowling. Limits exist on, among other things,
the declaration or payments of dividends, distribution of assets, and
issuance or sale of capital stock.
So long as Bowling Worldwide is not in default of the covenants contained in
the Credit Agreement, it may, i) declare and pay dividends in common stock;
ii) declare and pay cash dividends, to make payments of approximately $0.15
million in May 1997 and, to the extent necessary, to make payments of
approximately $0.15 million due in May 1998 under certain noncompete
agreements with the Prior Owners, iii) declare and pay cash dividends for
general administrative expenses not to exceed $0.25 million; and iv) declare
and pay cash dividends not to exceed $2.0 million for the repurchase of
Common Stock.
5. Total assets and liabilities:
At December 31, 1997 and 1996, assets represent AMF Bowling's investment in
AMF Group Holdings and other assets related to shareholder receivables which
are related to subscription of AMF Bowling's Common Stock. At December 31,
1997 and 1996, liabilities represent federal income taxes payable arising
from interest earned on the shareholder receivables previously described.
103
<PAGE>
SCHEDULE II
AMF BOWLING GROUP
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ----------------------------------------------- ------------ ----------------------------- ---------------- -----------
Additions
-----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts Deductions -- End of
Description of Period Expenses -- Describe Write-Offs Period
- ----------------------------------------------- ------------ ------------ ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Accounts Receivable -- Allowance for Doubtful
Accounts
Year ended December 31, 1995 ................ $1,898 $2,118 $ (643) $3,373
Four months ended April 30, 1996 ............ $3,373 $ (17) $ (246) $3,110
Inventory -- Reserves
Year ended December 31, 1995 ................ $ 800 $ 954 $ (498) $1,256
Four months ended April 30, 1996 ............ $1,256 $ 104 $ (553) $ 807
</TABLE>
104
EXHIBIT 3.3
[STATE OF CALIFORNIA LOGO]
SECRETARY OF STATE
[SEAL]
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 75 page(s) was prepared by and
in this office from the record on file, of which it purports to be a
copy, and that it is full, true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the
Great Seal of the State of
California this
Nov 05 1997
-----------------------------
[CALIFORNIA STATE SEAL]
/s/ Bill Jones
-----------------------------
Secretary of State
<PAGE>
State of California
OFFICE OF THE SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby certify:
That on the 13th day of April, 1959,
AMERICAN RECREATION CENTERS, INC.
- --------------------------------------------------------------------------
became incorporated under the laws of the State of California by filing its
Articles of Incorporation in this office.
That all documents amendatory and/or supplementary thereto (including
Agreements of Merger, Restated Articles of Incorporation and Certificates
of Determination of Preferences, if any), of record in this office for said
corporation are as follows:
page 1 of 4
DOCUMENT FILED
- -------- -----
CERTIFICATE OF AMENDMENT..........................August 17, 1960
CERTIFICATE OF AMENDMENT..........................July 26, 1961
CERTIFICATE OF OWNERSHIP..........................August 2, 1961
Merged in: South Shore Bowling Corporation,
a California corporation
CERTIFICATE OF OWNERSHIP..........................August 2, 1961
Merged in: M & W Bowling Corporation,
a California corporation
CERTIFICATE OF OWNERSHIP..........................August 2, 1961
Merged in: Ajax Restaurant Corporation,
a California corporation
CERTIFICATE OF OWNERSHIP..........................August 2, 1961
Merged in: Alameda Restaurant Corporation,
a California corporation
CERTIFICATE OF OWNERSHIP..........................May 29, 1963
Merged in: Mel's Redwood Bowl, Inc.,
a California corporation
<PAGE>
RE: AMERICAN RECREATION CENTERS, INC.
page 2 of 4
DOCUMENT FILED
- -------- -----
CERTIFICATE OF OWNERSHIP...........................May 29, 1963
Merged in: Highlander Lanes, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 29, 1963
Merged in: Carmichael Lanes, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Alpine Alley, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: ARC Athletic Supply, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Broadway Bowl, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Fiesta RC - San Jose Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Grass Valley Lanes, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1996
Merged in: Jayco, Inc., a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Palo Alto Bowl, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Peninsula Restaurants, Inc.,
a California corporation
<PAGE>
RE: AMERICAN RECREATION CENTERS, INC.
Page 3 of 4
DOCUMENT FILED
- -------- -----
CERTIFICATE OF OWNERSHIP...........................May 25, 1966
Merged in: Restco, Inc., a California corporation
CERTIFICATE OF AMENDMENT...........................May 31, 1978
CERTIFICATE OF AMENDMENT...........................May 30, 1979
CERTIFICATE OF AMENDMENT...........................May 27, 1980
CERTIFICATE OF AMENDMENT...........................July 2, 1982
CERTIFICATE OF AMENDMENT...........................April 12, 1983
CERTIFICATE OF OWNERSHIP...........................April 3, 1985
Merged in: Recreational Enterprises, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................April 3, 1985
Merged in: Mel's Alameda Bowl, Inc.,
a California corporation
CERTIFICATE OF AMENDMENT...........................July 15, 1985
CERTIFICATE OF AMENDMENT...........................July 15, 1985
CERTIFICATE OF AMENDMENT...........................August 1, 1986
CERTIFICATE OF AMENDMENT...........................November 17, 1988
CERTIFICATE OF OWNERSHIP...........................February 25, 1994
Merged in: San Francisco Sour Dogs, Inc.,
a California corporation
CERTIFICATE OF OWNERSHIP...........................June 29, 1995
Merged in: Texas Arc, Inc., a Texas corporation
AGREEMENT OF MERGER................................April 24, 1997
Merged in: Noah Acquisition Corp., a Delaware corporation
<PAGE>
RE: AMERICAN RECREATION CENTERS, INC.
Page 4 of 4
DOCUMENT FILED
- -------- -----
[CALIFORNIA STATE SEAL]
IN WITNESS WHEREOF, I execute
this certificate and affix
the Great Seal of the State
of California this 6th day
of November, 1997.
/s/ Bill Jones
-------------------------
Secretary of State
<PAGE>
CERTIFICATE OF STATUS
DOMESTIC CORPORATION
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That on the 13th day of April, 1959,
AMERICAN RECREATION CENTERS, INC.
- ----------------------------------------------------------------------------
became incorporated under the laws of the State of California by filing its
Articles of Incorporation in this office; and
That no record exists in this office of a certificate of dissolution
of said corporation nor of a court order declaring dissolution thereof, nor
of a merger or consolidation which terminated its existence; and
That said corporation's corporate powers, rights and privileges are
not suspended on the records of this office; and
That according to the records of this office, the said corporation
is authorized to exercise all its corporate powers, rights and privileges
and is in good legal standing in the State of California; and
That no information is available in this office on the financial
condition, business activity or practices of this corporation.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal
of the State of California this day
of
November 6, 1997.
----------------------------------
[CALIFORNIA STATE SEAL]
/s/ Bill Jones
------------------------------------
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
-------------------------
of
AMERICAN RECREATION CENTERS, INC.
---------------------------------
FIRST: The name of this corporation is:
AMERICAN RECREATION CENTERS, INC.
---------------------------------
SECOND: The purposes for which this corporation is formed are:
(a) Directly or through ownership in stock of any corporation,
to primarily engage in the specific business of providing recreational
facilities of all types for the general public.
(b) To engage, either directly or through ownership in stock
of any corporation, generally in the business of providing all types of
recreational facilities for the general public, including but not limited to
the operation of bowling alleys, theatres (both indoor and outdoor), golf
course and driving ranges, athletic fields, arenas, aquatic sports facilities,
facilities for winter sports of all kinds, the operation of restaurants, bars,
cocktail lounges, food concessions, catering services, and the retail sale of
all items related to the above mentioned recreational facilities and the
operation of all other enterprises related thereto.
(c) To engage, either directly or through ownership of stock
in any corporation, in a business of operating hotels, motels, boarding houses,
inns, bungalow courts, resort areas, and camp grounds, and all businesses and
enterprises related thereto.
(d) Directly or through ownership of stock in any corporation,
to buy, sell, mortgage, exchange, lease, hold for investment, or otherwise
use and operate real estate of all kinds and any interest therein.
(e) To subscribe or cause to be subscribed for, and to take,
purchase and otherwise acquire, own, hold, use, sell,
-1-
<PAGE>
assign, transfer, exchange, distribute and otherwise dispose of, the whole or
any part of the shares of the capital stock, bonds, coupons, mortgages, deeds of
trust, debentures, securities, obligations, evidences of indebtedness, notes,
goodwill, rights, assets and property of any and every kind, or any part
thereof, of any other corporation or corporations, association or associations,
firm or firms, or person or persons, together with shares, rights, units or
interest in, or in respect of any trust estate, now or hereinafter existing, and
whether created by the laws of the State of California or of any other state,
territory or country; and to operate, manage and control certain properties, or
any of them, either in the name of such other corporation or corporations, or in
the name of this corporation, and while the owners of any of said shares of
capital stock, to exercise all rights, powers and privileges of ownership of
every kind and description, including the right to vote thereon, the power to
designate some person or persons for that purpose from time to time, and to the
same extent as natural persons might or could do.
(f) To borrow and lend money, but nothing herein contained
shall be construed as authorizing the business of banking, or as including the
business purposes of a commercial bank, savings bank or trust company.
(g) To buy, sell, manufacture and deal at retail and wholesale
in merchandise and other personal property of all description.
(h) To engage in any business related or unrelated to those
described in Clauses (a), (b), (c), (d), (e), (f), and (g) of of this article,
and from time to time authorized or approved by the Board of Directors of this
corporation.
(i) To act as a partner and joint venturer and to enter into
co-partnership and joint venture agreements with
-2-
<PAGE>
joint venture agreements with other corporations and with individuals.
(j) To do business anywhere in the world.
(k) To have and exercise all rights and powers from time to
time granted to a corporation by law.
The above purposed clause shall not be limited by reference to or
inference from one another but each such purposed clause shall be construed
as a separate statement conferring independent purposes and powers upon the
corporation.
THIRD: The county in the State of California wherein the principal
office for the transaction of business of this corporation is to be located is
the county of Alameda.
FOURTH: (a) The number of the Directors of the corporation shall not
be less than five (5) nor more than seven (7), the exact number of which shall
be fixed by a by-law duly adopted by the shareholders or by the board of
directors.
(b) The names and addresses of the persons who are appointed
to act as the first directors are:
Eliot Jones, Jr., 4034 East Avenue, Hayward, California
Arthur J. Fowler Route 1, P.O. Box 367, Carmel, Calif.
Robert Feuchter 205 Whitmer Court, Irvington, California
George V. Yates P. O. Box N-1, Carmel, Calif.
George R. Walker 212 Professional Bldg., Monterey, Calif.
FIFTH: The total number of shares which the corporation is authorized
to issue is Five hundred thousand (500,000) shares, each share shall be without
par value, no distinction shall exist between the shares of the corporation or
the holders thereof.
IN WITNESS WHEREOF, the undersigned, and the above named incorporators
and first directors of this corporation have executed these Articles of
Incorporation on April 7, 1959.
-3-
<PAGE>
/s/ Eliot Jones, Jr.
-----------------------------
Eliot Jones, Jr.
/s/ Arthur J. Fowler
------------------------------
Arthur J. Fowler
/s/ Robert Feuchter
------------------------------
Robert Feuchter
/s/ George V. Yates
------------------------------
George V. Yates
/s/ George R. Walker
------------------------------
George R. Walker
STATE OF CALIFORNIA )
)ss.
COUNTY OF )
On April 8, 1959, before me GORDON CAMPBELL, a Notary Public in and for
said County and State, personally appeared Eliot Jones, Jr., Arthur J. Fowler,
Robert Feuchter, George V. Yates, and George R. Walker, known to me to be the
persons whose names are subscribed to the foregoing Articles of Incorporation,
and acknowledged to me that they executed the same.
WITNESS my hand and official seal.
/s/ Gordon Campbell
------------------------------------
Notary Public in and for said
County and State
-4-
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
AMERICAN RECREATION CENTERS, INC.
a California corporation
The undersigned, ELIOT JONES, JR., and GEORGE R. WALKER, certify
that they now are and at all times herein mentioned have been the duly
elected and acting President and Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation, and that:
1. At a regular meeting of the board of directors of the corporation
duly held at San Francisco, California, at 10:00 A.M. on July 12, 1960, the
following resolution was adopted:
RESOLVED, that Article THIRD and Subparagraph (a) of
ARTICLE FOURTH of the Articles of Incorporation
be amended to read as follows:
"THIRD: The County in the State of California wherein
the principal office for the transaction of
business of this corporation is to be located is
the County of SACRAMENTO."
(FOURTH):"(a) The number of Directors of this Corporation
shall be as provided in the By-Laws of the Corporation. A
By-Law duly adopted by the shareholders may state that the
number of directors shall not be less than a stated
minimum (but in no case shall be less than five (5) ) nor
more than a stated maximum, (which in no case shall exceed
the before stated minimum by more than three (3) ), and in
such event the exact number of Directors shall be fixed
within such limits by a By-Law or Amendment thereto duly
adopted by the shareholders or the Board of Directors of
this Corporation. The minimum and maximum number of
directors so set may be changed, or a definite number
fixed, without the provision for an indefinite number, by
a By-Law duly adopted by the shareholders."
RESOLVED FURTHER, that said amendment is hereby adopted and
approved.
2. At the annual meeting of shareholders of the corporation, duly
held at Sacramento, California, at 10:00 A.M. on August 17,
<PAGE>
1960, the foregoing amendment to the articles of incorporation was
ratified and approved by a resolution identical in form to said
directors' resolution set forth in paragraph 1 of this certificate.
3. The foregoing amendment was adopted and approved at said share-
holders' meeting by the total vote of 134,829 shares.
4. The total number of shares of the corporation entitled to vote
on or consent to the adoption of such amendment is 155,568.
DATED: August 17, 1960.
------------------
/s/ Eliot Jones, Jr.
--------------------------------
Eliot Jones, Jr., President of
American Recreation Centers, Inc.
/s/ George R. Walker
--------------------------------
George R. Walker, Secretary of
American Recreation Centers, Inc.
-------
STATE OF CALIFORNIA )
) ss.
COUNTY OF SACRAMENTO )
On August 17, 1960, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared ELIOT
JONES, JR., and GEORGE R. WALKER, known to me to be the President
and Secretary respectively of American Recreation Centers, Inc.,
and known to me to be the persons who executed the within Certificate
of Amendment of Articles of Incorporation on behalf of said
corporation, and acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal in the said County of Sacramento the day and year
in this certificate first above written.
/s/ Malcolm L. McConnell
--------------------------------
Notary Public in and for said
County and State
Malcolm L. McConnell
My Commission Expires:
April 6, 1963
-2-
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF SACRAMENTO )
We, the undersigned, say:
That we are the President and Secretary respectively of
AMERICAN RECREATION CENTERS, INC., a California corporation; that
the foregoing Certificate of Amendment of Articles of Incorporation
of American Recreation Centers, Inc., is true of our own knowledge.
We declare under penalty of perjury that the foregoing is
true and correct.
Executed on August 17, 1960 at Sacramento, California.
/s/ Eliot Jones, Jr.
----------------------------
Eliot Jones, Jr.
/s/ George R. Walker
----------------------------
George R. Walker
-3-
<PAGE>
Cap. stock chg. from 500,000 No Par to 1,000,000 No Par
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
---------------------------------
The undersigned, ELIOT JONES, JR., and GEORGE R. WALKER,
certify that they now are and at all times herein mentioned, have been the duly
elected and acting President and Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation, and that:
1. At a special meeting of the Board of Directors of the
corporation duly held at San Francisco, California, at 11 A.M. on June 22,
1961, the following resolution was duly adopted:
"RESOLVED: that Article Fifth of the Articles of
Incorporation of AMERICAN RECREATION CENTERS, INC.,
be amended to read in its entirety as follows:
`FIFTH: The total number of shares which the
corporation is authorized to issue is One Million
(1,000,000) shares. Each share shall be without par
value, and no distinction shall exist between the
shares of the corporation or the holders thereof.'
"RESOLVED FURTHER: that said Amendment is hereby adopted
and approved;
"RESOLVED FURTHER: that the President and Secretary of
this corporation be, and they hereby are, authorized
and directed to file the necessary Certificate of
Amendment with the Secretary of State of California,
and to do all other acts necessary to make this Amend-
ment effective."
2. At a special meeting of the Shareholders of the corpor-
ation duly held at Sacramento, California, at 10 A.M. on July 26, 1961,
the following resolution was duly adopted:
"RESOLVED: that Article Fifth of the Articles of Incor-
poration of AMERICAN RECREATION CENTERS, INC., be amended
to read in its entirety as follows:
`FIFTH: The total number of shares which the
corporation is authorized to issue is One Million
(1,000,000) shares. Each share shall be without
par value, and no distinction shall exist between
the shares of the corporation or the holders thereof.'"
3. The foregoing Amendment was adopted and approved at said
Shareholders' meeting by a total vote of 133,649 shares.
4. The total number of shares of the corporation entitled
-1-
<PAGE>
to vote on or consent to the adoption of such Amendment is 215,568.
DATED: JULY 26, 1961.
/s/ Eliot Jones, Jr.
------------------------------
Eliot Jones, Jr.
President of AMERICAN RECREATION
CENTERS, INC.
/s/ George R. Walker
---------------------------------
George R. Walker
Secretary of AMERICAN RECREATION
CENTERS, INC.
The undersigned declares under penalty of perjury that the
foregoing is true and correct of his own knowledge, and that this Certificate
was executed by him on July 26, 1961 at Sacramento, California.
/s/ Eliot Jones, Jr.
---------------------------------
Eliot Jones, Jr.
The undersigned declares under penalty of perjury that the
foregoing is true and correct of his own knowledge, and that this Certificate
was executed by him on July 26, 1961 at Sacramento, California.
/s/ George R. Walker
---------------------------------
George R. Walker
-2-
<PAGE>
NUMBER SHARES WITHOUT PAR VALUE CHANGED FORM 1,000,000 TO 1,250,000
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected
and acting Vice President-Legal and Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. At a meeting of the Board of Directors of the corporation duly
held at San Jose, California on May 4, 1978, the following resolution was
duly adopted:
RESOLVED, that Article Fifth of the Articles of Incorporation
of AMERICAN RECREATION CENTERS, INC., be amended to read in
its entirety as follows:
"FIFTH: The total number of shares which the corporation is
authorized to issue in One Million Two Hundred Fifty Thousand
(1,250,000) shares. Each share shall be without par value,
and no distinction shall exist between the shares of the
corporation or the holders thereof. Upon the amendment of
this Article to read as hereinabove set forth, each
outstanding share is split up and converted into One and
25/100 (1.25) shares."
3. The vote or consent of the shareholders of the corporation is not
required under Section 902(c) of the Corporations Code.
/s/ G. Gervaise Davis III
----------------------------
G. GERVAISE DAVIS III
Vice President-Legal and Secretary
-1-
<PAGE>
VERIFICATION
I declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Amendment are true and correct of my own
knowledge.
Executed at Monterey, California on May 24, 1978.
/s/ G. Gervaise Davis III
----------------------------
G. GERVAISE DAVIS III
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected
and acting Vice President-Legal and Secretary of AMERICAN RECREATION
CENTERS, INC., a California corporation.
2. At a meeting of the Board of Directors of the Corporation duly
held at Monterey, California on May 12, 1979, the following Resolution was
duly adopted unanimously:
RESOLVED, that Article Fifth of the Articles of Incorporation
of AMERICAN RECREATION CENTERS, INC., be amended to read in
its entirety as follows:
"FIFTH: The total number of shares which the corporation is
authorized to issue is Two Million Five Hundred Thousand
(2,500,000) shares. Each share shall be without par value,
and no distinction shall exist between the shares of the
corporation or the holders thereof. Upon the amendment of
this Article to read as hereinabove set forth, each
outstanding share is split up and converted into Two (2) shares."
3. The vote or consent of the shareholders of the corporation is
not required under Section 902(c) of the Corporations Code.
/s/ G. Gervaise Davis III
-----------------------------------
G. GERVAISE DAVIS III
Vice President-Legal and Secretary
-1-
<PAGE>
VERIFICATION
I declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Amendment are true and correct of my own
knowledge.
Executed at Monterey, California on May 18, 1979.
/s/ G. Gervaise Davis III
----------------------------
G. GERVAISE DAVIS III
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
ROBERT FEUCHTER and G. GERVAISE DAVIS III certify that:
1. They are the President and Secretary, respectively, of AMERICAN
RECREATION CENTERS, INC., a California corporation.
2. Article FIFTH of the Articles of Incorporation of this corporation is
amended to read as follows:
"FIFTH: The total number of shares which the corporation
is authorized to issue is Ten Million (10,000,000) shares.
Each share shall be without par value, and no distinction
shall exist between the shares of the corporation or the
holders thereof."
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of outstanding
shares of the corporation is 951,988. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
/s/ Robert Feuchter
------------------------------
ROBERT FEUCHTER, President
/s/ G. Gervaise Davis III
--------------------------------
G. GERVAISE DAVIS III, Secretary
The undersigned declare under penalty of perjury that the
matters set forth in the foregoing Certificate are true of their
own knowledge. Executed at Monterey, California on May 17, 1980.
/s/ Robert Feuchter
---------------------------------
/s/ G. Gervaise Davis III
---------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected and
acting Vice President-Legal and the Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. At a meeting of the Board of Directors of the corporation duly held
at Monterey, California on May 22, 1982, the following resolution was duly
adopted:
RESOLVED, that Article Fifth of the Articles of Incorporation of
AMERICAN RECREATION CENTERS, INC., be amended to read in its entirety as
follows:
"FIFTH: The total number of shares which the corporation is authorized
to issue is Twelve Million Five Hundred Thousand (12,500,000) shares.
Each share shall be without par value, and no distinction shall exist
between the shares of the corporation or the holders thereof. Upon the
amendment of this Article to read as hereinabove set forth, each
outstanding share is split up and covered into One and 25/100 (1.25)
shares."
3. The vote or consent of the shareholders of the corporation is not
required under Section 902(c) of the Corporations Code.
/s/ G. GERVAISE DAVIS III
------------------------------
G. GERVAISE DAVIS III
Vice President-Legal and Secretary
1
<PAGE>
VERIFICATION
I declare under penalty of perjury that the matters set
forth in the foregoing Certificate of Amendment are true and
correct of my own knowledge.
Executed at Monterey, California on June 10, 1982.
/s/ G. GERVAISE DAVIS III
------------------------------
G. GERVAISE DAVIS III
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected and
acting Vice President-Legal and the Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. At a meeting of the Board of Directors of the corporation duly held
at Monterey, California on March 30, 1983, the following resolution was duly
adopted:
RESOLVED, that Article Fifth of the Articles of Incorporation of
AMERICAN RECREATION CENTERS, INC., be amended to read in its entirety as
follows:
"FIFTH: The total number of shares which the corporation is authorized
to issue is Eighteen Million Seven Hundred Fifty Thousand (18,750,000)
shares. Each share shall be without par value, and no distinction shall
exist between the shares of the corporation or the holders thereof. Upon
the amendment of this Article to read as hereinabove set forth, each
outstanding share is split up and covered into One and 50/100 (1.50)
shares."
3. The vote or consent of the shareholders of the corporation is not
required under Section 902(c) of the Corporations Code.
/s/ G. GERVAISE DAVIS III
------------------------------
G. GERVAISE DAVIS III
Vice President-Legal and Secretary
1
<PAGE>
VERIFICATION
I declare under penalty of perjury that the matters set forth in the
foregoing Certificate of Amendment are true and correct of my own knowledge.
Executed at Monterey, California on April 8, 1983.
/s/ G. GERVAISE DAVIS III
------------------------------
G. GERVAISE DAVIS III
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected and
acting Vice President-Legal and Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. Article FIFTH of the Articles of Incorporation is amended in its
entirety to read as follows:
"FIFTH: This Corporation is authorized to issue two classes of
stock, designated "Common Stock" and "Preferred Stock". The
total number of shares which this Corporation is authorized
to issue is Eighteen Million Seven Hundred Fifty Thousand
(18,750,000) shares without par value. The number of shares
of Common Stock which this Corporation is authorized to issue
is Thirteen Million Seven Hundred Fifty Thousand (13,750,000).
The number of shares of Preferred Stock which this Corporation
is authorized to issue is Five Million (5,000,000). The Pre-
ferred Stock may be issued from time to time in one or more
series. The Board of Directors of this Corporation is author-
ized to determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly unissued
shares of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares
constituting any series of preferred stock, to increase or
decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any series
subsequent to the issuance of shares of that series, to
determine the designation of any series, and to fix the
number of shares of any series. Upon the amendment of this
article to read as hereinabove set forth, each outstanding
share of capital stock is reconstituted as one share of
Common Stock.
3. The foregoing amendment of the Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the Corporations Code. The total number of outstanding shares of the Corporation
on the date of the shareholder vote was 2,709,024. The number of shares voting
<PAGE>
in favor of the amendment equaled or exceeded the vote required.
The percentage vote required was more than 50%.
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of my own knowledge.
Executed at Monterey, California on July 12, 1985.
/s/ G. Gervaise Davis III
-------------------------------------
G. GERVAISE DAVIS III
Vice President/Legal and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected and
acting Vice President-Legal and the Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. At a meeting of the Board of Directors of the Corporation duly
held at Monterey, California on May 17, 1985, the following resolution was
duly adopted:
RESOLVED, that Article Fifth of the Articles of Incorporation
of AMERICAN RECREATION CENTERS, INC. be amended to read in
its entirety as follows:
"FIFTH: This Corporation is authorized to issue two classes of
stock, designated "Common Stock" and "Preferred Stock". The
total number of shares which this Corporation is authorized
to issue is Twenty-two Million One Hundred Eighty-seven
Thousand Five Hundred (22,187,500) shares without part value.
The number of shares of Common Stock which this Corporation
is authorized to issue is Seventeen Million One Hundred
Eighty-seven Thousand Five Hundred (17,187,500). The number of
shares of Preferred Stock which this Corporation is authorized
to issue is Five Million (5,000,000). The Preferred Stock may be
issued from time to time in one or more series. The Board of
Directors of this Corporation is authorized to determine or
alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued shares of
Preferred Stock, and within the limitations or restrictions
stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting
any series of preferred stock, to increase or decrease (but
not below the number of shares of any such series then
outstanding) the
1
<PAGE>
number of shares of any series subsequent to the issuance of shares
of that series, to determine the designation of any series, and to
fix the number of shares of any series. Upon the amendment of this
Article to read as hereinabove set forth, each outstanding share of
Common Stock is split up and converted into One and 25/100 (1.25)
shares."
3. The vote or consent of the shareholders of the Corporation is not
required under Section 902(c) of the Corporations Code.
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of my own knowledge.
Executed at Monterey, California on July 12, 1985.
/s/ G. Gervaise Davis III
-------------------------------------
G. GERVAISE DAVIS III
Vice President-Legal and Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
G. GERVAISE DAVIS III hereby certifies that:
1. He is now and at all times herein mentioned was the duly elected and
acting Vice President-Legal and the Secretary of AMERICAN RECREATION CENTERS,
INC., a California corporation.
2. At a meeting of the Board of Directors of the Corporation duly held
at Sacramento, California on May 23, 1986, the following resolution was duly
adopted:
RESOLVED, that Article Fifth of the Articles of Incorporation
of AMERICAN RECREATION CENTERS, INC. be amended to read in
its entirety as follows:
"FIFTH: This Corporation is authorized to issue two classes of stock,
designated "Common Stock" and "Preferred Stock". The total number of
shares which this Corporation is authorized to issue is Twenty-six
Million Four Hundred Eighty-four Thousand Three Hundred Seventy-five
(26,484,375) shares without par value. The number of shares of Common
Stock which this Corporation is authorized to issue is Twenty-one
Million Four Hundred Eighty-four Thousand Three Hundred Seventy-five
(21,484,375) shares. The number of shares of Preferred Stock which this
Corporation is authorized to issue is Five Million (5,000,000). The
Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of this Corporation is authorized to determine or
alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued shares of Preferred Stock, and within
the limitations or restrictions stated in any resolution or resolutions
of the Board of Directors originally fixing the number of shares
constituting any series of preferred stock, to increase or decrease (but
not below the number of shares of any such series then outstanding) the
number of shares of any series subsequent to the issuance of shares of
that series, to determine the designation of any series, and to fix the
number of shares of any series. Upon the amendment of this Article to
read as hereinabove set forth, each out-
<PAGE>
standing share of Common Stock is split up and converted into One and
25/100 (1.25) shares."
3. The vote or consent of the shareholders of the Corporation is not
required under Section 902(c) of the Corporations Code.
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of my own knowledge.
Executed at Monterey, California on July 31, 1986.
/s/ G. Gervaise Davis III
-------------------------------------
G. GERVAISE DAVIS III
Vice President/Legal and Secretary
<PAGE>
CERTIFICATE OF AMENDMENTS
OF ARTICLES OF INCORPORATION
OF
AMERICAN RECREATION CENTERS, INC.
ROBERT FEUCHTER and G. GERVAISE DAVIS III hereby certify that:
1. They are the President and Secretary, respectively, of AMERICAN
RECREATION CENTERS, INC., a California corporation.
2. Article Sixth of the Articles of Incorporation of this Corporation
is added and reads as follows:
"SIXTH: The liability of the directors of the Corporation for
monetary damages shall be eliminated to the fullest extent
permissible under California law."
3. Article Seventh of the Articles of Incorporation of this Corporation
is added and reads as follows:
"SEVENTH: The Corporation is authorized under Section 317 of the
California Corporations Code, to indemnify its agents (as defined
in Section 317), whether by bylaw, agreement, or otherwise, in
excess of that expressly permitted by Section 317, for claims
made against them alleging a breach of duty to the Corporation
or its shareholders, subject to the limits set forth in Section 204
of the California Corporations Code."
4. The foregoing amendments of Articles of Incorporation have been duly
approved by the Board of Directors.
5. The foregoing amendments of articles of incorporation have been duly
approved by the required vote of shareholders in accordance with Section 902
of the Corporations Code. The total number of outstanding shares is 4,740,970.
The number of shares voting in favor of the amendment equaled or exceeded the
vote required. The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
Date: November 9, 1988 AMERICAN RECREATION CENTERS, INC.
By: /s/ Robert Feuchter
-----------------------------
ROBERT FEUCHTER
President
By: /s/ G. Gervaise Davis III
---------------------------
G. GERVAISE DAVIS III
Secretary
BYLAWS
for the regulation, except as otherwise provided
by statute or the Articles of Incorporation,
of
AMERICAN RECREATION CENTERS, INC.
ARTICLE I. GENERAL PROVISIONS
Section 1.01 Principal Executive Office. The Board of Directors shall designate
the location of the principal executive office of the corporation at any place
within or without the State of California. The Board of Directors shall have the
power to change the principal executive office to another location and may
designate and locate one or more subsidiary offices within or without the State
of California.
Section 1.02 Number of Directors. The number of directors of the corporation
shall be one until changed by a bylaw amending this Section 1.02 duly adopted by
the vote or written consent of a majority of the outstanding shares entitled to
vote; provided, however, that if at any time the number of directors is more
than one, a bylaw reducing the number of directors to a number less than five
cannot be adopted if the votes cast against its adoption at a meeting or the
shares not consenting in the case of action by written consent are equal to more
than 16-2/3 percent of the outstanding shares entitled to vote.
ARTICLE II. SHARES AND SHAREHOLDERS
Section 2.01 Meetings of Shareholders.
(a) Place of Meetings. Meetings of shareholders shall be held at any place
within or without the State of California designated by the Board of Directors.
In the absence of any such designation, shareholders' meetings shall be held at
the principal executive office of the corporation.
(b) Annual Meetings. An annual meeting of the shareholders of the
corporation shall be held on the first Friday of April of each year at 10:00
a.m. or at such other date and time as may be designated by the Board of
Directors. Should said day fall upon a legal holiday, the annual meeting of
shareholders shall be held at the same time on the next day thereafter ensuing
which is a full business day. At each annual meeting directors shall be elected,
and any other proper business may be transacted.
(c) Special Meetings. Special meetings of the shareholders may be called by
the Board of Directors, the chairman of the board, the president, or by the
holders of shares entitled to cast not less than ten percent of the votes at the
meeting. Upon request
<PAGE>
in writing to the chairman of the board, the president, any vice president or
the secretary by any person (other than the board) entitled to call a special
meeting of shareholders, the officer forthwith shall cause notice to be given to
the shareholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than 35 nor
more than 60 days after the receipt of the request. If the notice is not given
within 20 days after receipt of the request, the persons entitled to call the
meeting may give the notice.
(d) Notice of Meetings. Notice of any shareholders' meeting shall be given
not less than 10 nor more than 60 days before the date of the meeting to each
shareholder entitled to vote thereat. Such notice shall state the place, date
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, and no other business may be
transacted, or (ii) in the case of the annual meeting, those matters which the
Board, at the time of the giving of the notice, intends to present for action by
the shareholders. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the board for election.
If action is proposed to be taken at any meeting, which action is within
Sections 310, 902, 1201, 1900 or 2007 of the General Corporation Law of the
State of California, the notice shall also state the general nature of that
proposal.
Notice of a shareholders' meeting shall be given either personally or by
first-class mail, or other means of written communication, charges prepaid,
addressed to the shareholder at the address of such shareholder appearing on the
books of the corporation or given by the shareholder to the corporation for the
purpose of notice; or if no such address appears or is given, at the place where
the principal executive office of the corporation is located or by publication
at least once in a newspaper of general circulation in the county in which the
principal executive office is located. The notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
other means of written communication. An affidavit of mailing of any notice
executed by the secretary, assistant secretary or any transfer agent, shall be
prima facie evidence of the giving of the notice.
(e) Adjourned Meeting and Notice Thereof. Any meeting of shareholders may
be adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy whether or not a quorum is present.
When a shareholders' meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. However, if the adjournment is for more than
45 days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting.
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(f) Waiver of Notice. The transactions of any meeting of shareholders,
however called and noticed, and wherever held, are as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of
subparagraph (d) of Section 2.01 of this Article II, the waiver of notice or
consent shall state the general nature of the proposal. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
(g) Quorum. The presence in person or by proxy of the persons entitled to
vote a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. If a quorum is present, the affirmative
vote of the majority of the shares represented and voting at the meeting (which
shares voting affirmatively also constitute at least a majority of the required
quorum) shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by law or the Articles of Incorporation
of the corporation.
The shareholders present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, provided that
any action taken (other than adjournment) must be approved by at least a
majority of the shares required to constitute a quorum.
Section 2.02 Action Without a Meeting. Any action which may be taken at any
annual or special meeting of shareholders may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Notwithstanding the foregoing, directors may not be elected by
written consent except by unanimous written consent of all shares entitled to
vote for the election of directors, except as provided by Section 3.04 hereof.
Where the approval of shareholders is given without a meeting by less than
unanimous written consent, unless the consents of all shareholders entitled to
vote have been solicited in writing, the secretary shall give prompt notice of
the corporate action approved by the shareholders without a meeting. In the case
of approval of transactions pursuant to Section 310, 317, 1201 or 2007 of the
General Corporation Law of the State of California, the notice shall be given at
least ten days before the consummation of any action authorized by that
approval. Such notice shall be given in the same manner as notice of
shareholders' meeting.
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Section 2.03 Voting of Shares.
(a) In General. Except as otherwise provided in the Articles of
Incorporation and subject to subparagraph (b) hereof, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of shareholders.
(b) Cumulative Voting. At any election of directors, every shareholder
complying with this paragraph (b) and entitled to vote may cumulate his or her
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are entitled, or distribute the shareholder's votes on the same principle
among as many candidates as the shareholder thinks fit. No shareholder shall be
entitled to cumulate votes (i.e., cast for any one or more candidates a number
of votes greater than the number of votes which such shareholder normally is
entitled to cast) unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. In any
election of directors, the candidates receiving the highest number of
affirmative votes up to the number of directors to be elected by such shares are
elected; votes against a director and votes withheld shall have no legal effect.
(c) Election by Ballot. Elections for directors need not be by ballot
unless a shareholder demands election by ballot at the meeting and before the
voting begins.
Section 2.04 Proxies. Every person entitled to vote shares may authorize another
person or persons to act by proxy with respect to such shares. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto, except as
otherwise herein provided. Such revocation may be effected by a writing
delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by the person executing the prior proxy and presented
to the meeting, or as to any meeting by attendance at such meeting and voting in
person by the person executing the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. A proxy is not revoked by the
death or incapacity of the maker unless, before the vote is counted, written
notice of such death or incapacity is received by the corporation. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Sections 705(e) and 705(f) of the California
General Corporation Law.
Section 2.05 Inspectors of Election.
(a) Appointment. In advance of any meeting of shareholders the Board may
appoint inspectors of election to act at the meeting and any adjournment
thereof. If inspectors of election are not so appointed, or if any persons so
appointed fail to appear
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or refuse to act, the chairman of any meeting of shareholders may, and on the
request of any shareholder or a shareholder's proxy shall, appoint inspectors of
election (or persons to replace those who so fail or refuse) at the meeting. The
number of inspectors shall be either one or three. If appointed at a meeting on
the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed.
(b) Duties. The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. The inspectors of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three inspectors of election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
Section 2.06 Record Date. In order that the corporation may determine the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days prior to the date of such meeting nor more than 60 days prior to
any other action. If no record date is fixed:
(1) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business
on the business day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior
action by the Board has been taken, shall be the day on which the first
written consent is given.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board adopts the
resolution relating thereto, or the 60th day prior to the date of such
other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
board fixes a new record date for the adjourned meeting, but the board shall fix
a new record date if the meeting is adjourned for more than 45 days from the
date set for the original meeting.
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Shareholders at the close of business on the record date are entitled to
notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date,
except as otherwise provided in the Articles of Incorporation or by agreement or
in the California General Corporation Law.
Section 2.07 Share Certificates.
(a) In General. The corporation shall issue a certificate or certificates
representing shares of its capital stock. Each certificate so issued shall be
signed in the name of the corporation by the chairman or vice chairman of the
board or the president or a vice president and by the chief financial officer or
an assistant treasurer or the secretary or any assistant secretary, shall state
the name of the record owner thereof and shall certify the number of shares and
the class or series of shares represented thereby. Any or all of the signatures
on the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
(b) Two or More Classes or Series. If the shares of the corporation are
classified or if any class of shares has two or more series, there shall appear
on the certificate one of the following:
(1) A statement of the rights, preferences, privileges, and
restrictions granted to or imposed upon the respective classes or series of
shares authorized to be issued and upon the holders thereof; or
(2) A summary of such rights, preferences, privileges and restrictions
with reference to the provisions of the Articles of Incorporation and any
certificates of determination establishing the same; or
(3) A statement setting forth the office or agency of the corporation
from which shareholders may obtain upon request and without charge, a copy
of the statement referred to in subparagraph (1).
(c) Special Restrictions. There shall also appear on the certificate
(unless stated or summarized under subparagraph (1) or (2) of subparagraph (b)
above) the statements required by all of the following clauses to the extent
applicable:
(1) The fact that the shares are subject to restrictions upon
transfer.
(2) If the shares are assessable, a statement that they are
assessable.
(3) If the shares are not fully paid, a statement of the total
consideration to be paid therefor and the amount paid thereon.
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(4) The fact that the shares are subject to a voting agreement or an
irrevocable proxy or restrictions upon voting rights contractually imposed by
the corporation.
(5) The fact that the shares are redeemable.
(6) The fact that the shares are convertible and the period for conversion.
Section 2.08 Transfer of Certificates. Where a certificate for shares is
presented to the corporation or its transfer clerk or transfer agent with a
request to register a transfer of shares, the corporation shall register the
transfer, cancel the certificate presented, and issue a new certificate if: (a)
the security is endorsed by the appropriate person or persons; (b) reasonable
assurance is given that those endorsements are genuine and effective; (c) the
corporation has no notice of adverse claims or has discharged any duty to
inquire into such adverse claims; (d) any applicable law relating to the
collection of taxes has been complied with; (e) the transfer is not in violation
of any federal or state securities law; and (f) the transfer is in compliance
with any applicable agreement governing the transfer of the shares.
Section 2.09 Lost Certificates. Where a certificate has been lost, destroyed or
wrongfully taken, the corporation shall issue a new certificate in place of the
original if the owner: (a) so requests before the corporation has notice that
the certificate has been acquired by a bona fide purchaser; (b) files with the
corporation a sufficient indemnity bond, if so requested by the Board of
Directors; and (c) satisfies any other reasonable requirements as may be imposed
by the Board. Except as above provided, no new certificate for shares shall be
issued in lieu of an old certificate unless the corporation is ordered to do so
by a court in the judgment in an action brought under Section 419(b) of the
California General Corporation Law.
ARTICLE III. DIRECTORS
Section 3.01 Powers. Subject to the provisions of the California General
Corporation Law and the Articles of Incorporation, the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised by
or under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operations of the business of the corporation to a
management company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board.
Section 3.02 Committees of the Board. The Board may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the pleasure
of the Board. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the
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authorized number of directors. Any such committee, to the extent provided in
the resolution of the Board, shall have all the authority of the Board, except
with respect to:
(1) The approval of any action which also requires, under the California
General Corporation Law, shareholders' approval or approval of the outstanding
shares;
(2) The filling of vacancies on the Board or in any committee.
(3) The fixing of compensation of the directors for serving on the Board or
on any committee.
(4) The amendment or repeal of bylaws or the adoption of new bylaws.
(5) The amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable.
(6) A distribution (within the meaning of the California General
Corporation Law) to the shareholders of the corporation, except at a rate or in
a periodic amount or within a price range determined by the Board.
(7) The appointment of other committees of the Board or the members
thereof.
Section 3.03 Election and Term of Office. The directors shall be elected at each
annual meeting of shareholders but, if any such annual meeting is not held or
the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders held for that purpose. Each director, including
a director elected to fill a vacancy, shall hold office until the expiration of
the term for which elected and until a successor has been elected and qualified.
Section 3.04 Vacancies. Except for a vacancy created by the removal of a
director, vacancies on the Board may be filled by approval of the Board or, if
the number of directors then in office is less than a quorum, by (a) the
unanimous written consent of the directors then in office, (b) the affirmative
vote of a majority of the directors then in office at a meeting held pursuant to
notice or waivers of notice under the California General Corporation Law, or (c)
a sole remaining director. The shareholders may elect a director or directors at
any time to fill any vacancy or vacancies not filled by the directors, but any
such election by written consent requires the consent of a majority of the
outstanding shares entitled to vote.
The Board of Directors shall have the power to declare vacant the office of
a director who has been declared of unsound mind by an order of court, or
convicted of a felony.
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Section 3.05 Removal. Any or all of the directors may be removed without cause
if such removal is approved by the vote of a majority of the outstanding shares
entitled to vote, except that no director may be removed (unless the entire
board is removed) when the votes cast against removal, or not consenting in
writing to such removal, would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes were cast
(or, if such action is taken by written consent, all shares entitled to vote
were voted) and the entire number of directors authorized at the time of the
director's most recent election were then being elected.
Section 3.06 Resignation. Any director may resign effective upon giving written
notice to the chairman of the board, the president, the secretary or the Board
of Directors of the corporation, unless the notice specifies a later time for
the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
Section 3.07 Meetings of the Board of Directors and Committees.
(a) Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place within or without the State as may be
designated from time to time by resolution of the Board or by written consent of
all members of the Board or in these bylaws.
(b) Organization Meeting. Immediately following each annual meeting of
shareholders the Board of Directors shall hold a regular meeting for the purpose
of organization, election of officers, and the transaction of other business.
Notice of such meetings is hereby dispensed with.
(c) Special Meetings. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by the chairman of the board or
the president or, by any vice president or the secretary or any two directors.
(d) Notices; Waivers. Special meetings shall be held upon four days' notice
by mail or forty-eight hours' notice delivered personally or by telephone,
including a voice messaging system or other system or technology designed to
record and commumcate messages, telegraph, facsimile, electronic mail, or other
electronic means. Notice of a meeting need not be given to any director who
signs a waiver of notice or a consent to holding the meeting or an approval of
the minutes thereof, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
(e) Adjournment. A majority of the directors present, whether or not a
quorum is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than 24 hours, notice of such adjournment to
another time and
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place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of adjournment.
(f) Place of Meeting. Meetings of the Board may be held at any place within
or without the state which has been designated in the notice of the meeting or,
if not stated in the notice or there is no notice, then such meeting shall be
held at the principal executive office of the corporation, or such other place
designated by resolution of the Board.
(g) Presence by Conference Telephone Call. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Such participation constitutes presence in person at such
meeting.
(h) Quorum. A majority of the authorized number of directors constitutes a
quorum of the Board for the transaction of business. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present is the act of the Board of Directors, unless a greater number
be required by law or by the Articles of Incorporation. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 3.08 Action Without Meeting. Any action required or permitted to be
taken by the Board of Directors, may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors.
Section 3.09 Committee Meetings. The provisions of Sections 3.07 and 3.08 of
these bylaws apply also to committees of the Board and action by such
committees, mutatis mutandis.
ARTICLE IV. OFFICERS
Section 4.01 Officers. The officers of the corporation shall consist of a
chairman of the board or a president, or both, a secretary, a chief financial
officer, and such additional officers as may be elected or appointed in
accordance with Section 4.03 of these bylaws and as may be necessary to enable
the corporation to sign instruments and share certificates. Any number of
offices may be held by the same person.
Section 4.02 Elections. All officers of the corporation, except such officers as
may be otherwise appointed in accordance with Section 4.03, shall be chosen by
the Board of Directors, and shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
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Section 4.03 Other Officers. The Board of Directors, the chairman of the board,
or the president at their or his discretion, may appoint one or more vice
presidents, one or more assistant secretaries, a treasurer, one or more
assistant treasurers, or such other officers as the business of the corporation
may require, each of whom shall hold office for such period, have such authority
and perform such duties as the Board of Directors, the chairman of the board, or
the president, as the case may be, may from time to time determine.
Section 4.04 Removal. Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with or without
cause, by the Board of Directors, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors, without prejudice to the rights, if any, of
the corporation under any contract to which the officer is a party.
Section 4.05 Resignation. Any officer may resign at any time by giving written
notice to the Board of Directors or to the president, or to the secretary of the
corporation without prejudice to the rights, if any, of the corporation under
any contract to which the officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.06 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to such office.
Section 4.07 Chairman of the Board. The chairman of the board, if there shall be
such an officer, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors. If there is no
president, the chairman of the board shall in addition be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 4.08 below.
Section 4.08 President. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the chairman of the board, if there be such
an officer, the president shall be general manager and chief executive officer
of the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and affairs of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the Board of Directors. He shall be ex-officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these bylaws.
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Section 4.09 Vice President. In the absence of the president or in the event of
the president's inability or refusal to act, the vice president, or in the event
there be more than one vice president, the vice president designated by the
Board of Directors, or if no such designation is made, in order of their
election, shall perform the duties of president and when so acting, shall have
all the powers of and be subject to all the restrictions upon the president. Any
vice president shall perform such other duties as from time to time may be
assigned to such vice president by the president or the Board of Directors.
Section 4.10 Secretary. The secretary shall keep or cause to be kept the minutes
of proceedings and record of shareholders, as provided for and in accordance
with Section 5.01(a) of these bylaws.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these bylaws or by
law to be given, and shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors.
Section 4.11 Chief Financial Officer. The chief financial officer shall have
general supervision, direction and control of the financial affairs of the
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these bylaws. In the absence of a named treasurer, the
chief financial officer shall also have the powers and duties of the treasurer
as hereinafter set forth and shall be authorized and empowered to sign as
treasurer in any case where such officer's signature is required.
Section 4.12 Treasurer. The treasurer shall keep or cause to be kept the books
and records of account as provided for and in accordance with Section 5.01(a) of
these bylaws. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors or
these bylaws. In the absence of a named chief financial officer, the treasurer
shall be deemed to be the chief financial officer and shall have the powers and
duties of such office as hereinabove set forth.
ARTICLE V. MISCELLANEOUS
Section 5.01 Records and Reports.
(a) Books of Account and Proceedings. The corporation shall keep adequate
and correct books and records of account and shall keep minutes of the
proceedings of
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its shareholders, Board and committees of the board and shall keep at its
principal executive office, or at the office of its transfer agent or registrar,
a record of its shareholders, giving the names and addresses of all shareholders
and the number and class of shares held by each. Such minutes shall be kept in
written form. Such other books and records shall be kept either in written form
or in any other form capable of being converted into written form.
(b) Annual Report. An annual report to shareholders referred to in Section
1501 of the California General Corporation Law is expressly dispensed with, but
nothing herein shall be interpreted as prohibiting the Board of Directors from
issuing annual or other periodic reports to the shareholders of the corporation
as they consider appropriate.
(c) Shareholders' Requests for Financial Reports. If no annual report for
the last fiscal year has been sent to shareholders, the corporation shall, upon
the written request of any shareholder made more than 120 days after the close
of that fiscal year, deliver or mail to the person making the request within 30
days thereafter the financial statements for that year required by Section
1501(a) of the California General Corporation Law. Any shareholder or
shareholders holding at least five percent of the outstanding shares of any
class of this corporation may make a written request to the corporation for an
income statement of the corporation for the three-month, six-month or nine-month
period of the current fiscal year ended more than 30 days prior to the date of
the request and a balance sheet of the corporation as of the end of such period,
and the corporation shall deliver or mail the statements to the person making
the request within 30 days thereafter. A copy of the statements shall be kept on
file in the principal office of the corporation for 12 months and they shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to such shareholder upon demand.
Section 5.02 Rights of Inspection.
(a) By Shareholders.
(1) Record of Shareholders. Any shareholder or shareholders holding at
least five percent in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent of such voting shares and have
filed a Schedule 14A with the United States Securities and Exchange Commission
shall have an absolute right to do either or both of the following: (i) inspect
and copy the record of shareholders' names and addresses and shareholdings
during usual business hours upon five business days' prior written demand upon
the corporation, or (ii) obtain from the transfer agent for the corporation,
upon written demand and upon the tender of its usual charges for such a list
(the amount of which charges shall be stated to the shareholder by the transfer
agent upon request), a list of the shareholders' names and addresses, who are
entitled to vote for the election of directors, and their shareholdings, as of
the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall be
made available on or before the later
-13-
<PAGE>
of five business days after demand is received or the date specified therein as
the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection and copying by
any shareholder or holder of a voting trust certificate at any time during usual
business hours upon written demand on the corporation, for a purpose reasonably
related to such holder's interests as a shareholder or holder of a voting trust
certificate.
(2) Corporate Records. The accounting books and records and minutes of
proceedings of the shareholders and the Board and committees of the board shall
be open to inspection upon the written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder or as the holder of such voting trust certificate.
This right of inspection shall also extend to the records of any subsidiary of
the corporation.
(3) Bylaws. The corporation shall keep at its principal executive office in
this state, the original or a copy of its bylaws as amended to date, which shall
be open to inspection by the shareholders at all reasonable times during office
hours.
(b) By Directors. Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of every
kind and to inspect the physical properties of the corporation of which such
person is a director and also of its subsidiary corporations, domestic or
foreign. Such inspection by a director may be made in person or by agent or
attorney and the right of inspection includes the right to copy and make
extracts.
Section 5.03 Checks, Drafts, Etc. All checks, drafts or other orders for payment
of money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 5.04 Representation of Shares of Other Corporations. The chairman of the
board, if any, president or any vice president of this corporation, or any other
person authorized to do so by the chairman of the board, president or any vice
president, is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.
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<PAGE>
Section 5.05 Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a party to or
is threatened to be made a party to or is involuntarily involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving (during such person's tenure as director
or officer) at the request of the corporation, any other corporation,
partnership, joint venture, trust or other enterprise in any capacity, whether
the basis of a Proceeding is an alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall be indenmified and held harmless by the corporation to the
fullest extent authorized by California General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgments, fines, or penalties and amounts to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. The right to indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by the corporation the
expenses incurred in defending a Proceeding in advance of its final disposition;
provided, however, that, if California General Corporation Law requires, the
payment of such expenses in advance of the final disposition of a Proceeding
shall be made only upon receipt by the corporation of an undertaking by or on
behalf of such director or officer to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. No amendment to or repeal of this
Section 5.05 shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
(b) Right of Claimant to Bring Suit. If a claim for indemnity under
paragraph (a) of this Section is not paid in full by the corporation within
ninety days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of prosecuting such
claim including reasonable attorneys' fees incurred in connection therewith. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending a Proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under California General Corporation Law for
the corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
-15-
<PAGE>
forth in California General Corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The rights conferred in this Section shall
not be exclusive of any other rights which any director, officer, employee or
agent may have or hereafter acquire under any statute, provision of the Articles
of Incorporation, bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, to the extent the additional rights to indemnification
are authorized in the Articles of Incorporation of the corporation.
(d) Insurance. In furtherance and not in limitation of the powers conferred
by statute:
(1) the corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify the person against that expense,
liability or loss under the California General Corporation Law.
(2) the corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or other similar arrangements), as well as enter into contracts
providing indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the foregoing
to ensure the payment of such amounts as may become necessary to effect
indemnification as provided therein, or elsewhere.
(e) Indemnification of Employees and Agents of the Corporation. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the corporation the expenses incurred in defending a Proceeding in advance of
its final disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Section or otherwise with respect to
the indemnification and advancement of expenses of directors and officers of the
corporation.
Section 5.06 Employee Stock Purchase Plans. The corporation may adopt and carry
out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons
-16-
<PAGE>
in paying for such shares by compensation for services rendered, promissory
notes or otherwise.
A stock purchase plan or agreement or stock option plan or agreement may
include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment, an option or obligation on the part of
the corporation to repurchase the shares upon termination of employment, subject
to the provisions of the California General Corporation Law, restrictions upon
transfer of the shares and the time limits of and termination of the plan.
Section 5.07 Time Notice Given or Sent. Any reference in these Bylaws to the
time a notice is given or sent means, unless otherwise expressly provided herein
or by law, (a) the time a written notice by mail is deposited in the United
States mails, postage prepaid; or (b) the time any other written notice,
including facsimile, telegram, or electronic mail message, is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient; or (c) the time any oral notice is communicated, in person or by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, or wireless, to the recipient,
including the recipient's designated voice mailbox or address on such system, or
to a person at the office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient.
Section 5.08 Construction and Definitions. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the California General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of the foregoing,
the masculine gender includes the feminine and neuter, the singular number
includes the plural and the plural number includes the singular, and the term
"person" includes a corporation as well as a natural person.
ARTICLE VI. AMENDMENTS
Section 6.01 Power of Shareholders. New bylaws may be adopted or these bylaws
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written assent of such
shareholders, except as otherwise provided by law or by the Articles of
Incorporation.
Section 6.02 Power of Directors. Subject to the right of shareholders as
provided in Section 6.01 to adopt, amend or repeal bylaws, any bylaw may be
adopted, amended or repealed by the Board of Directors other than a bylaw or
amendment thereof changing the authorized number of directors, if such number is
fixed, or the maximum-minimum limits thereof, if an indefinite number.
-17-
<PAGE>
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting the Corporation, and that
the foregoing bylaws were adopted as the bylaws of the Corporation as of the
24th day of April, 1997 by the Board of Directors of the Corporation.
Dated as of August 12, 1997
/s/ Michael P. Bardaro
-------------------------------
Michael P. Bardaro, Secretary
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DFI/CCS/Corp
Fm 38 (7/96)
United States of America
State of Wisconsin
DEPARTMENT OF FINANCIAL INSTITUTIONS
I, RICHARD L. DEAN, Secretary, Department of Financial Institutions, do
hereby certify that the annexed copy has been compared by me with the record on
file in the Corporations unit of the Division of Corporate & Consumer Services
of this department and that the same is a true copy thereof, and of the whole of
such record; and that I am the legal custodian of such record, and that this
certification is in due form.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the official
seal of the Department.
[SEAL]
Department of Financial Institutions /s/ RICHARD L. DEAN
State of Wisconsin Richard L. Dean, Secretary
Department of Financial Institutions
DATE: JUL. 24 1997 BY: /s/ PARTICIA WEBER
================================================================================
Effective July 1, 1996, the Department of Financial Institutions assumed the
functions previously performed by the Corporations Division of the Secretary of
State and is the successor custodian of corporate records formerly held by the
Secretary of State.
<PAGE>
DFI/CCS/Corp - Printed on Recycled Paper -
Fm 31-A (7/96)
United States of America
State of Wisconsin
DEPARTMENT OF FINANCIAL INSTITUTIONS
To All to Whom These Present Shall Come, Greeting:
I, RICHARD L. DEAN, Secretary, Department of Financial Institutions, do
hereby certify that
BURLEIGH RECREATION, INC.
is a domestic corporation organized under the laws of this state and that its
date of incorporation is NOVEMBER 15, 1984.
I further certify that said corporation has, during its most recently
completed report year, filed with this department an annual report required by
sec. 180.1622, 180.1921, or 181.651 of the Wisconsin Statutes, and that it has
not filed articles of dissolution.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the
official seal of the Department on JULY 24, 1997.
[SEAL]
Department of Financial Institutions /s/ RICHARD L. DEAN
State of Wisconsin Richard L. Dean, Secretary
Department of Financial Institutions
BY: /s/ PARTICIA WEBER
================================================================================
Effective July 1, 1996, the Department of Financial Institutions assumed the
functions previously performed by the Corporations Division of the Secretary of
State and is the successor custodian of corporate records formerly held by the
Secretary of State.
<PAGE>
ARTICLES OF INCORPORATION
OF
R. C. SUB I, INC.
Executed by the undersigned for the purpose of forming a Wisconsin
corporation under Chapter 180 of the Wisconsin Statutes.
Article 1. The name of the corporation shall be
R. C. SUB I, INC.
Article 2. The period of existence shall be perpetual.
Article 3. The purposes shall be to engage in any lawful activity within
the purposes for which corporations may be organized under the Wisconsin
Business Corporation Law, Chapter 180 of the Wisconsin Statutes.
Article 4. The number of shares which it shall have authority to issue,
itemized by classes, par value of shares, shares without par value, and series,
if any, within a class, is:
Class Series Number of Par Value Per Share
(if any) Shares
COMMON None 2,000 None
Article 5. The preferences, limitations designation, and relative rights of
each class or series of stock are:
A. Authorized but unissued Common Stock without par value may be issued
by the Corporation from time to time for such consideration as may be
fixed by the Board of Directors thereof, and any and all shares so
issued, the fixed consideration for which has been paid or delivered,
shall be deemed fully paid stock and not liable for any further call
or assessment thereon, and the holder of such stock shall not be
liable for any further payment.
B. Each share of No Par Value Common Stock shall be equal to every other
share of such No Par Value Common Stock and the same shall not be
divided into different classes, nor shall there exist as between
shares any difference in designation, voting power, restrictions or
qualifications.
Article 6. The address of the initial registered office and agent of this
Corporation is 222 East Erie Street, Milwaukee, Wisconsin 53202.
Article 7. The name of the initial registered agent of this Corporation is
Nancy A. Simos, 222 East Erie Street, Milwaukee, Wisconsin 53202. [Record in
Milwaukee County]
Article 8. The number of directors constituting the initial Board of
Directors shall be three. Thereafter the number shall be fixed by or in the
manner provided by the By-Laws.
Article 9. The name and address of the incorporator is Nancy A. Simos, 222
East Erie Street, Milwaukee, Wisconsin 53202.
<PAGE>
Article 10. These Articles may be amended in the manner authorized by law
at the time of amendment.
Executed in duplicate on the 13th day of November 1984.
/s/ NANCY A. SIMOS
------------------------------
Nancy A. Simos
STATE OF WISCONSIN )
) SS
MILWAUKEE COUNTY )
Personally came before me, this l3th day of November 1984 the above named
Nancy A. Simos to me known to be the person who executed the foregoing
instrument and acknowledged the same.
/s/ DORIS JEAN MATTHIESEN
----------------------------
Doris Jean Matthiesen, Notary Repulic
Milwaukee County, Wisconsin
My Commission expires 4-7-85
This instrument drafted
by Nancy A. Simos, Attorney
<PAGE>
Milwaukee
STATE OF WISCONSIN
FILED
NOV 15 1984
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
Return to:
Nancy A Simos
222 Erie St.
Milwaukee, WI 53202
<PAGE>
EXISTING RECORD
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
R. C. SUB I, INC.
RESOLVED, that Article 1 of the Articles of Incorroration of R. C. SUB I,
Inc., is hereby amended to read:
"Article 1. The name of the corporation shall be BURLEIGH RECREATION,
INC.".
The undersigned officers of R.C. SUB I, INC. certify the foregoing
Amendment of the Articles of Incorporation of said corporation was adopted by
the shareholders on April 2, 1985.
Number of Shares Number Entitled Number Voted
Classes of Shares Outstandinq To Vote For Against
----------------- ----------- -------------- -------------
Common 500 500 500 0
Original Articles of Incorporation
Recorded with Register of Deeds
Milwaukee County, Wisconsin
November 20, 1984, Reel 1701,
Image 312 to 314, Incl., as
Document No. 5767740.
Dated at Milwaukee, Wisconsin this 2nd day ot April, 1985.
/s/ DICK RICHARDS
--------------------------
Dick Richards, President
(NO CORPORATE SEAL)
/s/ NANCY RICHARDS
--------------------------
Nancy Richards, Secretary
04/15/85 WISCONSIN SECTY-STATE REMIT $25.00
2222 COR\ * This filing __X__
2207 $25.00 Other filing _____
CREDIT 25.00
This Instrument drafted by:
Ruth E. Booher
<PAGE>
Return to:
Ruth E. Booher
Attorney at Law
222 East Erie Street
Milwaukee, WI 53202
Amendment
Changes Name - Milwaukee -
$25.00
STATE OF WISCONSIN
FILED
MAY 13 1985
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
<PAGE>
---------
STATUTORY
CLOSE
---------
ARTICLES OF AMENDMENT
BURLEIGH RECREATION, INC.
OCT 12 12:00PM
$. E
148840 DCORP 40 40.00
1. The name of the coporation is Burleigh Recreation, Inc.
2. The Articles of Incorporation shall be amended as follows:
Article 2 is deleted and replaced with: "The corporation elects to be a
close corporation under ss. 180.1801 to ss. 180.1837, Stats."
Article 6 is amended to read as follows: "The address of the registered
office of this corporation is
c/o Gray & End
600 North Broadway
Suite 300
Milwaukee, WI 53202
Article 7 is amended to read as follows: "The name of the registered agent
of this coporation, at the registered office, is Dean B. Richards."
Article 8 is deleted and replaced with: "The corporation elects to operate
without a board of directors."
3. This amendment was adopted by unanimous consent of the shareholders on
September 16, 1994 pursuant to ss. 180.1003 and ss. 180.0704, Wis. Stats.
Dated this 6th day of October, 1994.
BURLEIGH RECREATION, INC.
By: /s/ WILLIAM M. KRATZENBERG
------------------------------
William M. Kratzenberg
Its secretary
This document was drafted by,
and upon filing return to:
Dean B. Richards
Gray & End
600 North Broadway
Milwaukee, Wisconsin 53202
<PAGE>
Amendment 180
- - Convert to Statutory Close Status
- - No Directors
- - Changes Registered Agent & Office
-------------------
STATE OF WISCONSIN
FILED
-------------------
OCT 13 1994
-------------------
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
-------------------
AMENDED AND RESTATED BYLAWS
of
BURLEIGH RECREATION, INC.
(a Wisconsin corporation)
<PAGE>
AMENDED AND RESTATED BYLAWS
of
BURLEIGH RECREATION, INC.
(a Wisconsin corporation)
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office. The registered office of the corporation required
by the Wisconsin Business Corporation Law to be maintained in the State of
Wisconsin may be, but need not be, identical with the principal office in the
State of Wisconsin, and the address of the registered office may be changed from
time to time by the Board of Directors or by the registered agent. The business
office of the registered agent of the corporation shall be identical to such
registered office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders shall be held
at such date and time as shall be fixed by resolution of the Board of Directors,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday in the State of Wisconsin, such meeting shall be held
on the next succeeding business day. If the election of directors shall not be
held on the day designated herein, or fixed as herein provided, for any annual
meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
2.02. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by the Wisconsin Business
Corporation Law, may be called by the Board of Directors or the President. The
Corporation shall call a special meeting of shareholders in the event that the
holders of at least 10% of all of the votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting sign, date and deliver
to the Corporation one or more written demands for the meeting describing one or
more purposes for which it is to be held. The Corporation shall give notice of
such a special meeting within thirty days after the date that the demand is
delivered to the Corporation.
2.03. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for any
annual or special meeting of shareholders. If no designation is made, the place
of meeting shall be the principal office of the Corporation. Any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented thereat.
<PAGE>
2.04. Notice of Meeting. Written notice stating the date, time and place of
any meeting of shareholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
days nor more than sixty days before the date of the meeting (unless a different
time is provided by the Wisconsin Business Corporation Law or the Articles of
Incorporation), either personally or by mail, by or at the direction of the
President or the Secretary, to each shareholder of record entitled to vote at
such meeting and to such other persons as required by the Wisconsin Business
Corporation Law. If mailed, such notice shall be deemed to be effective when
deposited in the United States mail, addressed to the shareholder at his or her
address as it appears on the stock record books of the Corporation, with postage
thereon prepaid. If an annual or special meeting of shareholders is adjourned to
a different date, time or place, the Corporation shall not be required to give
notice of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment; provided, however, that if a new
record date for an adjourned meeting is or must be fixed, the Corporation shall
give notice of the adjourned meeting to persons who are shareholders as of the
new record date.
2.05. Waiver of Notice. A shareholder may waive any notice required by the
Wisconsin Business Corporation Law, the Articles of Incorporation or these
Bylaws before or after the date and time stated in the notice. The waiver shall
be in writing and signed by the shareholder entitled to the notice, contain the
same information that would have been required in the notice under applicable
provisions of the Wisconsin Business Corporation Law (except that the time and
place of meeting need not be stated) and be delivered to the Corporation for
inclusion in the corporate records. A shareholder's attendance at a meeting, in
person or by proxy, waives objection to all of the following: (a) lack of notice
or defective notice of the meeting, unless the shareholder at the beginning of
the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
2.06. Fixing of Record Date. The Board of Directors may fix in advance a
date as the record date for the purpose of determining shareholders entitled to
notice of and to vote at any meeting of shareholders, shareholders entitled to
demand a special meeting as contemplated by Section 2.02 hereof, shareholders
entitled to take any other action, or shareholders for any other purpose. Such
record date shall not be more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed by the Board of Directors or by the Wisconsin
Business Corporation Law for the determination of shareholders entitled to
notice of and to vote at a meeting of shareholders, the record date shall be the
close of business on the day before the first notice is given to shareholders.
If no record date is fixed by the Board of Directors or by the Wisconsin
Business Corporation Law for the determination of shareholders entitled to
demand a special meeting as contemplated in Section 2.02 hereof, the record date
shall be the date that the first shareholder signs the demand. Except as
provided by the Wisconsin Business Corporation Law for a court-ordered
adjournment, a determination of shareholders entitled to
-2-
<PAGE>
notice of and to vote at a meeting of shareholders is effective for any
adjournment of such meeting unless the Board of Directors fixes a new record
date, which it shall do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting. The record date for determining
shareholders entitled to a distribution (other than a distribution involving a
purchase, redemption or other acquisition of the Corporation's shares) or a
share dividend is the date on which the Board of Directors authorized the
distribution or share dividend, as the case may be, unless the Board of
Directors fixes a different record date.
2.07. Shareholders' List for Meetings. After a record date for a special or
annual meeting of shareholders has been fixed, the Corporation shall prepare a
list of the names of all of the shareholders entitled to notice of the meeting.
The list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder, beginning two business days after
notice of the meeting is given for which the list was prepared and continuing to
the date of the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent may, on written demand, inspect and, subject to
the limitations imposed by the Wisconsin Business Corporation Law, copy the
list, during regular business hours and at his or her expense, during the period
that it is available for inspection pursuant to this Section 2.07. The
Corporation shall make the shareholders' list available at the meeting and any
shareholder or his or her agent or attorney may inspect the list at any time
during the meeting or any adjournment thereof. Refusal or failure to prepare or
make available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.
2.08. Quorum and Voting Requirements. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. If the Corporation has only one class
of common stock outstanding, such class shall constitute a separate voting group
for purposes of this Section 2.08. Except as otherwise provided in the Articles
of Incorporation or the Wisconsin Business Corporation Law, a majority of the
votes entitled to be cast on the matter shall constitute a quorum of the voting
group for action on that matter. Once a share is represented for any purpose at
a meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes of
determining whether a quorum exists for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting. If a quorum exists, except in the case of the election of
directors, action on a matter shall be approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation or the Wisconsin Business Corporation Law
requires a greater number of affirmative votes. Unless otherwise provided in the
Articles of Incorporation, each director shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election of directors at a
meeting at which a quorum is present. Though less than a quorum of the
outstanding votes of a voting group are represented at a meeting, a majority of
the votes so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
-3-
<PAGE>
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
2.09. Conduct of Meeting. The President, and in his or her absence, a Vice
President in the order provided under Section 4.07 hereof, and in their absence,
any person chosen by the shareholders present shall call the meeting of the
shareholders to order and shall act as chairman of the meeting, and the
Secretary of the Corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.10. Proxies. At all meetings of shareholders, a shareholder may vote his
or her shares in person or by proxy. A shareholder may appoint a proxy to vote
or otherwise act for the shareholder by signing an appointment form, either
personally or by his or her attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer or agent of the
Corporation authorized to tabulate votes. An appointment is valid for eleven
months from the date of its signing unless a different period is expressly
provided in the appointment form.
2.11. Voting of Shares. Except as provided in the Articles of Incorporation
or in the Wisconsin Business Corporation Law, each outstanding share, regardless
of class, is entitled to one vote on each matter voted on at a meeting of
shareholders.
2.12. Action without Meeting. Any action required or permitted by the
Articles of Incorporation or these Bylaws or any provision of the Wisconsin
Business Corporation Law to be taken at a meeting of the shareholders may be
taken without a meeting and without action by the Board of Directors if a
written consent or consents, describing the action so taken, is signed by all of
the shareholders entitled to vote with respect to the subject matter thereof and
delivered to the Corporation for inclusion in the corporate records.
2.13. Acceptance of Instruments Showing Shareholder Action. If the name
signed on a vote, consent, waiver or proxy appointment corresponds to the name
of a shareholder, the Corporation, if acting in good faith, may accept the vote,
consent, waiver or proxy appointment and give it effect as the act of a
shareholder. If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of a shareholder, the Corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and give
it effect as the act of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports to be that of
an officer or agent of the entity.
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(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the shareholder
and, if the Corporation requests, evidence of fiduciary status acceptable to the
Corporation is presented with respect to the vote, consent, waiver or proxy
appointment.
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the Corporation requests, evidence of this
status acceptable to the Corporation is presented with respect to the vote,
consent, waiver or proxy appointment.
(d) The name signed purports to be that of a pledgee, beneficial owner, or
attorney-in-fact of the shareholder and, if the Corporation requests, evidence
acceptable to the Corporation of the signatory's authority to sign for the
shareholder is presented with respect to the vote, consent, waiver or proxy
appointment.
(e) Two or more persons are the shareholders as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-owners and
the person signing appears to be acting on behalf of all co-owners.
The Corporation may reject a vote, consent, waiver or proxy appointment if the
Secretary or other officer or agent of the Corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation
managed under the direction of, the Board of Directors. The number of directors
of the Corporation shall be one (1) and thereafter such number as may be
determined from time to time by the Board of Directors.
3.02. Tenure and Qualifications. Each director shall hold office until the
next annual meeting of shareholders and until his or her successor shall have
been elected and, if necessary, qualified, or until there is a decrease in the
number of directors which takes effect after the expiration of his or her term,
or until his or her prior death, resignation or removal. A director may be
removed by the shareholders only at a meeting called for the purpose of removing
the director, and the meeting notice shall state that the purpose, or one of the
purposes, of the meeting is removal of the director. A director may be removed
from office with or without cause if the votes cast to remove the director
exceeds the number of votes cast not to remove such director. A director may
resign at any time by delivering written notice which complies with the
Wisconsin Business Corporation Law to the Board of Directors, to the
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President (in his or her capacity as chairperson of the Board of Directors) or
to the Corporation. A director's resignation is effective when the notice is
delivered unless the notice specifies a later effective date. Directors need not
be residents of the State of Wisconsin or shareholders of the Corporation.
3.03. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this bylaw immediately after the annual
meeting of shareholders and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors shall provide, by resolution,
the date, time and place, either within or without the State of Wisconsin, for
the holding of additional regular meetings of the Board of Directors without
other notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President, Secretary or any two directors.
The President or Secretary may fix any place, either within or without the State
of Wisconsin, as the place for holding any special meeting of the Board of
Directors, and if no other place is fixed the place of the meeting shall be the
principal business office of the Corporation in the State of Wisconsin.
3.05. Notice; Waiver. Notice of each special meeting of the Board of
Directors shall be given by written notice delivered or communicated in person,
by telegraph, teletype, facsimile or other form of wire or wireless
communication, or by mail or private carrier, to each director at his business
address or at such other address as such director shall have designated in
writing filed with the Secretary, in each case not less than forty-eight hours
prior to the meeting. The notice need not prescribe the purpose of the special
meeting of the Board of Directors or the business to be transacted at such
meeting. If mailed, such notice shall be deemed to be effective when deposited
in the United States mail so addressed, with postage thereon prepaid. If notice
is given by telegram, such notice shall be deemed to be effective when the
telegram is delivered to the telegraph company. If notice is given by private
carrier, such notice shall be deemed to be effective when delivered to the
private carrier. Whenever any notice whatever is required to be given to any
director of the Corporation under the Articles of Incorporation or these Bylaws
or any provision of the Wisconsin Business Corporation Law, a waiver thereof in
writing, signed at any time, whether before or after the date and time of
meeting, by the director entitled to such notice shall be deemed equivalent to
the giving of such notice. The Corporation shall retain any such waiver as part
of the permanent corporate records. A director's attendance at or participation
in a meeting waives any required notice to him or her of the meeting unless the
director at the beginning of the meeting or promptly upon his or her arrival
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
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3.06. Quorum. Except as otherwise provided by the Wisconsin Business
Corporation Law or by the Articles of Incorporation or these Bylaws, a majority
of the number of directors specified in Section 3.01 of these Bylaws shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors. Except as otherwise provided by the Wisconsin Business Corporation
Law or by the Articles of Incorporation or by these Bylaws, a quorum of any
committee of the Board of Directors created pursuant to Section 3.12 hereof
shall consist of a majority of the number of directors appointed to serve on the
committee. A majority of the directors present (though less than such quorum)
may adjourn any meeting of the Board of Directors or any committee thereof, as
the case may be, from time to time without further notice.
3.07. Manner of Acting. The affirmative vote of a majority of the directors
present at a meeting of the Board of Directors or a committee thereof at which a
quorum is present shall be the act of the Board of Directors or such committee,
as the case may be, unless the Wisconsin Business Corporation Law, the Articles
of Incorporation or these Bylaws require the vote of a greater number of
directors.
3.08. Conduct of Meetings. The President, and in his or her absence, a Vice
President in the order provided under Section 4.07, and in their absence, any
director chosen by the directors present, shall call meetings of the Board of
Directors to order and shall act as chairman of the meeting. The Secretary of
the Corporation shall act as secretary of all meetings of the Board of Directors
but in the absence of the Secretary, the presiding officer may appoint any other
person present to act as secretary of the meeting. Minutes of any regular or
special meeting of the Board of Directors shall be prepared and distributed to
each director.
3.09. Vacancies. Except as provided below, any vacancy occurring in the
Board of Directors, including a vacancy resulting from an increase in the number
of directors, may be filled by any of the following: (a) the shareholders; (b)
the Board of Directors; or (c) if the directors remaining in office constitute
fewer than a quorum of the Board of Directors, the directors, by the affirmative
vote of a majority of all directors remaining in office. If the vacant office
was held by a director elected by a voting group of shareholders, only the
holders of shares of that voting group may vote to fill the vacancy if it is
filled by the shareholders, and only the remaining directors elected by that
voting group may vote to fill the vacancy if it is filled by the directors. A
vacancy that will occur at a specific later date, because of a resignation
effective at a later date or otherwise, may be filled before the vacancy occurs,
but the new director may not take office until the vacancy occurs.
3.10. Compensation. The Board of Directors, irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the Corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority to an
appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employees
and to
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their estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers and employees to the Corporation.
3.11. Presumption of Assent. A director who is present and is announced as
present at a meeting of the Board of Directors or any committee thereof created
in accordance with Section 3.12 hereof, when corporate action is taken, assents
to the action taken unless any of the following occurs: (a) the director objects
at the beginning of the meeting or promptly upon his or her arrival to holding
the meeting or transacting business at the meeting; (b) the director's dissent
or abstention from the action taken is entered in the minutes of the meeting; or
(c) the director delivers written notice that complies with the Wisconsin
Business Corporation Law of his or her dissent or abstention to the presiding
officer of the meeting before its adjournment or to the Corporation immediately
after adjournment of the meeting. Such right of dissent or abstention shall not
apply to a director who votes in favor of the action taken.
3.12. Committees. The Board of Directors by resolution adopted by the
affirmative vote of a majority of all of the directors then in office may create
one or more committees, appoint members of the Board of Directors to serve on
the committees and designate other members of the Board of Directors to serve as
alternates. Each committee shall have two or more members who shall, unless
otherwise provided by the Board of Directors, serve at the pleasure of the Board
of Directors. A committee may be authorized to exercise the authority of the
Board of Directors, except that a committee may not do any of the following: (a)
authorize distributions; (b) approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires to be approved by shareholders; (c)
fill vacancies on the Board of Directors or, unless the Board of Directors
provides by resolution that vacancies on a committee shall be filled by the
affirmative vote of the remaining committee members, on any Board committee; (d)
amend the Corporation's Articles of Incorporation; (e) adopt, amend or repeal
Bylaws; (f) approve a plan of merger not requiring shareholder approval; (g)
authorize or approve reacquisition of shares, except according to a formula or
method prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences and limitations of a class or series of shares,
except that the Board of Directors may authorize a committee to do so within
limits prescribed by the Board of Directors. Unless otherwise provided by the
Board of Directors in creating the committee, a committee may employ counsel,
accountants and other consultants to assist it in the exercise of its authority.
3.13. Telephonic Meetings. To the extent provided herein and
notwithstanding any place set forth in the notice of the meeting or these
Bylaws, members of the Board of Directors (and any committees thereof created
pursuant to Section 3.12 hereof) may participate in regular or special meetings
by, or through the use of, any means of communication by which all participants
may simultaneously hear each other, such as by conference telephone. If a
meeting is conducted by such means, then at the commencement of such meeting the
presiding officer shall inform the participating directors that a meeting is
taking place at which official
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business may be transacted. Any participant in a meeting by such means shall be
deemed present in person at such meeting.
3.14. Action Without Meeting. Any action required or permitted by the
Wisconsin Business Corporation Law to be taken at a meeting of the Board of
Directors or a committee thereof created pursuant to Section 3.12 hereof may be
taken without a meeting if the action is taken by all members of the Board or of
the committee. The action shall be evidenced by one or more written consents
describing the action taken, signed by each director or committee member and
retained by the Corporation. Such action shall be effective when the last
director or committee member signs the consent, unless the consent specifies a
different effective date.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the Corporation shall be a
President, the number of Vice Presidents, if any, as elected from time to time
by the Board of Directors, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
The Board of Directors may also authorize any duly authorized officer to appoint
one or more officers or assistant officers. Any two or more offices may be held
by the same person.
4.02. Election and Term of Office. The officers of the Corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as is practicable.
Each officer shall hold office until his or her successor shall have been duly
elected or until his or her prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any officer and, unless
restricted by the Board of Directors or these Bylaws, an officer may remove any
officer or assistant officer appointed by that officer, at any time, with or
without cause and notwithstanding the contract rights, if any, of the officer
removed. The appointment of an officer does not of itself create contract
rights.
4.04. Resignation. An officer may resign at any time by delivering notice
to the Corporation that complies with the Wisconsin Business Corporation Law.
The resignation shall be effective when the notice is delivered, unless the
notice specifies a later effective date and the Corporation accepts the later
effective date.
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4.05. Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, shall be filled by the
Board of Directors for the unexpired portion of the term. If a resignation of an
officer is effective at a later date as contemplated by Section 4.04 hereof, the
Board of Directors may fill the pending vacancy before the effective date if the
Board provides that the successor may not take office until the effective date.
4.06. President. The President shall be the principal executive officer of
the Corporation and, subject to the direction of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
Corporation. The President shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. He or she shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to appoint
such agents and employees of the Corporation as he or she shall deem necessary,
to prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
President. He or she shall have authority to sign, execute and acknowledge, on
behalf of the Corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the Corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, he or she may authorize
any Vice President or other officer or agent of the Corporation to sign, execute
and acknowledge such documents or instruments in his or her place and stead. In
general he or she shall perform all duties incident to the office of President
and such other duties as may be prescribed by the Board of Directors from time
to time.
4.07. The Vice Presidents. In the absence of the President or in the event
of the President's death, inability or refusal to act, or in the event for any
reason it shall be impracticable for the President to act personally, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
Corporation; and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or by
the Board of Directors. The execution of any instrument of the Corporation by
any Vice President shall be conclusive evidence, as to third parties, of his or
her authority to act in the stead of the President.
4.08. The Secretary. The Secretary shall: (a) keep minutes of the meetings
of the shareholders and of the Board of Directors (and of committees thereof) in
one or more books provided for that purpose (including records of actions taken
by the shareholders or the Board of Directors (or committees thereof) without a
meeting); (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by the Wisconsin Business Corporation
Law; (c) be custodian of the corporate records and of the seal of the
Corporation
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and see that the seal of the Corporation is affixed to all documents the
execution of which on behalf of the Corporation under its seal is duly
authorized; (d) maintain a record of the shareholders of the Corporation, in a
form that permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and class or
series of shares held by each shareholder; (e) sign with the President, or a
Vice President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the Corporation; and (g) in
general perform all duties incident to the office of Secretary and have such
other duties and exercise such authority as from time to time may be delegated
or assigned by the President or by the Board of Directors.
4.09. The Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; (b) maintain
appropriate accounting records; (c) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of Section
5.04; and (d) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as from
time to time may be delegated or assigned by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his or her duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
4.10. Assistant Secretaries and Assistant Treasurers. There shall be such
number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the President or a Vice President certificates for shares of the
Corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors shall determine.
The Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties and have such authority as shall from time to time be delegated or
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors.
4.11. Other Assistants and Acting Officers. The Board of Directors shall
have the power to appoint, or to authorize any duly appointed officer of the
Corporation to appoint, any person to act as assistant to any officer, or as
agent for the Corporation in his or her stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors or an authorized officer shall have the power to perform
all the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
appointing officer.
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ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the President or one of the Vice Presidents and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or
an Assistant Secretary, when necessary or required, shall affix the corporate
seal, if any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
5.02. Loans. No indebtedness for borrowed money shall be contracted on
behalf of the Corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05. Voting of Securities Owned by this Corporation. Subject always to the
specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
Corporation may be voted at any meeting of security holders of such other
corporation by the President of this Corporation if he or she be present, or in
his or her absence by any Vice President of this Corporation who may be present,
and (b) whenever, in the judgment of the President, or in his or her absence, of
any Vice President, it is desirable for this Corporation to execute a proxy or
written consent in respect to any shares or other securities issued by any other
corporation and owned by this Corporation, such proxy or consent shall be
executed in the name of this Corporation by the President or one of the Vice
Presidents of this Corporation, without necessity of any authorization by the
Board of Directors, affixation of corporate seal, if any, or countersignature or
attestation by another
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officer. Any person or persons designated in the manner above stated as the
proxy or proxies of this Corporation shall have full right, power and authority
to vote the shares or other securities issued by such other corporation and
owned by this Corporation the same as such shares or other securities might be
voted by this Corporation.
ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
6.01. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form, consistent with the Wisconsin Business
Corporation Law, as shall be determined by the Board of Directors. Such
certificates shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except as
provided in Section 6.06.
6.02. Facsimile Signatures and Seal. The seal of the Corporation, if any,
on any certificates for shares may be a facsimile. The signature of the
President or Vice President and the Secretary or Assistant Secretary upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent, or a registrar, other than the Corporation itself or an
employee of the Corporation.
6.03. Signature by Former Officers. The validity of a share certificate is
not affected if a person who signed the certificate (either manually or in
facsimile) no longer holds office when the certificate is issued.
6.04. Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer the Corporation may treat the registered
owner of such shares as the person exclusively entitled to vote, to receive
notifications and otherwise to have and exercise all the rights and power of an
owner. Where a certificate for shares is presented to the Corporation with a
request to register for transfer, the Corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the Corporation had no duty to inquire into adverse claims
or has discharged any such duty. The Corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance with
such other regulations as may be prescribed by or under the authority of the
Board of Directors.
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6.05. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner claims that
certificates for shares have been lost, destroyed or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the Corporation has notice that such shares have been acquired by a bona fide
purchaser, (b) files with the Corporation a sufficient indemnity bond if
required by the Board of Directors or any principal officer, and (c) satisfies
such other reasonable requirements as may be prescribed by or under the
authority of the Board of Directors.
6.07. Consideration for Shares. The Board of Directors may authorize shares
to be issued for consideration consisting of any tangible or intangible property
or benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed or other securities of the
Corporation. Before the Corporation issues shares, the Board of Directors shall
determine that the consideration received or to be received for the shares to be
issued is adequate. The determination of the Board of Directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid and nonassessable. The
Corporation may place in escrow shares issued in whole or in part for a contract
for future services or benefits, a promissory note, or otherwise for property to
be issued in the future, or make other arrangements to restrict the transfer of
the shares, and may credit distributions in respect of the shares against their
purchase price, until the services are performed, the benefits or property are
received or the promissory note is paid. If the services are not performed, the
benefits or property are not received or the promissory note is not paid, the
Corporation may cancel, in whole or in part, the shares escrowed or restricted
and the distributions credited.
6.08. Stock Regulations. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
law as it may deem expedient concerning the issue, transfer and registration of
shares of the Corporation.
ARTICLE VII. TAXABLE YEAR
7.01. Taxable Year. The taxable year of the Corporation shall commence on
January 1 and end on December 31 of each year.
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ARTICLE VIII. SEAL
8.01. The Corporation shall have no corporate seal, and the words "NO
CORPORATE SEAL" may be inserted in any document executed by the Company where a
corporate seal would otherwise properly be imprinted.
ARTICLE IX. INDEMNIFICATION
9.01. Provision of Indemnification. The Corporation shall, to the fullest
extent permitted or required by Sections 180.0850 to 180.0859, inclusive, of the
Wisconsin Business Corporation Law, including any amendments thereto (but in the
case of any such amendment, only to the extent such amendment permits or
requires the Corporation to provide broader indemnification rights than prior to
such amendment), indemnify its Directors and Officers against any and all
Liabilities, and advance any and all reasonable Expenses, incurred thereby in
any Proceeding to which any such Director or Officer is a Party because he or
she is or was a Director or Officer of the Corporation. The Corporation shall
also indemnify an employee who is not a Director or Officer, to the extent that
the employee has been successful on the merits or otherwise in defense of a
Proceeding, for all Expenses incurred in the Proceeding if the employee was a
Party because he or she is or was an employee of the Corporation. The rights to
indemnification granted hereunder shall not be deemed exclusive of any other
rights to indemnification against Liabilities or the advancement of Expenses
which a Director, Officer or employee may be entitled under any written
agreement, Board resolution, vote of shareholders, the Wisconsin Business
Corporation Law or otherwise. The Corporation may, but shall not be required to,
supplement the foregoing rights to indemnification against Liabilities and
advancement of Expenses under this Section 9.01 by the purchase of insurance on
behalf of any one or more of such Directors, Officers or employees, whether or
not the Corporation would be obligated to indemnify or advance Expenses to such
Director, Officer or employee under this Section 9.01. All capitalized terms
used in this Article IX and not otherwise defined herein shall have the meaning
set forth in Section 180.0850 of the Wisconsin Business Corporation Law.
ARTICLE X. AMENDMENTS
10.01. By Shareholders. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the shareholders at any annual or special meeting of
the shareholders at which a quorum is in attendance.
10.02. By Directors. Except as otherwise provided by the Wisconsin Business
Corporation Law or the Articles of Incorporation, these Bylaws may also be
amended or repealed and new Bylaws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any meeting
at which a quorum is in attendance;
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<PAGE>
provided, however, that the shareholders in adopting, amending or repealing a
particular Bylaw may provide therein that the Board of Directors may not amend,
repeal or readopt that Bylaw.
10.03. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors which would be inconsistent with the
Bylaws then in effect but which is taken or authorized by affirmative vote of
not less than the number of shares or the number of directors required to amend
the Bylaws so that the Bylaws would be consistent with such action shall be
given the same effect as though the Bylaws had been temporarily amended or
suspended so far, but only so far, as is necessary to permit the specific action
so taken or authorized.
[LOGO]
THE STATE OF TEXAS
SECRETARY OF STATE
IT IS HEREBY CERTIFIED, that
Articles of Incorporation
of
300, INC.
CHARTER #1063875-00
were filed in this office and a certificate of incorporation was issued on
OCTOBER 1, 1987;
IT IS FURTHER CERTIFIED, that no certificate of dissolution has been
issued, and that the corporation is still in existence.
[SEAL] IN TESTIMONY WHEREOF, I have hereunto signed my
THE STATE OF TEXAS name officially and caused to be impressed hereon
the Seal of State at my office in the City of
Austin, on July 23, 1997.
[ILLEGIBLE]
/s/ ANTONIO O. GARZA
--------------------------------------------------
Antonio O. Garza, Jr. PH
Secretary of State
<PAGE>
[LOGO]
THE STATE OF TEXAS
SECRETARY OF STATE
IT IS HEREBY CERTIFIED, that the attached is/are true and correct copies of
the following described document(s) on file in this office:
300, INC.
CHARTER NO. 1063875
ARTICLES 0F INCORPORATION OCTOBER 1,1987
ASSUMED NAME CERTIFICATE DECEMBER 7, 1987
ARTICLES OF MERGER DECEMBER 22, 1994
EFFECTIVE DATE: DECEMBER 31, 1994 AT 11:59 PM
ASSUMED NAME CERTIFICATE DECEMBER 13, 1995
ASSUMED NAME CERTIFICATE SEPTEMBER 18, 1996
[SEAL] IN TESTIMONY WHEREOF, I have hereunto signed my
THE STATE OF TEXAS name officially and caused to be impressed hereon
the Seal of State at my office in the City of
Austin, on April 16, 1997.
[ILLEGIBLE]
/s/ ANTONIO O. GARZA
--------------------------------------------------
Antonio 0. Garza, Jr. BAM
Secretary of State
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
300, INC.
A Texas Corporation
Date of Adoption
April 23,1997
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
OFFICES
Section 1.1. Registered Office ......................................... 1
Section 1.2. Other Offices ............................................. 1
ARTICLE 2
SHAREHOLDERS
Section 2.1. Place of Meetings ......................................... 1
Section 2.2. Quorum; Adjournment of Meetings ........................... 1
Section 2.3. Annual Meetings ........................................... 2
Section 2.4. Special Meetings .......................................... 2
Section 2.5. Record Date ............................................... 2
Section 2.6. Notice of Meetings ........................................ 3
Section 2.7. Shareholder List .......................................... 4
Section 2.8. Proxies ................................................... 4
Section 2.9. Voting; Election; Inspectors .............................. 4
Section 2.10. Conduct of Meetings ....................................... 5
Section 2.11. Treasury Stock ............................................ 6
Section 2.12. Action Without Meeting .................................... 6
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1. Power; Number; Term of Office ............................. 6
Section 3.2. Quorum; Voting ............................................ 7
Section 3.3. Place of Meetings; Order of Business ...................... 7
Section 3.4. First Meeting ............................................. 7
Section 3.5. Regular Meetings .......................................... 7
Section 3.6. Special Meetings .......................................... 8
Section 3.7. Removal ................................................... 8
Section 3.8. Vacancies, Increases in the Number of Directors ........... 8
Section 3.9. Compensation .............................................. 8
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Section 3.10. Action Without a Meeting; Telephone Conference Meeting .... 8
Section 3.11. Approval or Ratification of Acts or Contracts by
Shareholders .............................................. 9
ARTICLE 4
COMMITTEES
Section 4.1. Designation; Powers ...................................... 9
Section 4.2. Procedure; Meetings; Quorum ............................... 9
Section 4.3. Substitution and Removal of Members; Vacancies ............ 10
ARTICLE 5
OFFICERS
Section 5.1. Number, Titles and Term of Office ......................... 10
Section 5.2. Powers and Duties of the Chairman of the Board ............ 10
Section 5.3. Powers and Duties of the President ........................ 11
Section 5.4. Powers and Duties of the Vice Chairman of the Board ....... 11
Section 5.5. Vice Presidents ........................................... 11
Section 5.6. Secretary ................................................. 11
Section 5.7. Assistant Secretaries ..................................... 12
Section 5.8. Treasurer ................................................. 12
Section 5.9. Assistant Treasurers ...................................... 12
Section 5.10. Action with Respect to Securities of Other
Corporations .............................................. 12
Section 5.11. Delegation ................................................ 13
ARTICLE 6
CAPITAL STOCK
Section 6.1. Certificates of Stock ..................................... 13
Section 6.2. Transfer of Shares ........................................ 13
Section 6.3. Ownership of Shares ....................................... 13
Section 6.4. Regulations Regarding Certificates ........................ 14
Section 6.5. Lost or Destroyed Certificates ............................ 14
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.1. Fiscal Year ............................................... 14
Section 7.2. Corporate Seal ............................................ 14
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<PAGE>
Section 7.3. Notice and Waiver of Notice ............................... 14
Section 7.4. Facsimile Signatures ...................................... 15
Section 7.5. Reliance upon Books, Reports and Records .................. 15
Section 7.6. Application of Bylaws ..................................... 15
ARTICLE 8
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 8.1. Indemnification ........................................... 15
Section 8.2. Nonexclusivity ............................................ 16
Section 8.3. Insurance ................................................. 16
Section 8.4. Witnesses ................................................. 16
ARTICLE 9
AMENDMENTS
Section 9.1. Amendments ................................................ 17
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<PAGE>
*****
AMENDED AND RESTATED
BYLAWS
OF
300, INC.
****
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the Corporation
required by the state of incorporation of the Corporation to be maintained in
the state of incorporation of the Corporation shall be the registered office
named in the charter documents of the Corporation, or such other office as may
be designated from time to time by the Board of Directors in the manner provided
by law.
Section 1.2. Other Offices. The Corporation may also have offices at such
other places both within and without the state of incorporation of the
Corporation as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE 2
SHAREHOLDERS
Section 2.1. Place of Meetings. All meetings of the shareholders shall be
held at the principal office of the Corporation, or at such other place within
or without the state of incorporation of the Corporation as shall be specified
or fixed in the notices or waivers of notice thereof.
Section 2.2. Quorum; Adjournment of Meetings. Unless otherwise required by
law or provided in the charter documents of the Corporation or these Bylaws, (i)
the holders of a majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders for the transaction of business, (ii) in
all matters other than election of directors, the affirmative vote of the
holders of a majority of such stock so present or represented at any meeting of
shareholders at which a quorum is present shall constitute the act of the
shareholders, and (iii) where a separate vote by a class or classes is required,
a majority of the outstanding shares of such class or classes, present in person
or represented by
<PAGE>
proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter and the affirmative vote of the majority of the shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, subject to the
provisions of clauses (ii) and (iii) above.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
Notwithstanding the other provisions of the charter documents of the
Corporation or these Bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy and entitled to vote thereat, at any meeting of shareholders whether or
not a quorum is present, shall have the power to adjourn such meeting from time
to time, without any notice other than announcement at the meeting of the time
and place of the holding of the adjourned meeting. If the adjournment is for
more then thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at such meeting. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.3. Annual Meetings. An annual meeting of the shareholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place (within or without the state of incorporation of the
Corporation), on such date, and at such time as the Board of Directors shall fix
and set forth in the notice of the meeting, which date shall be within thirteen
(13) months subsequent to the last annual meeting of shareholders.
Section 2.4. Special Meetings. Unless otherwise provided in the charter
documents of the Corporation, special meetings of the shareholders for any
purpose or purposes may be called at any time by the Chairman of the Board, by
the Vice Chairman of the Board or by the President, or by majority of the Board
of Directors, or by a majority of the executive committee (if any), at such
time and at such place as may be stated in the notice of the meeting. Business
transacted at a special meeting shall be confined to the purpose(s)) stated in
the notice of such meeting.
Section 2.5. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any divided or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other
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<PAGE>
lawful action, the Board of Directors of the Corporation may fix a date as the
record date for any such determination of shareholders, which record date shall
not precede the date on which the resolutions fixing the record date are adopted
and which record date shall not be more than sixty (60) days nor less then ten
(10) days before the date of such meeting of shareholders, nor more than sixty
(60) days prior to any other actions to which such record date relates.
If the Board of Directors does not fix a record date for any meeting of the
shareholders, the record date for determining shareholders entitled to notice of
or to vote at such meeting shall be at the close of business on the day next
preceding the day on which notice is given, or, if in accordance with Article 7,
Section 7.3 of these Bylaws notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. The record date for
determining shareholders for any other purpose (other than the consenting to
corporate action in writing without a meeting) shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
For the purpose of determining the shareholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If the
Board of Directors does not fix the record date, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation at its registered office
in the state of incorporation of the Corporation or at its principal place of
business. If the Board of Directors does not fix the record date, and prior
action by the Board of Directors is necessary, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
Section 2.6. Notice of Meetings. Written notice of the place, date and hour
of all meetings, and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by or at the direction of the
Chairman of the Board, the President, the Vice Chairman of the Board, or the
President, the Secretary or the other person(s) calling the meeting to each
shareholder entitled to vote thereat not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Such notice may be delivered either
personally or by mail. If mailed, notice is given when
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<PAGE>
deposited in the United States mail, postage prepaid, directed to the
shareholder at such shareholder's address as it appears on the records of the
Corporation.
Section 2.7. Shareholder List. A complete list of shareholders entitled to
vote at any meeting of shareholders, arranged in alphabetical order for each
class of stock and showing the address of each such shareholder and the number
of shares registered in the name of such shareholder shall be open to the
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The shareholder list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any shareholder who is present.
Section 2.8. Proxies. Each shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to a corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of shareholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meetings. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the secretary of the meeting, who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions.
No proxy shall be valid after eleven (11) months from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless such
instrument shall provide the contrary, a majority of such persons present at any
meeting at which their powers thereunder are to be exercised shall have and may
exercise all the powers of voting or giving consents thereby conferred, or if
only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of such
portion of the shares as is equal to the reciprocal of the fraction equal to the
number of proxies representing such shares divided by the total number of shares
represented by such proxies.
Section 2.9. Voting; Election; Inspectors. Unless otherwise required by Law
or provided in the charter documents of the Corporation, each shareholder shall
on each matter submitted to a vote at a meeting of shareholders have one vote
for each share of the stock entitled to vote which is
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<PAGE>
registered in his name on the record date for the meeting. For the purposes
hereof, each election to fill a directorship shall constitute a separate matter.
Shares registered in the name of another corporation, domestic or foreign, may
be voted by such officer, agent or proxy as the bylaws (or comparable body) of
such corporation may determine. Shares registered in the name of a deceased
person may be voted by the executor or administrator of such person's estate,
either in person or by proxy.
All voting, except as required by the charter document of the Corporation
or where otherwise required by law, may be by a voice vote; provided, however,
upon request of the chairman of the meeting or upon demand therefor by
shareholders holding a majority of the issued and outstanding stock present in
person or by proxy at any meeting a stock vote shall be taken. Every stock vote
shall be taken by written ballots, each of which shall state the name of the
shareholder or proxy voting and such other information as may be required under
the procedure established for the meeting. All elections of directors shall be
by written ballots, unless otherwise provided in the charter document of the
Corporation.
At any meeting at which a vote is taken by written ballots, the chairman of
the meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of such inspector's
ability. Such inspector shall receive the written ballots, count the votes, and
make and sign a certificate of the result thereof. The chairman of the meeting
may appoint any person to serve as inspector, except no candidate for the office
of director shall be appointed as an inspector.
Unless otherwise provided in the charter documents of the Corporation,
cumulative voting for the election of directors shall be prohibited.
Section 2.10. Conduct of Meetings. The meetings of the shareholders shall
be presided over by the Chairman of the Board, or, if the Chairman of the Board
is not present, by the President, or, if the President is not present, by the
Vice Chairman of the Board, or, if neither the Chairman of the Board, the
President nor the Vice Chairman of the Board is present, by a chairman elected
at the meeting. The Secretary of the Corporation, if present, shall act as
secretary of such meetings, or, if the Secretary is not present, an Assistant
Secretary shall so act, if neither the Secretary or an Assistant Secretary is
present, then a secretary shall be appointed by the chairman of the meeting.
The chairman of any meeting of shareholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to the chairman in order.
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<PAGE>
Section 2.11. Treasury Stock. The Corporation shall not vote, directly or
indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes. Nothing in this Section 2.11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
Section 2.12. Action Without Meeting. Unless otherwise provided in the
charter documents of the Corporation, any action permitted or required by law,
the charter documents of the Corporation or these Bylaws to be taken at a
meeting of shareholders, may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of all the outstanding shares
entitled to vote on such action and shall be delivered to the Corporation by
delivery to its registered office in the state of incorporation, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of shareholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each shareholder
who signs the consent, and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this Section to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the state of incorporation, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1. Power; Number; Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, and, subject to the restrictions imposed by law or the charter
documents of the Corporation, the Board of Directors may exercise all the powers
of the Corporation.
The number of directors which shall constitute the whole Board of Directors
shall be determined from time to time by the Board of Directors (provided that
no decrease in the number of directors which would have the effect of shortening
the term of the incumbent director may be made by the Board of Directors). If
the Board of Directors makes no such determination, the number of directors
shall be one. Each director shall hold office for the term for which such
director is
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<PAGE>
elected, and until such director's successor shall have been elected and
qualified or until such director's earlier death, resignation or removal.
Unless otherwise provided in the charter documents of the Corporation,
directors need not be shareholders nor residents of the state of incorporation
of the Corporation.
Section 3.2. Quorum; Voting. Unless otherwise provided in the charter
documents of the Corporation, a majority of the number of directors fixed in
accordance with Section 3.1 shall constitute a quorum for the transaction of
business of the Board of Directors and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 3.3. Place of Meetings; Order of Business. The directors may hold
their meetings, and may have an office and keep the books of the Corporation,
except as otherwise provided by law, in such place or places, within or without
the state of incorporation of the Corporation, as the Board of Directors may
from time to time determine. At all meetings of the Board of Directors business
shall be transacted in such order as shall from time to time be determined by
the Chairman of the Board, or in the Chairman of the Board's absence by the
President, or in the President's absence by the Vice Chairman of the Board.
Section 3.4. First Meeting. Each newly elected Board of Directors may hold
its first meetings for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the shareholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which a
quorum shall be present, held after the annual meeting of shareholders, the
Board of Directors shall elect the officers of the Corporation.
Section 3.5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by the Chairman of the Board, or in the absence of the Chairman of the Board, by
the President, or in the President's absence, by the Vice Chairman of the Board,
or in the absence of the Vice Chairman of the Board, by another officer of the
Corporation. Notice of such regular meetings shall not be required.
Section 3.6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or the Vice Chairman
of the Board or, on the written request of any director, by the Secretary, in
each case on at least twenty-four (24) hours' personal, written, telegraphic,
cable or wireless notice to each director. Such notice, or any waiver thereof
pursuant to Article 7, Section 7.3 hereof, need not state the purpose or
purposes of such meeting, except as may otherwise be required by law or
provided for in the charter documents of the
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<PAGE>
Corporation or these Bylaws. Meetings may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting in writing.
Section 3.7. Removal. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
Section 3.8. Vacancies; Increase in the Number of Directors. Unless
otherwise provided in the charter documents of the Corporation, vacancies
existing on the Board of Directors for any reason may be filled by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director; and any director so chosen shall
hold office until the next annual election and until such director's successor
shall have been elected and qualified, or until such director's earlier death,
resignation or removal.
Section 3.9. Compensation. No compensation shall be paid to directors and
members of standing committees, if any, for their services in such capacities,
provided, however, that they shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the Board of Directors.
Section 3.10. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the charter documents of the Corporation, any
action required or permitted to be taken at any Meeting of the Board of
Directors or any committee designated by the Board a Directors may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be stated as such in any document or instrument filed with the Secretary
of State of the state of incorporation of the Corporation.
Unless otherwise restricted by the charter documents of the Corporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of a conference telephone connection or similar communications
equipment by means of which all persons participates in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
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<PAGE>
Section 3.11. Approval or Ratification of Acts or Contracts by
Shareholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the shareholders,
or at any special meeting of the shareholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the shareholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present) shall be as valid and as binding upon the Corporation and upon all the
shareholders as if it has been approved or ratified by every shareholder of the
Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of shareholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote, and
such consent shall be as valid and binding upon the Corporation and upon all the
shareholders as if it had been approved or ratified by every shareholder of the
Corporation.
ARTICLE 4
COMMITTEES
Section 4.1. Designation; Powers. The Board of Directors may, by resolution
passed by a majority of the whole board, designate one or more committees,
including, if they shall so determine, an executive committee, with each such
committee to consist of one or more of the directors of the Corporation. Any
such designated committee shall have and may exercise such of the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in such resolution, except that no
such committee shall have the power or authority of the Board of Directors in
reference to amending the charter documents of the Corporation, adopting an
agreement of merger or consolidation, recommending to the shareholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution of the Corporation, or amending, altering or
repealing these Bylaws or adopting new bylaws for the Corporation. Any such
designated committee may authorize the seal of the Corporation to be affixed to
all papers which may require it. In addition to the above, such committee or
committees shall have such other powers and limitations of authority as may be
determined from time to time by the Board of Directors.
Section 4.2. Procedure; Meetings; Quorum. Any committee designated pursuant
to this Article 4 shall keep regular minutes of its actions and proceedings in a
book provided for that purpose and report the same to the Board of Directors at
its meeting next succeeding such action, shall fix its own rules or procedures,
and shall meet at such times and at such place or places as may be provided by
such rules, or by such committee or the Board of Directors. Should a committee
fail to fix its own rules, the provisions of these Bylaws, pertaining to the
calling of meetings and conduct of business by the Board of Directors, shall
apply as nearly as may be possible. At every meeting
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of any such committee the presence of a majority of all the members thereof
shall constitute a quorum, except as provided in Section 4.3 of this Article 4,
and the affirmative vote of a majority of the members present shall be necessary
for the adoption by it of any resolution.
Section 4.3. Substitution and Removal of Members; Vacancies. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member. The Board of Directors shall have the power at any time to
remove any member(s) of a committee and to appoint other directors in lieu of
the person(s) so removed and shall also have the power to fill vacancies in a
committee.
ARTICLE 5
OFFICERS
Section 5.1. Number, Titles and Term of Office. The officers of the
Corporation shall be a Chairman of the Board, President, one or more Vice
Presidents (any one or more of whom may be designated Executive Vice President
or Senior Vice President), a Treasurer, a Secretary, and such other officers as
the Board of Directors may from time to time elect or appoint (including, but
not limited to, a Vice Chairman of the Board, one or more Assistant Secretaries
and one or more Assistant Treasurers). Each officer shall hold office until such
officer's successor shall be duly elected and shall qualify or until such
officer's death or until such officer shall resign or shall have been removed.
Any number of offices may be held by the same person, unless the charter
documents of the Corporation provide otherwise. Except for the Chairman of the
Board and the Vice Chairman of the Board, no officer need be a director.
Section 5.2. Powers and Duties of the Chairman of the Board. The Chairman
of the Board shall be the chief executive officer of the Corporation. Subject to
the control of the Board of Directors and the Executive Committee (if any), the
Chairman of the Board shall have general executive charge, management and
control of the properties, business and operations of the Corporation with all
such powers as may be reasonably incident to such responsibilities; may agree
upon and execute all leases, contracts evidences of indebtedness and other
obligations in the name of the Corporation and may sign all certificates for
shares of capital stock of the Corporation; and shall have such other powers and
duties as designated in accordance with these Bylaws and as from time to time
may be assigned to the Chairman of the Board by the Board of Directors. The
Chairman of the Board shall preside at all meetings of the shareholders and of
the Board of Directors.
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Section 5.3. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, the President shall, in the absence of the Chairman of the
Board or if there be no Chairman of the Board (should the President be a
director) preside at all meetings of the shareholders and of the Board of
Directors; and the President shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned to the President by the Board of Directors or the Chairman of the
Board.
Section 5.4. Powers and Duties of the Vice Chairman of the Board. The Board
of Directors may assign areas of responsibility to the Vice Chairman of the
Board, and, in such event, and subject to the overall direction of the Chairman
of the Board and the Board of Directors, the Vice Chairman of the Board shall be
responsible for supervising the management of the affairs of the Corporation and
its subsidiaries within the area or areas assigned and shall monitor and review
on behalf of the Board of Directors all functions within such corresponding area
or areas of the Corporation and each such subsidiary of the Corporation. In the
absence of the President, or in the event of the President's inability or
refusal to act, the Vice Chairman of the Board shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Further, the Vice Chairman of the Board
shall have such other powers and duties as designated in accordance with these
Bylaws and as from time to time may be assigned to the Vice Chairman of the
Board by the Board of Directors or the Chairman of the Board.
Section 5.5. Vice Presidents. Each Vice President shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Chairman of the
Board, the President or the Vice Chairman of the Board of the Corporation. Each
Vice President shall have such other powers and duties as from time to time may
be assigned to such Vice President by the Board of Directors, the Chairman of
the Board, the President or the Vice Chairman of the Board.
Section 5.6. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
shareholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts and attest the affixation of the seal of the
Corporation thereto; may sign with the other appointed officers all certificates
for shares of capital stock of the Corporation; shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the Corporation during business hours; shall have such other powers
and duties as designated in these Bylaws and as from time to time may be
assigned to the Secretary by the Board of Directors, the
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Chairman of the Board, the President or the Vice Chairman of the Board; and
shall in general perform all acts incident to the office of Secretary, subject
to the control of the Board of Directors, the Chairman of the Board, the
President or the Vice Chairman of the Board.
Section 5.7. Assistant Secretaries. Each Assistant Secretary shall have the
usual powers and duties pertaining to such offices, together with such powers
and duties as designated in these Bylaws and as from time to time may be
assigned to an Assistant Secretary by the Board of Directors, the Chairman of
the Board, the President, the Vice Chairman of the Board, or the Secretary. The
Assistant Secretaries shall exercise the powers of the Secretary during that
officer's absence or inability or refusal to act.
Section 5.8. Treasurer. The Treasurer shall have responsibility for the
custody and control of all the funds and securities of the Corporation, and
shall have such other powers and duties as designated in these Bylaws and as
from time to time may be assigned to the Treasurer by the Board of Directors,
the Chairman of the Board, the President or the Vice Chairman of the Board. The
Treasurer shall perform all acts incident to the position of Treasurer, subject
to the control of the Board of Directors, the Chairman of the Board, the
President and the Vice Chairman of the Board; and the Treasurer shall, if
required by the Board of Directors, give such bond for the faithful discharge of
the Treasurer's duties in such form as the Board of Directors may require.
Section 5.9. Assistant Treasurers. Each Assistant Treasurer shall have the
usual powers and duties pertaining to such office, together with such
other powers and duties as designated in these Bylaws and as from time to time
may be assigned to each Assistant Treasurer by the Board of Directors, the
Chairman of the Board, the President, the Vice Chairman of the Board, or the
Treasurer. The Assistant Treasurers shall exercise the powers of the
Treasurer during that officer's absence or inability or refusal to act.
Section 5.10. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chairman of the Board,
the President or the Vice Chairman of the Board, together with the Secretary or
any Assistant Secretary shall have power to vote and otherwise act on behalf of
the Corporation, in person or by proxy, at any meeting of security holders of or
with respect to any action of security holders of any other corporation in which
this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
Section 5.11. Delegation. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or duties of any officer to any other person, and
may authorize any officer to delegate specified duties
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of such office to any other person. Any such delegation or authorization by the
Board shall be effected from time to time by resolution of the Board of
Directors.
ARTICLE 6
CAPITAL STOCK
Section 6.1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the charter documents of the Corporation, as shall be
approved by the Board of Directors. Every holder of stock represented by
certificates shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board, President, Vice Chairman of the
Board or a Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Corporation representing the number
of shares (and, if the stock of the Corporation shall be divided into classes or
series, certifying the class and series of such shares) owned by such
shareholder which are registered in certified form; provided, however, that any
of or all the signatures on the certificate may be facsimile. The stock record
books and the blank stock certificate books shall be kept by the Secretary or at
the office of such transfer agent or transfer agents as the Board of Directors
may from time to time determine. In case any officer, transfer agent or
registrar who shall have signed or whose facsimile signature or signatures shall
have been placed upon any such certificate or certificates shall have ceased to
be such officer, transfer agent or registrar before such certificate is issued
by the Corporation, such certificate may nevertheless be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue. The stock certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and number of shares.
Section 6.2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 6.3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
incorporation of the Corporation.
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Section 6.4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for share of capital stock of the Corporation.
Section 6.5. Lost or Destroyed Certificates. The Board of Directors may
determine the conditions upon which the Corporation may issue a new certificate
of stock in place of a certificate theretofore issued by it which is alleged to
have been lost, stolen or destroyed and may require the owner of each
certificate or such owner's legal representative to give bond, with surety
sufficient to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January of each year.
Section 7.2. Corporate Seal. The corporate seal shall be circular in form
and shall have inscribed thereon the name of the Corporation and the state of
its incorporation, which seal shall be in the charge of the Secretary and shall
be affixed to certificates of stock, debentures, bonds, and other documents, in
accordance with the direction of the Board of Directors or a committee thereof,
and as may be required by law; however, the Secretary may, if the Secretary
deems it expedient, have a facsimile of the corporate seal inscribed on any such
certificates of stock, debentures, bonds, contract or other documents.
Duplicates of the seal may be kept for use by any Assistant Secretary.
Section 7.3. Notice and Waiver of Notice. Whenever any notice is required
to be given by law, the charter documents of the Corporation or under the
provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission (including by telecopy
or facsimile transmission) or (ii) by deposit of the same in a post office box
or by delivery to an overnight courier service company in a sealed prepaid
wrapper addressed to the person entitled thereto at such person's post office
address, as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such transmission or mailing or
delivery to courier, as the case may be.
Whenever notice is required to be given by law, the charter documents of
the Corporation or under any of the provisions of these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to
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notice. Attendance of a person, including without limitation a director, at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the charter documents of the Corporation or these
Bylaws.
Section 7.4. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
Section 7.5. Reliance upon Books, Reports and Records. A member of the
Board of Directors, or a member of any committee designated by the Board of
Director, shall, in the performance of such person's duties, be protected to the
fullest extent permitted by law in relying upon the records of the Corporation
and upon information, opinion, reports or statements presented to the
Corporation.
Section 7.6. Application of Bylaws. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of incorporation of the Corporation or of any other govenmental body or
power having jurisdiction over this Corporation, or over the subject matter to
which such provision of these Bylaws applies, or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the operation thereof
unavoidably conflicts with state law, and shall in all other respects be in full
force and effect.
ARTICLE 8
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 8.1. Indemnification. As permitted by Section G of Article 2.02-1
of the Texas Business Corporation Act or any successor statute (the
"Indemnification Article"), the Corporation hereby:
(a) makes mandatory the indemnification permitted under Section B of
the Indemnification Article as contemplated by Section G thereof;
(b) makes mandatory its payment or reimbursement of the reasonable
expenses incurred by a former or present director who was, is, or is
threatened to be made a named defendant or respondent in a proceeding upon
such director's compliance with the requirements of Section K of the
Indemnification Article; and
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(c) extends the mandatory indemnification referred to in Section
8.1(a) above and the mandatory payment or reimbursement of expenses
referred to in Section 8.1(b) above (i) to all former or present officers
of the Corporation and (ii) to all persons who are or were serving at the
request of the Corporation as a director, officer, partner or trustee of
another foreign or domestic corporation, partnership, joint venture, trust
or employee benefit plan, to the same extent that the Corporation is
obligated to indemnify and pay or reimburse expenses to directors.
Section 8.2. Nonexclusivity. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which the person
indemnified may be entitled under any bylaw, agreement, authorization of
shareholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall enure to the benefit of such person's heirs
and legal representatives
Section 8.3. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation or who is or was serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another business, foreign, domestic or
non-profit corporation, partnership, joins venture, sole proprietorship, trust
or other enterprise or employee benefit plan, against any liability asserted
against such person and incurred by such person in such a capacity or arising
out of such person's status as such a person, whether or not the Corporation
would have the power to indemnify such person against that liability under the
provisions of this Article or the Texas Business Corporation Act.
Section 8.4. Witness. Notwithstanding any other provision of this Article,
the Corporation shall pay or reimburse expenses incurred by any director,
officer, employee or agent in connection with such person's appearance as a
witness or other participation in a proceeding at a time when such person is not
a named defendant or respondent in such proceeding
ARTICLE 9
AMENDMENTS
Section 9.1. Amendments. The Board of Directors shall have the power to
adopt, amend and repeal from time to time Bylaws of the Corporation, subject to
the right of the shareholders entitled to vote with respect thereto to amend or
repeal such Bylaws as adopted or amended by the Board of Directors.
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BYLAWS
OF
300, INC.
(A Texas Corporation)
<PAGE>
TABLE OF CONTENTS
ARTICLE I
OFFICES
Section 1. Principal Office ......................... 1
Section 2. Other Offices ............................ 1
ARTICLE II
SHAREHOLDERS
Section 1. Time and Place of Meetings ............... 1
Section 2. Annual Meetings .......................... 1
Section 3. Special Meetings ......................... 1
Section 4. Notice ................................... 1
Section 5. Closing of Share Transfer Records and
Fixing Record Dates for Matters Other
than Consents to Action .................. 2
Section 6. Fixing Record Dates for Consents to
Action ................................... 2
Section 7. List of Shareholders ..................... 3
Section 8. Quorum ................................... 3
Section 9. Voting ................................... 4
Section 10. Action by Consent ........................ 5
Section 11. Presence at Meetings by Means of
Communications Equipment ................. 6
ARTICLE III
DIRECTORS
Section 1. Number of Directors ...................... 6
Section 2. Vacancies ................................ 7
Section 3. General Powers ........................... 7
Section 4. Place of Meetings ........................ 8
Section 5. Annual Meetings .......................... 8
Section 6. Regular Meetings ......................... 8
Section 7. Special Meetings ......................... 8
Section 8. Quorum and Voting ........................ 8
Section 9. Committees of the Board of Directors ..... 9
Section 10. Compensation of Directors ................ 9
Section 11. Action by Unanimous Consent .............. 10
Section 12. Presence at Meetings by Means of
Communications Equipment ................. 10
ARTICLE IV
NOTICES
Section 1. Form of Notice ........................... 10
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Section 2. Waiver ................................... 10
Section 3. When Notice Unnecessary .................. 10
ARTICLE V
OFFICERS
Section 1. General .................................. 11
Section 2. Election ................................. 11
Section 3. Chairman of the Board .................... 11
Section 4. President ................................ 12
Section 5. Vice Presidents .......................... 12
Section 6. Assistant Vice Presidents ................ 12
Section 7. Secretary ................................ 12
Section 8. Assistant Secretaries .................... 13
Section 9. Treasurer ................................ 13
Section 10. Assistant Treasurers ..................... 14
Section 11. Bonding .................................. 14
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates ..................... 14
Section 2. Lost Certificates ........................ 15
Section 3. Transfer of Shares ....................... 15
Section 4. Registered Shareholders .................. 15
ARTICLE VII
INDEMNIFICATION
Section 1. General .................................. 16
Section 2. Insurance ................................ 16
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Distributions and Share Dividends ........ 17
Section 2. Reserves ................................. 17
Section 3. Fiscal Year .............................. 18
Section 4. Seal ..................................... 18
Section 5. Resignation .............................. 18
ARTICLE IX
AMENDMENTS TO BYLAWS ....................................................... 18
ii
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ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation shall
be in Dallas County, Texas, or such other county as the Board of Directors may
from time to time designate.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
Section 1. Time and Place of Meetings. Meetings of the shareholders shall
be held at such time and at such place, within or without the State of Texas, as
shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of shareholders shall be held
on such date and at such time as shall be determined by the Board of Directors.
At each annual meeting the shareholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may be
called at any time by the Chief Executive Officer, the President or the Board of
Directors, and shall be called by the Chief Executive Officer, the President or
the Secretary at the request in writing of the holders of not less than ten
percent (10%) of the voting power represented by all the shares issued,
outstanding and entitled to be voted at the proposed special meeting, unless the
Articles of Incorporation provide for a different percentage, in which event
such provision of the Articles of Incorporation shall govern. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
special meetings shall be confined to the purposes stated in the notice of the
meeting.
Section 4. Notice. Written or printed notice stating the place, day and
hour of any shareholders' meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the Chief Executive Offices, President,
Secretary or the officer or person calling the meeting, to each shareholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, addressed
to the shareholder at his
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address as it appears on the share transfer records of the Corporation.
Section 5. Closing of Share Transfer Records and Fixing Record Dates for
Matters Other than Consents to Action. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any distribution or
share dividend, or in order to make a determination of shareholders for any
other proper purpose (other than determining shareholders entitled to consent to
action by shareholders proposed to be taken without a meeting of shareholders),
the Board of Directors of the Corporation may provide that the share transfer
records shall be closed for a stated period but not to exceed, in any case, 60
days. If the share transfer records shall be closed for the purpose of
determining shareholders, such records shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the share transfer
records, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than 60 days and, in the case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the share transfer records are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a distribution (other than a distribution
involving a purchase or redemption by the Corporation of any of its own shares)
or share dividend, the date on which notice of the meeting is mailed or the date
on which the resolution of the Board of Directors declaring such distribution or
share dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof except where the
determination has been made through the closing of share transfer records and
the stated period of closing has expired.
Section 6. Fixing Record Dates for Consents to Action. Unless a record date
shall have previously been fixed or determined pursuant to this Section 6,
whenever action by shareholders is proposed to be taken by consent in writing
without a meeting of shareholders, the Board of Directors may fix a record date
for the purpose of determining shareholders entitled to consent to that action,
which record date shall not precede, and shall not be more than ten days after,
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. If no record date has been fixed by the Board of Directors
and the prior action of the Board of Directors is not required by the Texas
Business Corporation Act (herein called the "Act"), the record date for
determining shareholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written
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consent setting forth the action taken or proposed to be taken is delivered to
the Corporation as provided in Section 10 of this Article II. Delivery shall be
by hand or by certified or registered mail, return receipt requested. Delivery
to the Corporation's principal place of business shall be addressed to the
President or the Chief Executive Officer of the Corporation. If no record date
shall have been fixed by the Board of Directors and prior action of the Board of
Directors is required by the Act, the record date for determining shareholders
entitled to consent to action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts a resolution
taking such prior action.
Section 7. List of Shareholders. The officer or agent of the Corporation
having charge of the share transfer records for shares of the Corporation shall
make, at least ten days before each meeting of the shareholders, a complete list
of the shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of voting
shares held by each, which list, for a period of ten days prior to such meeting,
shall be kept on file at the registered office or principal place of business of
the Corporation and shall be subject to inspection by any shareholder at any
time during the usual business hours of the Corporation. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original share transfer records shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer records or to vote at any
meeting of shareholders. Failure to comply with the requirements of this
Section 7 shall not affect the validity of any action taken at such meeting.
Section 8. Quorum. With respect to any matter, a quorum shall be present at
a meeting of shareholders if the holders of shares having a majority of the
voting power represented by all issued and outstanding shares entitled to vote
on that matter are present in person or represented by proxy, unless otherwise
provided by the Articles of Incorporation in accordance with the Act. Once a
quorum is present at a meeting of shareholders, the shareholders represented in
person or by proxy at the meeting may conduct such business as may properly be
brought before the meeting until it is adjourned, and the subsequent withdrawal
from the meeting of any shareholder or the refusal of any shareholder
represented in person or by proxy to vote shall not affect the presence of a
quorum at the meeting. If, however, a quorum shall not be present at any meeting
of shareholders, the shareholders entitled to vote, present in person or
represented by proxy, shall have power to adjourn the meeting, without notice
(other than announcement at the meeting at which the adjournment is taken of the
time and place of the adjourned meeting), until such time and to such place as
may be determined by a vote of the holders of a majority of the shares
represented in person or by proxy at such
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meeting until a quorum shall be present. At such adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed.
Section 9. Voting. When a quorum is present at any meeting, the vote of the
holders of a majority of the shares entitled to vote on a matter, present in
person or represented by proxy at such meeting, shall decide such matter brought
before such meeting, other than the election of directors or a matter for which
the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by the Act, and shall be the act of the
shareholders, unless otherwise provided by the Articles of Incorporation or
these Bylaws in accordance with the Act.
Unless otherwise provided in the Articles of Incorporation or these Bylaws
in accordance with the Act, directors of the Corporation shall be elected by a
plurality of the votes cast by the holders of shares entitled to vote in the
election of directors at a meeting of shareholders at which a quorum is present.
At every meeting of the shareholders, each shareholder shall be entitled to
such number of votes, in person or by proxy, for each share having voting power
held by such shareholder, as is specified in the Articles of Incorporation
(including the resolution of the Board of Directors (or a committee thereof)
creating such shares), except to the extent that the voting rights of the
shares of any class or series are limited or denied by the Articles of
Incorporation. At each election of directors, every shareholder shall be
entitled (a) to cast, in person or by proxy, the number of votes to which the
shares owned by him are entitled for as many persons as there are directors to
be elected and for whose election he has a right to vote or (b) unless
prohibited by the Articles of Incorporation and subject to the immediately
succeeding sentence of this paragraph, to cumulate the votes to which the shares
owned by him are entitled by giving one candidate as many votes as the number of
such directors multiplied by the shares owned by him shall equal or by
distributing such votes on the same principle among any number of such
candidates. Cumulative voting shall not be allowed in an election of directors
unless a shareholder who intends to cumulate his votes shall have given written
notice of such intention to the Secretary of the Corporation on or before the
day preceding the election at which such shareholder intends to cumulate his
votes; all shareholders entitled to vote cumulatively may cumulate their votes
if any shareholder gives such written notice. Every proxy shall be in writing
and be executed by the shareholder. A telegram, telex, cablegram, or similar
transmission by the shareholder, or a photographic, photostatic, facsimile, or
similar reproduction of a writing executed by the shareholder, shall be treated
as an execution in writing for the purposes of this Section 9. No proxy shall be
valid after 11 months from the date of its execution unless otherwise provided
therein. Each proxy shall be revocable unless (i) the proxy form conspicuously
states that the proxy is
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irrevocable, and (ii) the proxy is coupled with an interest, as defined in the
Act and other Texas law.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe or, in
the absence of such provision, as the board of directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name as trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without being transferred into his name, if such authority is contained
in an appropriate order of the court that appointed the receiver.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Treasury shares, shares of the Corporation's stock owned by another
corporation the majority of the voting stock of which is owned or controlled by
the Corporation, and shares of its own stock held by the Corporation in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Section 10. Action by Consent. Any action required or permitted to be taken
at a meeting of the shareholders may be taken without a meeting, without prior
notice, and without a vote if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders entitled to vote with respect
to the action that is the subject of the consent.
In addition, if the Articles of Incorporation so provide, any action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting, without prior notice, and without a vote if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holder or holders of shares having not less than the minimum number of votes
that would be necessary to take such action at a meeting at which the holders of
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of any action by shareholders without a meeting by less than
unanimous written consent shall be given to those shareholders who did not
consent in writing to the action.
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Every written consent signed by the holders of less than all the shares
entitled to vote with respect to the action that is the subject of the consent
shall bear the date of signature of each shareholder who signs the consent. No
written consent signed by the holders of less than all the shares entitled to
vote with respect to the action that is the subject of the consent shall be
effective to take the action that is the subject of the consent unless, within
60 days after the date of the earliest dated consent delivered to the
Corporation as set forth below in this Section 10, the consent or consents
signed by the holder or holders of shares having not less than the minimum
number of votes that would be necessary to take the action that is the subject
of the consent are delivered to the Corporation by delivery to its registered
office, registered agent, principal place of business, transfer agent,
registrar, exchange agent, or an officer or agent of the Corporation having
custody of the records in which proceedings of meetings of shareholders are
recorded. Delivery shall be by hand or certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the President or the Chief Executive Officer of the
Corporation.
A telegram, telex, cablegram, or similar transmission by a shareholder, or
a photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a shareholder, shall be regarded as signed by the shareholder for the
purposes of this Section 10.
Section 11. Presence at Meetings by Means of Communications Equipment.
Shareholders may participate in and hold a meeting of the shareholders by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this Section 11 shall constitute presence in person at
such meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the Corporation
shall be fixed from time to time by resolution of the Board of Directors, but in
no case shall the number of directors be less than one. Until otherwise fixed by
resolution of the Board of Directors, the number of directors shall be the
number stated in the Articles of Incorporation. No decrease in the number of
directors shall have the effect of reducing the term of any incumbent director.
Directors shall be elected at each annual meeting of the shareholders by the
holders of shares entitled to vote in the election of directors, except as
provided in Section 2 of this Article III, and each director shall hold office
until the
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annual meeting of shareholders following his election or until his successor is
elected and qualified. Directors need not be residents of the State of Texas or
shareholders of the Corporation.
Section 2. Vacancies. Subject to other provisions of this Section 2, any
vacancy occurring in the Board of Directors may be filled by election at an
annual or special meeting of the shareholders called for that purpose or by the
affirmative vote of a majority of the remaining directors, though the remaining
directors may constitute less than a quorum of the Board of Directors as fixed
by Section 8 of this Article III. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of directors shall be filled
by election at an annual meeting or at a special meeting of shareholders called
for that purpose or may be filled by the Board of Directors for a term of office
continuing only until the next election of one or more directors by the
shareholders; provided that the Board of Directors may not fill more than two
such directorships during the period between any two successive annual meetings
of shareholders. Shareholders holding a majority of shares then entitled to vote
at an election of directors may, at any time and with or without cause,
terminate the term of office of all or any of the directors by a vote at any
annual or special meeting called for that purpose. Such removal shall be
effective immediately upon such shareholder action even if successors are not
elected simultaneously, and the vacancies on the Board of Directors caused by
such action shall be filled only by election by the shareholders.
Notwithstanding the foregoing, whenever the holders of any class or series
of shares or group of classes or series of shares are entitled to elect one or
more directors by the provisions of the Articles of Incorporation, only the
holders of shares of that class or series or group shall be entitled to vote for
or against the removal of any director elected by the holders of shares of that
class or series or group; and any vacancies in such directorships and any newly
created directorships of such class or series or group to be filled by reason of
an increase in the number of such directors may be filled by the affirmative
vote of a majority of the directors elected by such class or series or group
then in office or by a sole remaining director so elected, or by the vote of the
holders of the outstanding shares of such class or series or group, and such
directorships shall not in any case be filled by the vote of the remaining
directors or the holders of the outstanding shares as a whole unless otherwise
provided in the Articles of Incorporation.
Section 3. General Powers. The powers of the Corporation shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, its Board of Directors, which may do or
cause to be done all such lawful acts and things, as are not by the Act, the
Articles of
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Incorporation or these Bylaws directed or required to be exercised or done by
the shareholders.
Section 4. Place of Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Texas.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held, without further notice, immediately following the
annual meeting of shareholders at the same place, unless by the majority vote or
unanimous consent of the directors then elected and serving, such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors may
be held with or without notice at such time and place as the Board of Directors
may determine by resolution.
Section 7. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chief Executive Officer and shall be
called by the Secretary on the written request of a majority of the incumbent
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by such person or persons. Notice of any special
meeting shall be given at least 24 hours previous thereto if given either
personally (including written notice delivered personally or telephone notice)
or by telex, telecopy, telegram or other means of immediate communication, and
at least 72 hours previous thereto if given by written notice mailed or
otherwise transmitted to each director at the address of his business or
residence. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting. Any director may waive notice of any
meeting, as provided in Section 2 of Article IV of these Bylaws. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
Section 8. Quorum and Voting. At all meetings of the Board of Directors,
the presence of a majority of the number of directors fixed in the manner
provided in Section 1 of this Article III shall constitute a quorum for the
transaction of business, unless a different number or portion is required by
law, the Articles of Incorporation, or these Bylaws. At all meetings of
committees of the Board of Directors (if one or more be designated in the manner
described in Section 9 of this Article III), the presence of a majority of the
number of directors fixed from time to time by resolution of the Board of
Directors to serve as members of such committees shall constitute a quorum for
the transaction of
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business. The affirmative vote of at least a majority of the directors present
and entitled to vote at any meeting of the Board of Directors or a committee of
the Board of Directors at which there is a quorum shall be the act of the Board
of Directors or the committee, except as may be otherwise specifically provided
by the Act, the Articles of Incorporation or these Bylaws. Directors may not
vote by proxy at any meeting of the Board of Directors. Directors with an
interest in a business transaction of the Corporation and directors who are
directors or officers or have a financial interest in any other corporation,
partnership, association or other organization with which the Corporation is
transacting business may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee of the Board of Directors to
authorize such business transaction. If a quorum shall not be present at any
meeting of the Board of Directors or a committee thereof, a majority of the
directors present thereat may adjourn the meeting, without notice other than
announcement at the meeting, until such time and to such place as may be
determined by such majority of directors, until a quorum shall be present.
Section 9. Committees of the Board of Directors. The Board of Directors
may, by resolution passed by a majority of the whole Board of Directors,
designate from among its members one or more committees, each of which shall be
composed of one or more of its members, and may designate one or more of its
members as alternate members of any committee, who may, subject to any
limitations imposed by the Board of Directors, replace absent or disqualified
members at any meeting of that committee. Any such committee, to the extent
provided in the resolution of the Board of Directors designating the committee
or in the Articles of Incorporation or these Bylaws, shall have and may exercise
all of the authority of the Board of Directors of the Corporation, except where
action of the Board of Directors is required by the Act or by the Articles of
Incorporation. Any member of a committee of the Board of Directors may be
removed, for or without cause, by the affirmative vote of a majority of the
whole Board of Directors. If any vacancy or vacancies occur in a committee of
the Board of Directors caused by death, resignation, retirement,
disqualification, removal from office or otherwise, the vacancy or vacancies
shall be filled by the affirmative vote of a majority of the whole Board of
Directors. Such committee or committees shall have such name or names as may be
designated by the Board of Directors and shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
Section 10. Compensation of Directors. Unless otherwise provided by
resolution of the Board of Directors, directors, as members of the Board of
Directors or of any committee thereof, shall not be entitled to receive any
stated salary for their services. Nothing herein contained, however, shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
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Section 11. Action by Unanimous Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a written consent, setting forth the action so
taken, is signed by all the members of the Board of Directors or the committee,
as the case may be, and such written consent shall have the same force and
effect as a unanimous vote at a meeting of the Board of Directors.
Section 12. Presence at Meetings by Means of Communications Equipment.
Members of the Board of Directors of the Corporation or any committee designated
by the Board of Directors, may participate in and hold a meeting of such board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 12 shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the Act, the
Articles of Incorporation or these Bylaws, notice is required to be given to any
director or shareholder, and no provision is made as to how such notice shall be
given, it shall not be construed to mean personal notice exclusively, but any
such notice may be given in writing, by mail, postage prepaid, or by telex,
telecopy, or telegram, or other means of immediate communication, addressed or
transmitted to such director or shareholder at such address as appears on the
books of the Corporation. Any notice required or permitted to be given by mail
shall be deemed to be given at the time when the same be thus deposited, postage
prepaid, in the United States mail as aforesaid. Any notice required or
permitted to be given by telex, telecopy, telegram, or other means of immediate
communication shall be deemed to be given at the time of actual delivery.
Section 2. Waiver. Whenever under the provisions of the Act, the Articles
of Incorporation or these Bylaws, any notice is required to be given to any
director or shareholder of the Corporation, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated in such notice, shall be equivalent to the giving of such notice.
Section 3. When Notice Unnecessary. Whenever, under the provisions of the
Act, the Articles of Incorporation or these Bylaws, any notice is required to be
given to any shareholder, such notice need not be given to the shareholder if:
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(a) notice of two consecutive annual meetings and all notices of meetings
held during the period between those annual meetings, if any, or
(b) all (but in no event less than two) payments (if sent by first class
mail) of distributions or interest on securities during a 12-month
period,
have been mailed to that person, addressed at his address as shown on the
records of the Corporation, and have been returned undeliverable. Any action or
meeting taken or held without notice to such a person shall have the same force
and effect as if the notice had been duly given. If such a person delivers to
the Corporation a written notice setting forth his then current address, the
requirement that notice be given to that person shall be reinstated.
ARTICLE V
OFFICERS
Section 1. General. The elected officers of the Corporation shall be a
President and a Secretary. The Board of Directors may also elect or appoint a
Chairman of the Board, one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer, one or more
Assistant Treasurers, and such other officers as may be deemed necessary, all of
whom shall also be officers. Two or more offices may be held by the same person.
Section 2. Election. The Board of Directors shall elect the officers of the
Corporation at each annual meeting of the Board of Directors. The Board of
Directors may appoint such other officers and agents as it shall deem necessary
and shall determine the salaries of all officers and agents from time to time.
The officers shall hold office until their successors are chosen and qualified.
No officer need be a member of the Board of Directors except the Chairman of the
Board, if one be elected. Any officer elected or appointed by the Board of
Directors may be removed, with or without cause, at any time by a majority vote
of the whole Board. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if any, shall
be the Chief Executive Officer of the Corporation and, subject to the provisions
of these Bylaws, shall have general supervision of the affairs of the
Corporation and shall have general and active control of all its business. He
shall preside, when present, at all meetings of shareholders and at all meetings
of the Board of Directors. He shall see that all orders and resolutions of the
Board of Directors and the shareholders are carried into effect. He shall have
general authority to execute bonds, deeds and contracts in the name of the
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Corporation and affix the corporate seal thereto; to sign stock certificates; to
cause the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to fix their
compensation, subject to the provisions of these Bylaws; to remove or suspend
any employee or agent who shall have been employed or appointed under his
authority or under authority of an officer subordinate to him; to suspend for
cause, pending final action by the authority which shall have elected or
appointed him, any officer subordinate to the Chairman of the Board; and, in
general, to exercise all the powers and authority usually appertaining to the
chief executive officer of a corporation, except as otherwise provided in these
Bylaws.
Section 4. President. In the absence of a Chairman of the Board, the
President shall be the ranking and Chief Executive Officer of the Corporation,
and shall have the duties and responsibilities, and the authority and power, of
the Chairman of the Board. The President shall be the Chief Operating Officer of
the Corporation and as such shall have, subject to review and approval of the
Chairman of the Board, if one be elected, the responsibility for the operation
of the Corporation and the authority of the Chairman of the Board.
Section 5. Vice Presidents. In the absence of the President or in the event
of his inability or refusal to act, the Vice President, if any (or in the event
there be more than one, the Vice presidents in the order designated or, in the
absence of any designation, then in the order of their election), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. The Vice President
shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Chief Operating Officer may from
time to time prescribe. The Vice President in charge of finance, if any, shall
also perform the duties and assume the responsibilities described in Section 9
of this Article for the Treasurer, and shall report directly to the Chief
Executive Officer of the Corporation.
Section 6. Assistant Vice Presidents. In the absence of a Vice President or
in the event of his inability or refusal to act, the Assistant Vice President,
if any (or, if there be more than one, the Assistant Vice Presidents in the
order designated or, in the absence of any designation, then in the order of
their election), shall perform the duties and exercise the powers of that Vice
President, and shall perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer, the Chief Operating Officer or
the Vice President under whose supervision he is appointed may from time to time
prescribe.
Section 7. Secretary. The Secretary shall attend and record minutes of the
proceedings of all meetings of the Board of Directors and any committees thereof
and all meetings of the shareholders. He shall file the records of such meetings
in one or
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more books to be kept by him for that purpose. Unless the Corporation has
appointed a transfer agent or other agent to keep such a record, the Secretary
shall also keep at the Corporation's registered office or principal place of
business a record of the original issuance of shares issued by the Corporation
and a record of each transfer of those shares that have been presented to the
Corporation for registration of transfer. Such records shall contain the names
and addresses of all past and current shareholders of the Corporation and the
number and class of shares issued by the Corporation held by each of them. He
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer,
under whose supervision he shall be. He shall have custody of the corporate
seal of the Corporation and he, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it, and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature. The
Secretary shall keep and account for all books, documents, papers and records of
the Corporation except those for which some other officer or agent is properly
accountable. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of the
secretary of a corporation.
Section 8. Assistant Secretaries. In the absence of the Secretary or in the
event of his inability or refusal to act, the Assistant Secretary, if any (or,
if there be more than one, the Assistant Secretaries in the order designated or,
in the absence of any designation, then in the order of their election), shall
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
Chief Executive Officer or the Secretary may from time to time prescribe.
Section 9. Treasurer. The Treasurer, if any (or the Vice President in
charge of finance, if one be elected), shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the Board of Directors, at its regular meetings,
or when the Board of Directors so requires, an account of all his transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, he shall give the Corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the Board
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of Directors for the faithful performance of the duties of his office and for
the restoration of the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation. The Treasurer shall be under the supervision of the Vice
President in charge of finance, if any, and he shall perform such other duties
as may be prescribed by the Board of Directors, the Chief Executive Officer or
any such Vice President in charge of finance.
Section 10. Assistant Treasurers. In the absence of the Treasurer or in the
event of his inability or refusal to act, the Assistant Treasurer, if one be
elected (or, if there shall be more than one, the Assistant Treasurer in the
order designated or, in the absence of any designation, then in the order of
their election), shall perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer or the Treasurer may from time
to time prescribe.
Section 11. Bonding. If required by the Board of Directors, all or certain
of the officers shall give the Corporation a bond, in such form, in such sum and
with such surety or sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of their office and for the restoration to
the Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates. The Corporation shall deliver certificates
representing all shares to which shareholders are entitled. Certificates
representing shares of the Corporation shall be in such form as shall be
approved and adopted by the Board of Directors and shall be numbered
consecutively and entered in the share transfer records of the Corporation as
they are issued. Each certificate shall state on the face thereof that the
Corporation is organized under the laws of the State of Texas, the name of the
registered holder, the number and class of shares, and the designation of the
series, if any, which said certificate represents, and either the par value of
the shares or a statement that the shares are without par value. Each
certificate shall also set forth on the back thereof a full or summary statement
of matters required by the Act or the Articles of Incorporation to be described
on certificates representing shares, and shall contain a conspicuous statement
on the face thereof referring to the matters set forth on the back thereof.
Certificates shall be signed by the Chairman of the Board, President or any Vice
President and the
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Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation. Either the seal of the Corporation or the signatures of the
Corporation's officers or both may be facsimiles. In case any officer or
officers who have signed, or whose facsimile signature or signatures have been
used on such certificate or certificates, shall cease to be such officer or
officers of the Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates have been delivered by the Corporation
or its agents, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed the certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation.
Section 2. Lost Certificates. The Corporation may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost or destroyed certificate, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only
on the share transfer records of the Corporation by the holder thereof in person
or by his duly authorized attorney. Subject to any restrictions on transfer set
forth in the Articles of Incorporation, these Bylaws or any agreement among
shareholders to which this Corporation is a party or has notice, upon surrender
to the Corporation or to the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Registered Shareholders. Except as otherwise provided in the Act
or other Texas law, the Corporation shall be entitled to regard the person in
whose name any shares issued by the Corporation are registered in the share
transfer records of the Corporation at any particular time (including, without
limitation, as of the record date fixed pursuant to Section 5 or Section 6 of
Article II hereof) as the owner of those shares and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof.
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ARTICLE VII
INDEMNIFICATION
Section 1. General. The Corporation [shall/may] indemnify persons who are
or were a director or officer of the Corporation both in their capacities as
directors and officers of the Corporation and, if serving at the request of the
Corporation as a director, officer, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, trust, partnership,
joint venture, sole proprietorship, employee benefit plan or other enterprise,
in each of those capacities, against any and all liability and reasonable
expense that may be incurred by them in connection with or resulting from (a)
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative (collectively, a
"Proceeding"), (b) an appeal in such a Proceeding, or (c) any inquiry or
investigation that could lead to such a Proceeding, all to the full extent
permitted by Article 2.02-1 of the Act. [The Corporation shall pay or reimburse,
in advance of the final disposition of the Proceeding, to all persons who are or
were a director or officer of the Corporation all reasonable expenses incurred
by such person who was, is or is threatened to be made a named defendant or
respondent in a Proceeding to the full extent permitted by Article 2.02-1 of the
Act.] The Corporation [shall/may] indemnify persons who are or were an employee
or agent (other than a director or officer) of the Corporation, or persons who
are not or were not employees or agents of the Corporation but who are or were
serving at the request of the Corporation as a director, officer, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, trust, partnership, joint venture, sole proprietorship, employee
benefit plan or other enterprise (collectively, along with the directors and
officers of the Corporation, such persons are referred to herein as "Corporate
Functionaries") against any and all liability and reasonable expense that may be
incurred by them in connection with or resulting from (a) any Proceeding, (b) an
appeal in such a Proceeding, or (c) any inquiry or investigation that could lead
to such a Proceeding, all to the full extent permitted by Article 2.02-1 of the
Act. The rights of indemnification provided for in this Article VII shall be in
addition to all rights to which any Corporate Functionary may be entitled under
any agreement or vote of shareholders or as a matter of law or otherwise.
Section 2. Insurance. The Corporation may purchase or maintain insurance on
behalf of any Corporate Functionary against any liability asserted against him
and incurred by him in such a capacity or arising out of his statue as a
Corporate Functionary, whether or not the Corporation would have the power to
indemnify him or her against the liability under the Act or these Bylaws;
provided, however, that if the insurance or other arrangement is with a person
or entity that is not regularly engaged in the business of providing insurance
coverage, the insurance or
16
<PAGE>
arrangement may provide for payment of a liability with respect to which the
Corporation would not have the power to indemnify the person only if including
coverage for the additional liability has been approved by the shareholders of
the Corporation. Without limiting the power of the Corporation to procure or
maintain any kind of insurance or arrangement, the Corporation may, for the
benefit of persons indemnified by the Corporation, (i) create a trust fund,
(ii) establish any form of self-insurance, (iii) secure its indemnification
obligation by grant of any security interest or other lien on the assets of the
Corporation, or (iv) establish a letter of credit, guaranty or surety
arrangement. Any such insurance or other arrangement may be procured, maintained
or established within the Corporation or its affiliates or with any insurer or
other person deemed appropriate by the Board of Directors of the Corporation
regardless of whether all or part of the stock or other securities thereof are
owned in whole or in part by the Corporation. In the absence of fraud, the
judgment of the Board of Directors of the Corporation as to the terms and
conditions of such insurance or other arrangement and the identity of the
insurer or other person participating in an arrangement shall be conclusive, and
the insurance or arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in approving such insurance or
other arrangement shall be beneficiaries thereof.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Distributions and Share Dividends. Distributions or share
dividends to the shareholders of the Corporation, subject to the provisions of
the Act and the Articles of Incorporation and any agreements or obligations of
the Corporation, if any, may be declared by the Board of Directors at any
regular or special meeting. Distributions may be declared and paid in cash or in
property (other than shares or rights to acquire shares of the Corporation),
provided that all such declarations and payments of distributions, and all
declarations and issuances of share dividends, shall be in strict compliance
with all applicable laws and the Articles of Incorporation.
Section 2. Reserves. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation such reserve or reserves as the
Board of Directors from time to time, in its discretion, deems proper to provide
for contingencies, or to equalize distributions or share dividends, or to repair
or maintain any property of the Corporation, or for such other proper purpose as
the Board shall deem beneficial to the Corporation, and the Board may increase,
decrease or abolish any reserve in the same manner in which it was created.
17
<PAGE>
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 4, Seal. The Corporation shall have a seal which may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced. Any officer of the Corporation shall have authority to affix the
seal to any document requiring it.
Section 5. Resignation. Any director, officer or agent of the Corporation
may resign by giving written notice to the President or the Secretary. The
resignation shall take effect at the time specified therein, or immediately if
no time is specified therein. Unless specified in such notice, the acceptance
of such resignation shall not be necessary to make it effective.
ARTICLE IX
AMENDMENTS TO BYLAWS
Unless otherwise provided by the Articles of Incorporation or a bylaw
adopted by the shareholders of the Corporation, these Bylaws may be amended or
repealed, or new Bylaws may be adopted, at any meeting of the shareholders of
the Corporation or of the Board of Directors at which a quorum is present, by
the affirmative vote of the holders of a majority of the shares or the
directors, as the case may be, present at such meeting.
18
<PAGE>
CERTIFICATION
I, Jan Elois Hupfauer, Secretary of the Corporation, hereby certify that
the foregoing is a true, accurate and complete copy of the Bylaws of 300, Inc.
adopted by its Board of Directors as of October 1, 1987.
/s/ JAN ELOIS HUPFAUER
---------------------------
Secretary
19
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "MICHAEL JORDAN GOLF COMPANY, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF
JUNE, A.D. 1995, AT 2 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[LOGO] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2359829 8100 7534983
DATE:
950128582 06-09-95
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
MICHAEL JORDAN GOLF COMPANY, INC.
Michael Jordan Golf Company, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify:
FIRST: That the Board of Directors of the Corporation, by written consent
adopted the following resolution:
RESOLVED, that ARTICLE FOURTH of the Certificate of Incorporation of the
Corporation be amended and restated in its entirety so that it shall read as
follows:
"ARTICLE FOURTH: The total number of shares of stock which the Corporation
shall be authorized to issue is 1,000,000, consisting of two classes as
follows: 800,000 shares of Common Stock, par value $.01. per share, and
200,000 shares of Preferred Stock, par value $.01 per share. Preferred
Stock may be issued from time to time in one or more series, each of which
series may have such powers, designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in
the resolution or resolutions providing for the issue of such stock adopted
by the Board of Directors pursuant to the authority that is hereby
expressly vested in the Board of Directors."
SECOND: That said amendment has been duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the DGCL by written consent of
holders of all of the issued and outstanding stock entitled to vote thereon.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed and acknowledged pursuant to Section 103 of the DGCL by the undersigned
duly authorized officer of the Corporation on this 9th day of June, 1995.
MICHAEL JORDAN GOLF COMPANY, INC.
By: /s/ Charles W. Reeves
----------------------------------
Charles W. Reeves
President
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<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "MICHAEL JORDAN GOLF COMPANY, INC." FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF NOVEMBER, A.D. 1993, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * *
/s/ William T. Quillen
[LOGO] --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION:
*4153102
DATE:
713321003 11/18/1993
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MICHAEL JORDAN GOLF COMPANY, INC.
FIRST: The name of the Corporation is Michael Jordan Golf Company, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 5,000,000 shares of Common Stock,
par value $0.01 per share.
FIFTH: The name and mailing address of the incorporator of the Corporation
are as follows:
Name Address
---- -------
Gary J. Kocher One First National Plaza
Suite 4200
Chicago, Illinois 60603
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By--Laws of the Corporation, subject to any specific limitation on such
power provided by any By-Laws adopted by the stockholders.
SEVENTH: Elections of directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation is to have perpetual existence.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
TENTH: A. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for
<PAGE>
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of such director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which such director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended. Any repeal or modification of this
Section A by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
B. (1) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that such person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with
-2-
<PAGE>
the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such Court of Chancery or such other court shall deem proper.
(3) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (1) and (2) of this Section
B, or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
(4) Any indemnification under paragraphs (1) and (2) of this Section B
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in paragraphs (1) and (2) of
this Section B. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, (ii) if such a quorum is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion or (iii) by the stockholders.
(5) Expenses (including attorneys' fees) incurred by a director or officer
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation pursuant to this Section B. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(6) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section B shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested
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<PAGE>
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
(7) For purposes of this Section B, any reference to the "Corporation"
shall include, in addition to the resulting or surviving corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section B with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
(8) For purposes of this Section B, any reference to "other enterprise"
shall include employee benefit plans; any reference to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
any reference to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Section
B.
(9) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section B shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
C. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of Section 145 of the General
Corporation Law of the State of Delaware.
-4-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, makes this Certificate, hereby declaring and certifying that the facts
herein stated are true, and accordingly has hereunto set his hand and seal this
17th day of November, 1993.
/s/ Gary J. Kocher
------------------------------------
Gary J. Kocher
-5-
EXHIBIT 3.10
BY-LAWS
of
MICHAEL JORDAN GOLF COMPANY, INC.
--------------------------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE -- The registered office of Michael Jordan
Golf Company, Inc. (the "Corporation") shall be established and maintained
at the office of The Corporation Trust Company at The Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle,
State of Delaware, and said Corporation Trust Company shall be the registered
agent of the corporation in charge thereof.
SECTION 2. OTHER OFFICES -- The Corporation may have other offices,
either within or without the State of Delaware, at such place or places as
the Board of Directors may from time to time select or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders for the
election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors,
by resolution, shall determine and as set forth in the notice of the meeting.
If the Board of Directors fails so to determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the Corporation on the first Tuesday in April. If the date of the
annual meeting shall fall upon a legal holiday, the meeting shall be held on
the next succeeding business day. At each annual meeting, the stockholders
entitled to vote shall elect a Board of Directors and they may transact such
other corporate business as shall be stated in the notice of the meeting.
<PAGE>
SECTION 2. SPECIAL MEETINGS -- Special meetings of the stockholders for
any purpose or purposes may be called by the President or the Secretary, or by
resolution of the Board of Directors.
SECTION 3. VOTING -- Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation of the Corporation and these
By-Laws may vote in person or by proxy, but no proxy shall be voted after three
years from its date unless such proxy provides for a longer period. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, with the address of each, and the number of
shares held by each, shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder who is entitled to be present.
SECTION 4. QUORUM -- Except as otherwise required by law, by the
Certificate of Incorporation of the Corporation or by these By-Laws, the
presence, in person or by proxy, of stockholders holding shares constituting
a majority of the voting power of the Corporation shall constitute a quorum
at all meetings of the stockholders. In case a quorum shall not be present
at any meeting, a majority in interest of the stockholders entitled to vote
thereat, present in person or by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until the requisite amount of stock entitled to vote shall be present.
At any such adjourned meeting at which the requisite amount of stock entitled
to vote shall be represented, any business may be transacted that might have
been transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
SECTION 5. NOTICE OF MEETINGS -- Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to
-2-
<PAGE>
each stockholder entitled to vote thereat, at his or her address as it appears
on the records of the Corporation, not less than ten nor more than sixty days
before the date of the meeting. No business other than that stated in the notice
shall be transacted at any meeting without the unanimous consent of all the
stockholders entitled to vote thereat.
SECTION 6. ACTION WITHOUT MEETING -- Unless otherwise provided by the
Certificate of Incorporation of the Corporation, any action required or
permitted to be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM -- The business and affairs of the Corporation
shall be managed under the direction of a Board of Directors which shall
consist of not less than one person. The exact number of directors shall
initially be one and may thereafter be fixed from time to time by the Board
of Directors. Directors shall be elected at the annual meeting of stockholders
and each director shall be elected to serve until his or her successor shall
be elected and shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS -- Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or the Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
SECTION 3. VACANCIES -- If the office of any director becomes vacant, the
remaining directors in the office, though less than a quorum, by a majority
vote, may appoint any qualified person to fill such vacancy, who shall hold
office for the unexpired term and until his or her successor shall be duly
chosen. If the office of any director becomes vacant and
-3-
<PAGE>
there are no remaining directors, the stockholders, by the affirmative vote of
the holders of shares constituting a majority of the voting power of the
Corporation, at a special meeting called for such purpose, may appoint any
qualified person to fill such vacancy.
SECTION 4. REMOVAL -- Except as hereinafter provided, any director or
directors may be removed either for or without cause at any time by the
affirmative vote of the holders of a majority of the voting power entitled
to vote for the election of directors, at an annual meeting or a special
meeting called for the purpose, and the vacancy thus created may be filled,
at such meeting, by the affirmative vote of holders of shares constituting
a majority of the voting power of the Corporation.
SECTION 5. COMMITTEES -- The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board of Directors, designate
one or more committees, each committee to consist of one or more directors
of the Corporation.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
SECTION 6. MEETINGS -- The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the stock-
holders; or the time and place of such meeting may be fixed by consent of
all the Directors.
Regular meetings of the Board of Directors may be held without notice
at such places and times as shall be determined from time to time by
resolution of the Board of Directors.
Special meetings of the Board of Directors may be called by the
President, or by the Secretary on the written request of any director, on
at least one day's notice to each director (except that notice to any
director may be waived in writing by such director) and shall be held at
such place or places as may be determined by the Board of Directors, or as
shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of Incorporation of
the Corporation or these By-Laws, members of
-4-
<PAGE>
the Board of Directors, or any committee designated by the Board of Directors,
may participate in any meeting of the Board of Directors or any committee
thereof by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
SECTION 7. QUORUM -- A majority of the Directors shall constitute a
quorum for the transaction of business. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum is obtained,
and no further notice thereof need be given other than by announcement at the
meeting which shall be so adjourned. The vote of the majority of the
Directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors unless the Certificate of Incorporation of the
Corporation or these By-Laws shall require the vote of a greater number.
SECTION 8. COMPENSATION -- Directors shall not receive any stated salary
for their services as directors or as members of committees, but by
resolution of the Board of Directors a fixed fee and expenses of attendance
may be allowed for attendance at each meeting. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in
any other capacity as an officer, agent or otherwise, and receiving
compensation therefor.
SECTION 9. ACTION WITHOUT MEETING -- Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if a written consent thereto is
signed by all members of the Board of Directors or of such committee, as
the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or such committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS -- The officers of the Corporation shall be a
President, one or more Vice Presidents, a Treasurer and a Secretary, all of
whom shall be elected by the Board of Directors and shall hold office until
their successors are duly elected and qualified. In addition, the Board of
Directors may elect such Assistant Secretaries and Assistant Treasurers as
they may deem proper. The Board of Directors may
-5-
<PAGE>
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 2. PRESIDENT -- The President shall be the Chief Executive
Officer of the Corporation. He or she shall preside at all meetings of the
Board of Directors and shall have and perform such other duties as may be
assigned to him or her by the Board of Directors. He or she shall have the
general powers and duties of supervision and management usually vested in
the office of President of a corporation. The President shall have the power
to execute bonds, mortgages and other contracts on behalf of the Corporation,
and to cause the seal to be affixed to any instrument requiring it, and when
so affixed the seal shall be attested to by the signature of the Secretary
or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 3. VICE PRESIDENTS -- Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him or her by the
Board of Directors.
SECTION 4. TREASURER -- The Treasurer shall be the Chief Financial
Officer of the Corporation. He or she shall have the custody of the Corporate
funds and securities and shall keep full and accurate account of receipts
and disbursements in books belonging to the Corporation. He or she shall
deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board
of Directors. He or she shall disburse the funds of the Corporation as may
be ordered by the Board of Directors or the President, taking proper vouchers
for such disbursements. He or she shall render to the President and Board
of Directors at the regular meetings of the Board of Directors, or whenever
they may request it, an account of all his or her transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board
of Directors, he or she shall give the Corporation a bond for the faithful
discharge of his or her duties in such amount and with such surety as the
Board of Directors shall prescribe.
SECTION 5. SECRETARY -- The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and of the Board of Directors and
all other notices required by law or by these By-Laws, and in case of his
or her absence or refusal or neglect so to do, any such notice may be given
by any person thereunto directed by the President, or by the Board of
Directors, upon whose request the meeting is called as provided in these
By-Laws. He or she shall record all the proceedings
-6-
<PAGE>
of the meetings of the Board of Directors, any committees thereof and the
stockholders of the Corporation in a book to be kept for that purpose, and shall
perform such other duties as may be assigned to him or her by the Board of
Directors or the President. He or she shall have the custody of the seal of the
Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors or the President, and attest to the same.
SECTION 6. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES -- Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall
have such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board of Directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock shall be
issued to each stockholder certifying the number of shares owned by such
stockholder in the Corporation. Certificates of stock of the Corporation shall
be of such form and device as the Board of Directors may from time to time
determine.
SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be issued
in the place of certificate theretofore issued by the Corporation, alleged
to have been lost or destroyed, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or such
owner's legal representatives, to give the Corporation a bond, in such sum
as they may direct, not exceeding double the value of the stock, to indemnify
the Corporation against any claim that may be made against it on account of
the alleged loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES -- The shares of stock of the Corporation
shall be transferable only upon its books by the holders thereof in person
or by their duly authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the Corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued.
A record shall be made of each transfer and whenever a transfer shall be made
for
-7-
<PAGE>
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE -- In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and
which record date: (1) in the case of determination of stockholders entitled
to vote at any meeting of stockholders or adjournment thereof, shall, unless
otherwise required by law, not be more than sixty nor less than ten days
before the date of such meeting; (2) in the case of determination of stock-
holders entitled to express consent to corporate action in writing without a
meeting, shall not be more than ten days from the date upon which the
resolution fixing the record date is adopted by the Board of Directors; and
(3) in the case of any other action, shall not be more than sixty days prior
to such other action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held; (2)
the record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting when no prior action of the
Board of Directors is required by law, shall be the first day on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in accordance with applicable law, or,
if prior action by the Board of Directors is required by law, shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action; and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 5. DIVIDENDS -- Subject to the provisions of the Certificate of
Incorporation of the Corporation, the Board
-8-
<PAGE>
of Directors may, out of funds legally available therefor at any regular or
special meeting, declare dividends upon stock of the Corporation as and when
they deem appropriate. Before declaring any dividend there may be set apart out
of any funds of the Corporation available for dividends, such sum or sums as the
Board of Directors from time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the Board of Directors shall deem conducive to the
interests of the Corporation.
SECTION 6. SEAL -- The corporate seal of the Corporation shall be in
such form as shall be determined by resolution of the Board of Directors.
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise imprinted upon the subject document or
paper.
SECTION 7. FISCAL YEAR -- The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS -- All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, or agent or agents,
of the Corporation, and in such manner as shall be determined from time to
time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice is
required to be given under these By-Laws, personal notice is not required
unless expressly so stated, and any notice so required shall be deemed to
be sufficient if given by depositing the same in the United States mail,
postage prepaid, addressed to the person entitled thereto at his or her
address as it appears on the records of the Corporation, and such notice
shall be deemed to have been given on the day of such mailing. Stockholders
not entitled to vote shall not be entitled to receive notice of any meetings
except as otherwise provided by law. Whenever any notice is required to be
given under the provisions of any law, or under the provisions of the
Certificate of Incorporation of the Corporation or of these By-Laws, a
waiver thereof, in writing and signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be
deemed equivalent to such required notice.
-9-
<PAGE>
ARTICLE VI
AMENDMENTS
These By-Laws may be altered, amended or repealed at any annual meeting
of the stockholders (or at any special meeting thereof if notice of such
proposed alteration, amendment or repeal to be considered is contained in
the notice of such special meeting) by the affirmative vote of the holders
of shares constituting a majority of the voting power of the Corporation.
Except as otherwise provided in the Certificate of Incorporation of the
Corporation, the Board of Directors may by majority vote of those present
at any meeting at which a quorum is present alter, amend or repeal these
By-Laws, or enact such other By-Laws as in their judgment may be advisable
for the regulation and conduct of the affairs of the Corporation.
-10-
File Number 5872-907-8
96161517
o DEPT-01 RECORDING $29.00
o T#0014 TRAN 2504 03/01/96 11:15:00
o #7269 # JW *-96-16151
o COOK COUNTY RECORDED
State of Illinois
Office of
The Secretary of State
Whereas,
ARTICLES OF INCORPORATION OF
MICHAEL JORDAN GOLF - WATER TOWER, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE
OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF
ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attach hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the Great
Seal of the State of Illinois, at the City of Springfield, this 22ND day of
FEBRUARY A.D. 1996 and of the Independence of the United States the two
hundred and 20TH.
[SEAL]
SEAL OF THE STATE OF ILLINOIS /s/ GEORGE H. RYAN
AUG. 26TH 1818
Secretary of State
C-212.2
<PAGE>
<TABLE>
<CAPTION>
Form BCA-2.10 ARTICLES OF INCORPORATION
- -----------------------------------------------------------------------------------------------------------------------------------
(Rev. Jan. 1995) This space for use by Secretary State
George H. Ryan FILED SUBMIT IN DUPLICATE!
Secretary of State FEB 22 1996
Department of Business Services --------------------------------------
Springfield, IL 62756 GEORGE H. RYAN This space for use by
- --------------------------------- SECRETARY OF STATE
Payment must be made by certi- Date 2-22-96
fied check, cashier's check, Ill- Franchise Tax $ 25
inois attorney's check, Illinois Filing Fee $ 75
C.P.A.'s check or money order, ------
payable to "Secretary of State". Approved 100 -- /s/JM
===================================================================================================================================
<S> <C>
1. CORPORATE NAME: Michael Jordan Golf - Water Tower, Inc.
--------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
(The corporate name must contain the word "corporation", "company," "incorporated," "limited" or an abbreviation thereof.)
===================================================================================================================================
2. Initial Registered Agent: C T CORPORATION SYSTEM
----------------------------------------------------------------------------------------------------
First Name Middle Last Name
Initial Registered Office: c/o C T CORPORATION SYSTEM, 208 S. La Salle Street
---------------------------------------------------------------------------------------------------
Number Street Suite #
Chicago 60604 Cook
---------------------------------------------------------------------------------------------------
City Zip Code County
===================================================================================================================================
3. Purpose or purposes for which the corporation is organized:
(If not sufficient space to cover this point, add one or more sheets of this size.)
To engage in the transaction of any and all lawful business for which Corporations may be incorporated under the Illinois
Business Corporation Act.
===================================================================================================================================
4. Paragraph 1: Authorized Shares, Issued Shares and Consideration Received:
Par Value Number of Shares Number of Shares Consideration to be
Class per Share Authorized Proposed to be Issued Received Therefor
------------------------------------------------------------------------------------------------------------------------------
Common $ .01 1000 100 $ 10.00
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 10.00
Paragraph 2: The preferences, qualifications, limitations, restrictions and special or relative rights in respect of the
shares of each class are: See attached
(If not sufficient space to cover this point, add one or more sheets of this size.)
box 170 EXPEDITED
FEB 22 1996
SECRETARY OF STATE
(over)
</TABLE>
<PAGE>
5. OPTIONAL:
(a) Number of directors constituting the initial board of directors of the
corporation:
(b) Names and addresses of the persons who are to serve as directors until
the first annual meeting of shareholders or until their successors are
elected and qualify:
Name Residential Address City, State, Zip
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
================================================================================
6. OPTIONAL:
(a) It is estimated that the value of all property to
be owned by the corporation for the following year
wherever located will be: $
--------------
(b) It is estimated that the value of the property to
be located within the State of Illinois during the
following year will be: $
--------------
(c) It is estimated that the gross amount of business
that will be transacted by the corporation during
the following year will be: $
--------------
(d) It is estimated that the gross amount of business
that will be transacted from places of business in
the State of Illinois during the following year
will be: $
--------------
================================================================================
7. OPTIONAL: OTHER PROVISIONS
Attach a separate sheet of this size for any other provision to be included
in the Articles of Incorporation, e.g., authorizing preemptive rights,
denying cumulative voting, regulating internal affairs, voting majority
requirements, fixing a duration other than perpetual, etc. See Rider.
================================================================================
8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S)
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated February 21, 1996.
Signature and Name Address
1. /s/ CAROL C. METCALFE 1. One First National Plaza
------------------------------------ ---------------------------------
Signature Street
Carol C. Metcalfe Chicago IL 60603
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
2. 2.
------------------------------------ ---------------------------------
Signature Street
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
3.
------------------------------------ ---------------------------------
Signature Street
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
(Signatures must be in BLACK INK on original document. Carbon copy, photocopy or
rubber stamp signatures may only be used on conformed copies.)
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
president or vice president and verified by him, and attested by its secretary
or assistant secretary.
================================================================================
FEE SCHEDULE
o The initial franchise tax is assessed at the rate of 15/100 of 1 percent
($1.50 per $1,000) on the paid-in capital represented in this state, with a
minimum of $25.
o The filing fee is $75.
o The minimum total due (franchise tax + filing fee) is $100.
(Applies when the Consideration to be Received as set forth in Item 4 does
not exceed $16,667)
o The Department of Business Services in Springfield will provide assistance
in calculating the total fees if necessary
Illinois Secretary of State Springfield, IL 62756
Department of Business Services Telephone (217) 782-9522 or 782-9523
C-162.18
<PAGE>
RIDER TO ARTICLES OF INCORPORATION
OF
MICHAEL JORDAN GOLF - WATER TOWER, INC.
7. OTHER PROVISIONS
Paragraph 1: No shareholder of the Corporation shall have cumulative voting
rights with respect to any matter upon which shareholders are entitled to vote.
Paragraph 2: A director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) under Section 8.65 of the Business Corporation
Act of the State of Illinois, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Business Corporation Act
of the State of Illinois is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Business Corporation Act of the State of Illinois, as so
amended. Any repeal or modification of this Paragraph 2 by the shareholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
Paragraph 3: Each person who is or was or had agreed to become a director
or officer of the Corporation, and each person who is or was serving or who had
agreed to serve at the request of the Board of Directors or an officer of the
Corporation as an employee or agent of the Corporation or as a director,
officer, employee, or agent, trustee or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be indemnified
<PAGE>
by the Corporation to the fullest extent permitted by the Business Corporation
Act of the State of Illinois or any other applicable laws as presently or
hereafter in effect. Without limiting the generality of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this Paragraph 3.
Any repeal or modification of this Paragraph 3 by the shareholders of the
Corporation shall not adversely affect any right or protection existing
hereunder immediately prior to such repeal or modification.
-2-
Exhibit A
BY-LAWS
OF
MICHAEL JORDAN GOLF - WATER TOWER, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the first Thursday in April each year, beginning with the year 1996, at
the hour of 10:00 A.M., for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of directors shall not
be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as may be convenient.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the president, by the board of directors or by the holders of not less
than one-fifth of all the outstanding shares of the Corporation.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all shareholders may designate any
place, either within or without the State of Illinois, as the place for the
holding of such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the registered office of the
Corporation in the State of Illinois.
Section 4. Notice of Meetings. Written or printed notice stating the place,
day and hour of the meeting, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten nor more than forty days before the date of the meeting, or in the case of a
merger or consolidation, not less than twenty nor more than forty days before
the meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
<PAGE>
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors of the Corporation may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than sixty days and, for a meeting of shareholders, not
less than ten days, or in the case of a merger or consolidation, not less than
twenty days, immediately preceding such meeting. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
Section 6. Voting Lists. The officer or agent having charge of the transfer
books for shares of the Corporation shall make, at least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of and the number
of shares held by each shareholder, which list, for a period of ten days prior
to such meeting, shall be kept on file at the registered office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof kept in the State of Illinois, shall be
prima facie evidence as to who are the shareholders entitled to examine such
list or share ledger or transfer book or to vote at any meeting of shareholders.
Section 7. Quorum. Unless otherwise provided in the articles of
incorporation, a majority of the outstanding shares of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders; provided, that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so
-2-
<PAGE>
represented may adjourn the meeting from time to time without further notice. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by the Illinois Business
Corporation Act (the "BCA") or the articles of incorporation.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. Voting of Shares. Unless otherwise provided in the articles of
incorporation, each outstanding share, regardless of class, shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or a person
under legal disability may be voted by his administrator, executor, court
appointed guardian or conservator, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor, court
appointed guardian or conservator. Shares standing in the name of a trustee may
be voted by him, either in person or by proxy.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. No Cumulative Voting. As provided in the articles of
incorporation, no shareholder shall have cumulative voting rights with respect
to any matter upon which shareholders are entitled to vote.
-3-
<PAGE>
Section 12. Inspectors. At any meeting of shareholders, the chairman of the
meeting may, or upon the request of any shareholder shall, appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented
at the meeting based upon their determination of the validity and effect of
proxies, count all votes and report the results, and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of the inspectors if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 13. Informal Action by Shareholders. Any action required by the BCA
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by (i)
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voting, provided that
at least five days' prior notice of the proposed action is given in writing to
all of the shareholders entitled to vote with respect to the subject matter
thereof, or (ii) all of the shareholders entitled to vote with respect to the
subject matter thereof.
Section 14. Voting by Ballot. Voting on any question or in any election may
be viva voce unless the presiding officer shall order or any shareholder shall
demand that voting be by ballot.
ARTICLE II
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its board of directors.
Section 2. Number, Tenure and Qualifications. The number of directors of
the Corporation shall be no less than one
-4-
<PAGE>
and no more than 12 as shall be determined from time to time by the board of
directors. Each director shall hold office until the next succeeding annual
meeting of shareholders or until his successor shall have been elected and
qualified. Directors need not be residents of Illinois or shareholders of the
Corporation.
Section 3. Resignations. Any director may resign at any time by giving
written notice to the board of directors, the president or the secretary of the
Corporation. A resignation need not be accepted in order to be effective.
Section 4. Vacancies. Any vacancy occurring in the board of directors, and
any directorship to be filled by reason of an increase in the number of
directors, may be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose; provided, however, that any
vacancy in the board of directors arising between meetings of shareholders by
reason of an increase in the number of directors or otherwise may be filled by
the vote of a majority of the directors then in office. Any director so selected
shall serve until the next annual meeting of shareholders.
Section 5. Removal. Any director may be removed, with or without cause, at
any meeting of shareholders (provided the notice for such meeting states that a
purpose of the meeting is to vote upon the removal of one or more directors
named in the notice), by the affirmative vote of the holders of a majority of
the outstanding shares then entitled to vote at an election of directors, and
the vacancy in the board of directors caused by such removal may be filled by
the shareholders at such meeting.
Section 6. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
State of Illinois, for the holding of additional regular meetings without other
notice than such resolution.
Section 7. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the president or any two directors. The person
or persons authorized to call special meetings of the board of directors may fix
any place, either within or without the State of Illinois, as the place for
holding any special meeting of the board of directors called by them.
Section 8. Notice. Notice of any special meeting shall be given at least
two days previous thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram, telex, graphic scanning
or
-5-
<PAGE>
other communication system. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, telex, graphic scanning or
other communication system, such notice shall be deemed to be delivered when the
notice is delivered to the telegraph, telex, graphic scanning or other
communication system company. Any director may waive notice of any meeting. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 9. Quorum. Unless otherwise provided in the articles of
incorporation, a majority of the number of directors fixed by these by-laws
shall constitute a quorum for the transaction of business at any meeting of the
board of directors, provided, that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 10. Meetings by Conference Telephone. Members of the board of
directors may participate in and act at any meeting of the board through the use
of a conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting by means of such equipment shall constitute attendance and presence in
person at such meeting.
Section 11. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 12. Informal Action by Directors. Any action required by the BCA to
be taken at a meeting of the board of directors, or any other action which may
be taken at a meeting of the board of directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors or all the members of such
committee, as the case may be, entitled to vote with respect to the subject
matter thereof.
Section 13. Executive Committee. The board of directors may, at its
discretion, by resolution passed by a majority of the entire board of directors,
designate an Executive Committee consisting of such number of directors as the
board of directors shall determine. The Executive Committee shall have
-6-
<PAGE>
and may exercise all of the powers and authority of the board of directors in
the management of the business and affairs of the corporation with respect to
any matter which may require action prior to, or which in the opinion of the
Executive Committee may be inconvenient, inappropriate or undesirable to be
postponed until, the next meeting of the board of directors; provided, however,
that the Executive Committee shall not have the power or authority of the board
of directors in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the shareholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the shareholders a dissolution of the
Corporation or a revocation of such a dissolution, amending these by-laws,
declaring a dividend, authorizing the issuance of capital stock of the
Corporation or adopting a certificate of ownership and merger. Any member of the
board of directors may request the chairman of the Executive Committee to call a
meeting of the Executive Committee with respect to a specified subject.
Section 14. Other Committees. The board of directors, by resolution adopted
by a majority of the directors then in office, may create one or more other
committees consisting of one or more directors, which committees, to the extent
provided in such resolution and Section 8.40(c) of the BCA, shall have and may
exercise such other lawfully delegable powers and duties of the board of as
shall be conferred or authorized by such resolution. The board of directors
shall have the power to change at any time the members of any such committee, to
fill vacancies and to dissolve any such committee.
Section 15. Compensation. The board of directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise. By resolution of the board of directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
Section 16. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
-7-
<PAGE>
ARTICLE III
OFFICERS
Section 1. Number. The officers of the Corporation shall be a president, a
treasurer, and a secretary, and such vice presidents, assistant treasurers,
assistant secretaries or other officers as may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election or appointment of an
officer or agent shall not of itself create contract rights. Any officer may
resign at any time by giving notice to the board of directors or to the
president or the secretary. A resignation of an officer need not be accepted in
order to be effective.
Section 3. Removal. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. President. The president shall be the Corporation's general
manager and chief executive officer and shall, subject to the control of the
board of directors, have general supervision, direction and control of the
business, affairs and officers of the Corporation. Unless otherwise determined
by the board of directors, he shall preside as chairman at all meetings of
shareholders, the board of directors and any committees of which he is a member.
He shall have the
-8-
<PAGE>
general powers and duties of management usually vested in the office of
president of a corporation; shall have any other powers and duties that are
prescribed by the board of directors or the by-laws; and shall be primarily
responsible for carrying out all orders and resolutions of the board of
directors.
Section 6. The Vice Presidents. In the absence of the president or in the
event of his inability or refusal to act, the vice president (if elected by the
board of directors or, in the event there be more than one vice president, the
vice presidents in the order designated or, in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. Any vice president shall perform such other
duties as from time to time may be assigned to him by the president, the board
of directors or these by-laws.
Section 7. The Treasurer. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; (b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be approved by the board of directors; and (c) in general
perform all the duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him by the president, the board of
directors or these by-laws.
Section 8. The Secretary. The secretary shall: (a) keep the minutes of the
meetings of the shareholders, the board of directors and committees of
directors, in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these by-laws or as
required by law; (c) be custodian of the corporate records and of the seal, if
any, of the Corporation and, if the Corporation adopts a corporate seal, see
that such seal is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these by-laws; (d) keep a register of the post-office address of each
shareholder which shall be furnished to the secretary by such shareholder; (e)
have general charge of the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president, the board
of directors or these by-laws.
-9-
<PAGE>
Section 9. Assistant Treasurers and Assistant Secretaries. The assistant
treasurers shall, if required by the board of directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
board of directors shall determine. The assistant treasurers and assistant
secretaries, in general, shall perform such duties as shall be assigned to them
by the treasurer or the secretary, respectively, or by the president, the board
of directors or these by-laws.
Section 10. Salaries. The salaries of the officers shall be fixed from time
to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE IV
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the president or a vice
president and by the secretary or an assistant secretary. All certificates for
shares shall be consecutively numbered or otherwise identified. The name of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the Corporation as the board of directors may
prescribe.
Section 2. Transfers of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
-10-
<PAGE>
ARTICLE V
VOTING OF SECURITIES
The president shall have full authority, in the name and on behalf of the
Corporation, to attend, act and vote at any meeting of security holders of any
corporation in which the Corporation may hold securities, and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the holder thereof, the
Corporation might possess and exercise if personally present, and may exercise
such power and authority through the execution of proxies or may delegate such
power and authority to any other officer, agent or employee of this Corporation.
ARTICLE VI
INDEMNIFICATION
Section 1. Right to Indemnification. (a) The Corporation shall indemnify
and hold harmless, to the fullest extent permitted by law as in effect on the
date of adoption of these by-laws or as it may thereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person. The
Corporation shall not be required to indemnify a person in connection with a
proceeding initiated by such person, including a counterclaim or crossclaim,
unless the proceeding was authorized by the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to "other
enterprise" shall include all plans, programs, policies, agreements, contracts
and payroll practices and related trusts for the benefit of or relating to
employees of the Corporation and its related entities ("employee benefit
plans"); (ii) any reference to "fines" shall include any excise taxes assessed
against a person with respect to any employee benefit plan; (iii) any reference
to "serving at the request of the Corporation" shall include any service as a
director or
-11-
<PAGE>
officer of the Corporation or trustee or administrator of any employee benefit
plan which imposes duties on, or involves services by, such director or officer
with respect to an employee benefit plan, its participants, beneficiaries,
fiduciaries, administrators and service providers; (iv) any reference to serving
at the request of the Corporation as a director or officer of a partnership or
trust shall include service as a partner or trustee; and (v) a person who acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" for purposes of this Article VI.
Section 2. Prepayment of Expenses. The Corporation may pay or reimburse the
reasonable expenses incurred in defending any proceeding in advance of its final
disposition if the Corporation has received in advance an undertaking by the
person receiving such payment or reimbursement to repay all amounts advanced if
it should be ultimately determined that he or she is not entitled to be
indemnified under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
Section 3. Claims. If a claim for indemnification or payment of expenses
under this Article VI is not paid in full within sixty days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification or payment of expenses under
applicable law.
Section 4. Non-Exclusivity of Rights. The rights conferred on any person by
this Article VI shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the articles of
incorporation, these By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director or
officer of another corporation, partnership, joint venture or other enterprise
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture or other enterprise.
-12-
<PAGE>
Section 6. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article VI shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE VII
DIVIDENDS
The board of directors may from time to time declare, and the Corporation
may pay, in the manner and upon the terms and conditions provided by law and the
articles of incorporation, dividends on its outstanding shares in cash, property
or its own shares or dividends on its treasury shares in its own shares.
ARTICLE VIII
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 2. Corporate Seal. The board of directors may provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words, "Corporate Seal, Illinois."
Section 3. Waiver of Notice. Whenever any notice whatever is required to be
given under the provisions of these by-laws, the articles of incorporation or
the BCA, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section 4. Amendments. Unless otherwise provided in the articles of
incorporation, these by-laws may be altered, amended or repealed and new
by-laws, not inconsistent with the Corporation's articles of incorporation or
the laws of the State of Illinois (except in the case of emergency by-laws
adopted
-13-
<PAGE>
under the BCA), may be adopted at any properly constituted meeting of the board
of directors by a majority vote of the directors present at the meeting;
provided that no by-law adopted by the shareholders may be altered, amended or
repealed by the board of directors if these by-laws so provide.
-14-
File Number 5903-043-4
96692985
o DEPT-01 RECORDING $27.00
o T#0011 TRAN 3182 09/11/96 09:50:00
o #7002 # ER *-96-692985
o COOK COUNTY RECORDER
State of Illinois
Office of
The Secretary of State
Whereas,
ARTICLES OF INCORPORATION OF
MJG-O'HARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE
OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF
ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois,
by virtue of the powers vested in me by law, do hereby issue this certificate
and attach hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the Great
Seal of the State of Illinois, at the City of Springfield, this 6TH day of
SEPTEMBER A.D. 1996 and of the Independence of the United States the two
hundred and 21ST
[SEAL]
SEAL OF THE STATE OF ILLINOIS /s/ GEORGE H. RYAN
AUG. 26TH 1818
Secretary of State
C-212.2
<PAGE>
<TABLE>
<CAPTION>
Form BCA-2.10 ARTICLES OF INCORPORATION
- -----------------------------------------------------------------------------------------------------------------------------------
(Rev. Jan. 1995) This space for use by Secretary State
George H. Ryan FILED SUBMIT IN DUPLICATE!
Secretary of State SEP 06 1996 --------------------------------------
Department of Business Services This space for use by
Springfield, IL 62756 GEORGE H. RYAN Secretary of State
- --------------------------------- SECRETARY OF STATE
Payment must be made by certi- Date 9-6-96
fied check, cashier's check, Ill- Franchise Tax $ 25
nois attorney's check, Illinois Filing Fee $ 75
C.P.A.'s check or money order, ------
payable to "Secretary of State. Approved 100 --
===================================================================================================================================
<S> <C>
1. CORPORATE NAME: MJG-O'Hare, Inc.
--------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
(The corporate name must contain the word "corporation", "company," "incorporated," "limited" or an abbreviation thereof.)
===================================================================================================================================
2. Initial Registered Agent: CT CORPORATION SYSTEM
----------------------------------------------------------------------------------------------------
First Name Middle Last Name
Initial Registered Office: 208 S. La Salle Street
---------------------------------------------------------------------------------------------------
Number Street Suite #
Chicago IL 60604 Cook
---------------------------------------------------------------------------------------------------
City Zip Code County
===================================================================================================================================
3. Purpose or purposes for which the corporation is organized:
(If not sufficient space to cover this point, add one or more sheets of this size.)
To engage in the transaction of any and all lawful business for which corporations may be incorporated under the Illinois
Business Corporation Act.
===================================================================================================================================
4. Paragraph 1: Authorized Shares, Issued Shares and Consideration Received:
Par Value Number of Shares Number of Shares Consideration to be
Class per Share Authorized Proposed to be Issued Received Therefor
------------------------------------------------------------------------------------------------------------------------------
Common $ .01 1000 100 $ 10.00
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 10.00
Paragraph 2: The preferences, qualifications, limitations, restrictions and special or relative rights in respect of the shares
of each class are:
(If not sufficient space to cover this point, add one or more sheets of this size.)
EXPEDITED
SEP 6 1996
SECRETARY OF STATE
(over)
</TABLE>
<PAGE>
5. OPTIONAL:
(a) Number of directors constituting the initial board of directors of the
corporation: 3.
(b) Names and addresses of the persons who are to serve as directors until
the first annual meeting of shareholders or until their successors are
elected and qualify:
Name Residential Address City, State, ZIP
---------------------------------------------------------------------------
Kenneth Waters 144 Green Bay Road Winnetka, IL 60093
---------------------------------------------------------------------------
Peter Bynoe 203 N. LaSalle St., Suite 1500 Chicago, IL 60601
---------------------------------------------------------------------------
Charles Reeves 144 Green Bay Road Winnetka, IL 60093
---------------------------------------------------------------------------
================================================================================
6. OPTIONAL:
(a) It is estimated that the value of all property to
be owned by the corporation for the following year
wherever located will be: $
--------------
(b) It is estimated that the value of the property to
be located within the State of Illinois during the
following year will be: $
--------------
(c) It is estimated that the gross amount of business
that will be transacted by the corporation during
the following year will be: $
--------------
(d) It is estimated that the gross amount of business
that will be transacted from places of business in
the State of Illinois during the following year
will be: $
--------------
================================================================================
7. OPTIONAL: OTHER PROVISIONS
Attach a separate sheet of this size for any other provision to be included
in the Articles of Incorporation, e.g., authorizing preemptive rights,
denying cumulative voting, regulating internal affairs, voting majority
requirements, fixing a duration other than perpetual, etc.
================================================================================
8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S)
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated September 5, 1996.
Signature and Name Address
1. /s/ JULIE A. COLLINS 1. One First National Plaza
------------------------------------ ---------------------------------
Signature Street
Julie A. Collins Chicago IL 60603
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
2. 2.
------------------------------------ ---------------------------------
Signature Street
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
3.
------------------------------------ ---------------------------------
Signature Street
------------------------------------ ---------------------------------
(Type or Print Name) City/Town State Zip Code
(Signatures must be in BLACK INK on original document. Carbon copy, photocopy or
rubber stamp signatures may only be used on conformed copies.)
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
president or vice president and verified by him, and attested by its secretary
or assistant secretary.
================================================================================
FEE SCHEDULE
o The initial franchise tax is assessed at the rate of 15/100 of 1 percent
($1.50 per $1,000) on the paid-in capital represented in this state, with a
minimum of $25.
o The filing fee is $75.
o The minimum total due (franchise tax + filing fee) is $100. (Applies when
the Consideration to be Received as set forth in Item 4 does not exceed
$16,667)
o The Department of Business Services in Springfield will provide assistance
in calculating the total fees if necessary.
Illinois Secretary of State Springfield, IL 62756
Department of Business Services Telephone (217) 782-9522 or 782-9523
C-162.18
<PAGE>
RIDER TO ARTICLES OF INCORPORATION
OF
MJG-O'Hare, Inc.
7. OTHER PROVISIONS
Paragraph 1: No shareholder of the Corporation shall have cumulative voting
rights with respect to any matter upon which shareholders are entitled to vote.
Paragraph 2: A director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) under Section 8.65 of the Business Corporation
Act of the State of Illinois, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Business Corporation Act
of the State of Illinois is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Business Corporation Act of the State of Illinois, as so
amended. Any repeal or modification of this Paragraph 2 by the shareholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
Paragraph 3: Each person who is or was or had agreed to become a director
or officer of the Corporation, and each person who is or was serving or who had
agreed to serve at the request of the Board of Directors or an officer of the
Corporation as an employee or agent of the Corporation or as a director,
officer, employee, or agent, trustee or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be indemnified by the
Corporation to the fullest extent permitted by the Business Corporation Act of
the State of Illinois or any other applicable laws as presently or hereafter in
effect. Without limiting the generality of the foregoing, the Corporation may
enter into one or more agreements with any person which provide for
indemnification greater or different than that provided in this Paragraph 3. Any
repeal or modification of this Paragraph 3 by the shareholders of the
Corporation shall not adversely affect any right or protection existing
hereunder immediately prior to such repeal or modification.
BY-LAWS
OF
MJG - O'HARE, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the first Thursday in April each year, beginning with the year 1996, at
the hour of 10:00 A.M., for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of directors shall not
be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as may be convenient.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the president, by the board of directors or by the holders of not less
than one-fifth of all the outstanding shares of the Corporation.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all shareholders may designate any
place, either within or without the State of Illinois, as the place for the
holding of such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the registered office of the
Corporation in the State of Illinois.
Section 4. Notice of Meetings. Written or printed notice stating the place,
day and hour of the meeting, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten nor more than forty days before the date of the meeting, or in the case of a
merger or consolidation, not less than twenty nor more than forty days before
the meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
<PAGE>
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors of the Corporation may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than sixty days and, for a meeting of shareholders, not
less than ten days, or in the case of a merger or consolidation, not less than
twenty days, immediately preceding such meeting. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
Section 6. Voting Lists. The officer or agent having charge of the transfer
books for shares of the Corporation shall make, at least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of and the number
of shares held by each shareholder, which list, for a period of ten days prior
to such meeting, shall be kept on file at the registered office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof kept in the State of Illinois, shall be
prima facie evidence as to who are the shareholders entitled to examine such
list or share ledger or transfer book or to vote at any meeting of shareholders.
Section 7. Quorum. Unless otherwise provided in the articles of
incorporation, a majority of the outstanding shares of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders; provided, that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so
-2-
<PAGE>
represented may adjourn the meeting from time to time without further notice. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by the Illinois Business
Corporation Act (the "BCA") or the articles of incorporation.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. Voting of Shares. Unless otherwise provided in the articles of
incorporation, each outstanding share, regardless of class, shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or a person
under legal disability may be voted by his administrator, executor, court
appointed guardian or conservator, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor, court
appointed guardian or conservator. Shares standing in the name of a trustee may
be voted by him, either in person or by proxy.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. No Cumulative Voting. As provided in the articles of
incorporation, no shareholder shall have cumulative voting rights with respect
to any matter upon which shareholders are entitled to vote.
-3-
<PAGE>
Section 12. Inspectors. At any meeting of shareholders, the chairman of the
meeting may, or upon the request of any shareholder shall, appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented
at the meeting based upon their determination of the validity and effect of
proxies, count all votes and report the results, and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of the inspectors if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 13. Informal Action by Shareholders. Any action required by the BCA
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by (i)
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voting, provided that
at least five days' prior notice of the proposed action is given in writing to
all of the shareholders entitled to vote with respect to the subject matter
thereof, or (ii) all of the shareholders entitled to vote with respect to the
subject matter thereof.
Section 14. Voting by Ballot. Voting on any question or in any election may
be viva voce unless the presiding officer shall order or any shareholder shall
demand that voting be by ballot.
ARTICLE II
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its board of directors.
Section 2. Number, Tenure and Qualifications. The number of directors of
the Corporation shall be no less than one
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and no more than 12 as shall be determined from time to time by the board of
directors. Each director shall hold office until the next succeeding annual
meeting of shareholders or until his successor shall have been elected and
qualified. Directors need not be residents of Illinois or shareholders of the
Corporation.
Section 3. Resignations. Any director may resign at any time by giving
written notice to the board of directors, the president or the secretary of the
Corporation. A resignation need not be accepted in order to be effective.
Section 4. Vacancies. Any vacancy occurring in the board of directors, and
any directorship to be filled by reason of an increase in the number of
directors, may be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose; provided, however, that any
vacancy in the board of directors arising between meetings of shareholders by
reason of an increase in the number of directors or otherwise may be filled by
the vote of a majority of the directors then in office. Any director so selected
shall serve until the next annual meeting of shareholders.
Section 5. Removal. Any director may be removed, with or without cause, at
any meeting of shareholders (provided the notice for such meeting states that a
purpose of the meeting is to vote upon the removal of one or more directors
named in the notice), by the affirmative vote of the holders of a majority of
the outstanding shares then entitled to vote at an election of directors, and
the vacancy in the board of directors caused by such removal may be filled by
the shareholders at such meeting.
Section 6. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
State of Illinois, for the holding of additional regular meetings without other
notice than such resolution.
Section 7. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the president or any two directors. The person
or persons authorized to call special meetings of the board of directors may fix
any place, either within or without the State of Illinois, as the place for
holding any special meeting of the board of directors called by them.
Section 8. Notice. Notice of any special meeting shall be given at least
two days previous thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram, telex, graphic scanning
or
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other communication system. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, telex, graphic scanning or
other communication system, such notice shall be deemed to be delivered when the
notice is delivered to the telegraph, telex, graphic scanning or other
communication system company. Any director may waive notice of any meeting. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 9. Quorum. Unless otherwise provided in the articles of
incorporation, a majority of the number of directors fixed by these by-laws
shall constitute a quorum for the transaction of business at any meeting of the
board of directors, provided, that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 10. Meetings by Conference Telephone. Members of the board of
directors may participate in and act at any meeting of the board through the use
of a conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting by means of such equipment shall constitute attendance and presence in
person at such meeting.
Section 11. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 12. Informal Action by Directors. Any action required by the BCA to
be taken at a meeting of the board of directors, or any other action which may
be taken at a meeting of the board of directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors or all the members of such
committee, as the case may be, entitled to vote with respect to the subject
matter thereof.
Section 13. Executive Committee. The board of directors may, at its
discretion, by resolution passed by a majority of the entire board of directors,
designate an Executive Committee consisting of such number of directors as the
board of directors shall determine. The Executive Committee shall have
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and may exercise all of the powers and authority of the board of directors in
the management of the business and affairs of the corporation with respect to
any matter which may require action prior to, or which in the opinion of the
Executive Committee may be inconvenient, inappropriate or undesirable to be
postponed until, the next meeting of the board of directors; provided, however,
that the Executive Committee shall not have the power or authority of the board
of directors in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the shareholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the shareholders a dissolution of the
Corporation or a revocation of such a dissolution, amending these by-laws,
declaring a dividend, authorizing the issuance of capital stock of the
Corporation or adopting a certificate of ownership and merger. Any member of the
board of directors may request the chairman of the Executive Committee to call a
meeting of the Executive Committee with respect to a specified subject.
Section 14. Other Committees. The board of directors, by resolution adopted
by a majority of the directors then in office, may create one or more other
committees consisting of one or more directors, which committees, to the extent
provided in such resolution and Section 8.40(c) of the BCA, shall have and may
exercise such other lawfully delegable powers and duties of the board of as
shall be conferred or authorized by such resolution. The board of directors
shall have the power to change at any time the members of any such committee, to
fill vacancies and to dissolve any such committee.
Section 15. Compensation. The board of directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise. By resolution of the board of directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
Section 16. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
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ARTICLE III
OFFICERS
Section 1. Number. The officers of the Corporation shall be a president, a
treasurer, and a secretary, and such vice presidents, assistant treasurers,
assistant secretaries or other officers as may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election or appointment of an
officer or agent shall not of itself create contract rights. Any officer may
resign at any time by giving notice to the board of directors or to the
president or the secretary. A resignation of an officer need not be accepted in
order to be effective.
Section 3. Removal. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. President. The president shall be the Corporation's general
manager and chief executive officer and shall, subject to the control of the
board of directors, have general supervision, direction and control of the
business, affairs and officers of the Corporation. Unless otherwise determined
by the board of directors, he shall preside as chairman at all meetings of
shareholders, the board of directors and any committees of which he is a member.
He shall have the
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general powers and duties of management usually vested in the office of
president of a corporation; shall have any other powers and duties that are
prescribed by the board of directors or the by-laws; and shall be primarily
responsible for carrying out all orders and resolutions of the board of
directors.
Section 6. The Vice Presidents. In the absence of the president or in the
event of his inability or refusal to act, the vice president (if elected by the
board of directors or, in the event there be more than one vice president, the
vice presidents in the order designated or, in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. Any vice president shall perform such other
duties as from time to time may be assigned to him by the president, the board
of directors or these by-laws.
Section 7. The Treasurer. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; (b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be approved by the board of directors; and (c) in general
perform all the duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him by the president, the board of
directors or these by-laws.
Section 8. The Secretary. The secretary shall: (a) keep the minutes of the
meetings of the shareholders, the board of directors and committees of
directors, in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these by-laws or as
required by law; (c) be custodian of the corporate records and of the seal, if
any, of the Corporation and, if the Corporation adopts a corporate seal, see
that such seal is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these by-laws; (d) keep a register of the post-office address of each
shareholder which shall be furnished to the secretary by such shareholder; (e)
have general charge of the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president, the board
of directors or these by-laws.
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Section 9. Assistant Treasurers and Assistant Secretaries. The assistant
treasurers shall, if required by the board of directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
board of directors shall determine. The assistant treasurers and assistant
secretaries, in general, shall perform such duties as shall be assigned to them
by the treasurer or the secretary, respectively, or by the president, the board
of directors or these by-laws.
Section 10. Salaries. The salaries of the officers shall be fixed from time
to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE IV
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the president or a vice
president and by the secretary or an assistant secretary. All certificates for
shares shall be consecutively numbered or otherwise identified. The name of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the Corporation as the board of directors may
prescribe.
Section 2. Transfers of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
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ARTICLE V
VOTING OF SECURITIES
The president shall have full authority, in the name and on behalf of the
Corporation, to attend, act and vote at any meeting of security holders of any
corporation in which the Corporation may hold securities, and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the holder thereof, the
Corporation might possess and exercise if personally present, and may exercise
such power and authority through the execution of proxies or may delegate such
power and authority to any other officer, agent or employee of this Corporation.
ARTICLE VI
INDEMNIFICATION
Section 1. Right to Indemnification. (a) The Corporation shall indemnify
and hold harmless, to the fullest extent permitted by law as in effect on the
date of adoption of these by-laws or as it may thereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person. The
Corporation shall not be required to indemnify a person in connection with a
proceeding initiated by such person, including a counterclaim or crossclaim,
unless the proceeding was authorized by the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to "other
enterprise" shall include all plans, programs, policies, agreements, contracts
and payroll practices and related trusts for the benefit of or relating to
employees of the Corporation and its related entities ("employee benefit
plans"); (ii) any reference to "fines" shall include any excise taxes assessed
against a person with respect to any employee benefit plan; (iii) any reference
to "serving at the request of the Corporation" shall include any service as a
director or
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officer of the Corporation or trustee or administrator of any employee benefit
plan which imposes duties on, or involves services by, such director or officer
with respect to an employee benefit plan, its participants, beneficiaries,
fiduciaries, administrators and service providers; (iv) any reference to serving
at the request of the Corporation as a director or officer of a partnership or
trust shall include service as a partner or trustee; and (v) a person who acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" for purposes of this Article VI.
Section 2. Prepayment of Expenses. The Corporation may pay or reimburse the
reasonable expenses incurred in defending any proceeding in advance of its final
disposition if the Corporation has received in advance an undertaking by the
person receiving such payment or reimbursement to repay all amounts advanced if
it should be ultimately determined that he or she is not entitled to be
indemnified under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
Section 3. Claims. If a claim for indemnification or payment of expenses
under this Article VI is not paid in full within sixty days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification or payment of expenses under
applicable law.
Section 4. Non-Exclusivity of Rights. The rights conferred on any person by
this Article VI shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the articles of
incorporation, these by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director or
officer of another corporation, partnership, joint venture or other enterprise
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture or other enterprise.
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<PAGE>
Section 6. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article VI shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE VII
DIVIDENDS
The board of directors may from time to time declare, and the Corporation
may pay, in the manner and upon the terms and conditions provided by law and the
articles of incorporation, dividends on its outstanding shares in cash, property
or its own shares or dividends on its treasury shares in its own shares.
ARTICLE VIII
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 2. Corporate Seal. The board of directors may provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words, "Corporate Seal, Illinois."
Section 3. Waiver of Notice. Whenever any notice whatever is required to be
given under the provisions of these by-laws, the articles of incorporation or
the BCA, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section 4. Amendments. Unless otherwise provided in the articles of
incorporation, these by-laws may be altered, amended or repealed and new
by-laws, not inconsistent with the Corporation's articles of incorporation or
the laws of the State of Illinois (except in the case of emergency by-laws
adopted
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under the BCA), may be adopted at any properly constituted meeting of the board
of directors by a majority vote of the directors present at the meeting;
provided that no by-law adopted by the shareholders may be altered, amended or
repealed by the board of directors if these by-laws so provide.
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EXHIBIT 3.15
Commonwealth of Virginia
[seal] State Corporation Commission
I Certify the Following from the Records of the Commission:
the foregoing is a true copy of all documents constituting the charter of
LAKE GROVE CENTERS, INC.,
Nothing more is hereby certified.
Signed and Sealed at Richmond
on this Date: November 17, 1997
[seal] State Corporation Commission
Virginia 1903
/s/ William J. Bridge
--------------------------------------
William J. Bridge, Clerk of the Commission
<PAGE>
ARTICLES OF INCORPORATION
OF
LAKE GROVE CENTER, INC.
The undersigned, desiring to form a stock corporation under the provisions
of Chapter 9 of Title 13.1 of the Code of Virginia of 1950, as amended,
hereby sets forth the following:
A. Corporate Name. The name of the corporation is Lake Grove Centers,
Inc., a Virginia corporation (the ``Corporation'').
B. Purposes and Powers. The purpose for which the Corporation is formed
is to engage in any lawful business. In addition, the Corporation shall have
the same powers as an individual to do all things necessary or convenient to
carry out its business and affairs.
C. Authorized Stock. The aggregate number of shares which the
Corporation shall have authority to issue, and the par value per share,
are as follows:
Class Number Par
and Series of Shares Value
---------- --------- -----
Common 10,000 $1.00
The holders of the Common Stock shall have unlimited voting rights
and be entitled to receive the net assets of the Corporation upon dissolution.
No holders of any class or series of stock shall have the preemptive right
to acquire unissued shares of any class or series of stock of the
Corporation.
D. Registered Office and Registered Agent. The address of the
Corporation's initial registered office is 5511 Staples Mill Road, Richmond,
Virginia 23228. The name of the co. in which the initial registered office
is located is the County of Henrico, Virginia. The name of the initial
registered agent is Edward R. Parker, Esquire, who is a resident of the
Commonwealth of Virginia, a member of the Virginia State Bar, and whose
business office is identical with the registered office of the
Corporation.
E. Directors. The number of directors constituting the initial Board
of Directors is one (1) and set forth below are the name and address of the
person who is to serve as the initial director until the first annual meeting
of the shareholders or until his successor shall be duly elected and qualify:
Douglas J. Stanard
8100 AMF Drive
Mechanicsville, Virginia 23111
The foregoing person who is to serve as the initial director has
heretofore consented to being named as the initial director of the
Corporation.
F. Limitation on Liability. In any proceeding brought in the right of
the Corporation or by or on behalf of shareholders of the Corporation, the
damages assessed against an officer or director arising out of a single
transaction, occurrence, or course of conduct shall not
<PAGE>
exceed one dollar, unless the officer or director engaged in willful
misconduct or a knowing violation of the criminal law or any federal or
state securities law, including without limitation, any claim of unlawful
insider trading or manipulation of the market for any security.
G. Indemnification of Directors, Officers and Others.
1. Indemnification. The Corporation shall indemnify an individual who
is, was or is threatened to be made a party to a proceeding (including a
proceeding by or in the right of the Corporation) because he is or was a
director against liability incurred in the proceeding and against expenses
incurred by him in connection therewith except such liabilities and expenses
incurred because of his willful misconduct or knowing violation of the criminal
law.
2. Advance for Expenses. The Corporation shall pay for or reimburse the
reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(a) the director furnishes the Corporation a written statement of
his good faith belief that he has met the standard of conduct described in
Section 1;
(b) the director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay the advance if it is ultimately
determined that he did not meet the standard of conduct (which undertaking
shall be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment); and
(c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under Article 10
of the Virginia Stock Corporation Act or Section 1 hereof.
3. Determination and Authorization of Indemnification. The Corporation
shall not indemnify a director under Section 1 unless authorized in the
specific case after a determination has been made that indemnification of the
director is permissible in the circumstances because he has met the
standard of conduct set forth in Section 1. The determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(b) if such a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors (in which directors who
are parties may participate in such designation), consisting solely of two
or more directors not at the time parties to the proceeding;
(c) by special legal counsel:
(i) selected by the Board of Directors or its committee in
the manner prescribed in subsection (a) or (b) above;
(ii) if such a quorum of the Board of Directors cannot be
obtained and such a committee cannot be designated, selected by a majority vote
of the full Board of Directors, in which directors who are parties may
participate in such selection; or
<PAGE>
(d) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under
subsection (c) of this Section 3 to select counsel.
If a majority of the directors of the Corporation has changed after the
date of the alleged conduct giving rise to a claim for indemnification, the
determination that indemnification is permissible and the authorization of
indemnification and evaluation as to the reasonableness of expenses in a
specific case shall, at the option of the person claiming indemnification, be
made by special legal counsel agreed upon by the Board of Directors and such
person.
4. Indemnification of Officers, Employees, Agents and Others.
Each officer and employee of the Corporation shall be entitled to
indemnification and advance expenses to the same extent as a director.
The Corporation may, to a lesser extent or to the same extent that
the Corporation is required to provide indemnification and make advances for
expenses to its directors, provide indemnification and make advances and
reimbursements for expenses to its agents, the directors, officers,
employees and agents of its subsidiaries and predecessor entities, and
any person serving any other legal entity in any capacity at the request
of the Corporation, and may contract in advance to do so. The determination
that indemnification under this paragraph is permissible, the authorization
of such indemnification and the evaluation as to the reasonableness of
expenses in a specific case shall be made as authorized from time to time
by general or specific action of the Board of Directors, which action may
be taken before or after a claim for indemnification is made, or as otherwise
provided by law.
5. Insurance. The Corporation may purchase and maintain insurance
on behalf of an individual who is or was a director, officer, employee or agent
of the Corporation, or who, while a director, officer, employee or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against liability asserted against or incurred by
him in that capacity or arising from his status as a director, officer,
employee or agent, whether or not the Corporation would have power to
indemnify him against the same liability under Section 1.
6. Application. Indemnity hereunder shall continue as to a person who
has ceased to have the capacity referred to above and shall inure to the
benefit of the heirs, executors and administrators of such a person.
DATED: November 13, 1997
/s/ Eric C. Perkins
---------------------------------
Eric C. Perkins, Incorporator
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
November 13, 1997
The State Corporation Commission has found the accompanying articles
submitted on behalf of
LAKE GROVE CENTERS, INC.
to comply with the requirements of law, and confirms payment of all
related fees.
Therefore, it is ORDERED that this
CERTIFICATE OF INCORPORATION
be issued and admitted to record with the articles of incorporation in the
Office of the Clerk of the Commission, effective November 13, 1997.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By /s/ T. V. Morrison Jr.
--------------------------
Commissioner
CORPACPT
CIS20460
97-11-13-0145
LAKE GROVE CENTERS, INC.
BYLAWS
**********************
ARTICLE I
OFFICES
1. Principal Office. The principal office of the corporation shall be
in Mechanicsville, Virginia, but the corporation may conduct its business or
open branch offices within or without the Commonwealth as the Board of Directors
deems advisable.
ARTICLE II
SHAREHOLDERS
2. Place of Meeting. Meetings of the shareholders shall be held at the
principal office of the corporation or at such other place, within or without
the Commonwealth of Virginia, as may be designated by the Board of Directors and
set forth in the notice of the meeting.
3. Annual Meeting. Commencing with the year 1998, the annual meeting of
the shareholders of the corporation shall be held on or about the 13th day in
November of each year (and if such date is a legal holiday, on the next business
day) for the purpose of electing a Board of Directors and transacting such other
business as may properly come before the meeting.
4. Special Meetings. Special meetings of the shareholders may be called
by the Board of Directors, the Chairman of the Board of Directors, the
President, the Secretary or, in the case the corporation has thirty-five or
fewer shareholders, if the holders of at least twenty percent (20%) of all votes
entitled to be cast on any issue proposed to be considered at the meeting sign,
date and deliver to the corporation's Secretary one or more written demands for
such a meeting describing the purpose or purposes for which the meeting is to be
held.
5. Action without Meeting. Action required or permitted to be taken by
the Virginia Stock Corporation Act (the "Act") at a shareholders' meeting may be
taken without a meeting and without action by the Board of Directors if the
action is taken by all the shareholders entitled to vote on the action. The
action shall be evidenced by one or more written consents describing the action
taken, signed by all the shareholders entitled to vote on the action and
delivered to the Secretary of the corporation for inclusion in the minutes or
filing with the corporate records. Any action taken by unanimous written consent
shall be effective according to its terms when all consents are in possession of
the corporation. A shareholder may withdraw his consent only by delivering a
written notice of withdrawal to the corporation prior to the time that all
consents are in the possession of the corporation. Action taken under this
Section 5 of these bylaws is effective as of the date specified in the consent
provided the consent states the date of execution by each shareholder. A consent
signed under this Section 5 of these bylaws has the effect of a unanimous vote
of voting shareholders and may be described as such in any document filed with
the Virginia State Corporation Commission under the Act.
If the Act or these bylaws requires notice of proposed action to be
given to nonvoting shareholders, if any, and the action is to be taken by
unanimous consent of the voting shareholders written notice of the proposed
action at least ten (10) days before the action is taken.
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The notice shall contain or be accompanied by the same material that would have
been required to be sent to nonvoting shareholders in a notice of meeting at
which the proposed action would have been submitted to the shareholders for
action.
6. Notice of Meeting. The corporation shall notify shareholders of the
date, time and place of each annual and special shareholders' meeting. Such
notice shall be given no less than ten (10) nor more than sixty (60) days before
the meeting date except that notice of a shareholders' meeting to act on an
amendment of the Articles of Incorporation, a plan of merger or share exchange,
a proposed sale of all or substantially all of the assets of the corporation,
otherwise than in the usual and regular course of business, or the dissolution
of the corporation shall be given not less than twenty-five (25) nor more than
sixty (60) days before the meeting date, which notice shall be accompanied by a
copy of the proposed amendment, plan of merger, share exchange or dissolution
or agreement pursuant to which the proposed sale will be effected. Unless the
Act or the Articles of Incorporation require otherwise, the corporation is
required to give notice only to shareholders entitled to vote at the meeting and
notice of an annual meeting need not state the purpose or purposes for which the
meeting is called. Notice of a special meeting, however, shall state the purpose
or purposes for which the meeting is called.
If an annual or special meeting is adjourned to a different date, time
or place, notice need not be given if the new date, time or place is announced
at the meeting before adjournment. If a new record date for the adjourned
meeting is or shall be fixed under Section 8 of these bylaws, however, notice of
the adjourned meeting shall be given under this Section 6 of these bylaws to
persons who are shareholders as of the new record date.
Notwithstanding the foregoing, no notice of a shareholders' meeting need
be given to a shareholder if (i) an annual report and proxy statements for two
(2) consecutive annual meetings of shareholders or (ii) all, and at least two
(2), checks in payment of dividends or interest on securities during a twelve
(12) month period, have been sent by first-class United States mail, addressed
to the shareholder at his address as it appears on the stock transfer books of
the corporation, and were returned undeliverable. The obligation of the
corporation to give notice of shareholders' meetings to any such shareholder
shall be reinstated once the corporation shall have received a new address for
such shareholder for entry on its stock transfer books.
7. Waiver of Notice. A shareholder may waive any notice required by the
Act, the Articles of Incorporation or these bylaws before or after the date and
time of the meeting that is the subject of such notice. The waiver shall be in
writing, be signed by the Shareholder entitled to the notice and be delivered to
the Secretary of the corporation for inclusion in the minutes or filing with the
corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
8. Determination of Shareholders of Record. The Board of Directors may
fix in advance the record date in order to make a determination of shareholders
entitled to notice of, or to vote at, any meeting of the shareholders or any
adjournment thereof, to receive payment of any
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dividend or distribution, to demand a special meeting, to take action without a
meeting or to make a determination of shareholders for any other proper purpose.
A record date fixed under this Section 8 of these bylaws may not be more than
seventy (70) days before the meeting or action requiring a determination of
shareholders. If not otherwise fixed by the Board of Directors, the record date
for determining shareholders entitled to (i) notice of and to vote at a
shareholders' meeting is the close of business on the day before the effective
date of the notice to shareholders, (ii) receive payment of any dividend or
distribution, other than a distribution involving a repurchase or acquisition of
shares by the corporation, is the date the Board of Directors authorizes the
dividend or distribution, (iii) demand a special meeting is the date the first
shareholder signs the demand and (iv) take action without a meeting is the date
the first shareholder signs the consent. A determination of shareholders
entitled to notice of, or to vote at, a shareholders' meeting is effective for
any adjournment of the meeting unless the Board of Directors fixes a new record
date, which it shall do if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
9. Shareholders' List for Meeting. The officer or agent having charge of
the stock transfer books of the corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. The list shall be arranged by voting
group and within that voting group, if more than one, by class or series of
shares.
For a period of ten (10) days prior to the meeting, the list of
shareholders shall be kept on file at the registered office if the corporation
or at its principal office or at the office of its transfer agent or registrar
and shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof. The original
share transfer books shall be proma facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders. The right of the holder of shares of the corporation
whose securities are registered under the Securities Exchange Act of 1934, as
amended, to inspect such list prior to a meeting of shareholders shall be
subject to the limitations set forth in Section 13.1-771.C. of the Code of
Virginia of 1950, as amended (the "Code"), and Section 51 of these bylaws.
If the requirements of this Section 9 of these bylaws have not been
substantially complied with, the meeting shall, on the demand of any shareholder
in person or by proxy, be adjourned until the requirements are met. Refusal or
failure to prepare or make available the shareholders' list does not affect the
validity of nay action taken at the meeting prior to the making of any such
demand, but any action taken by the shareholders after the making of any such
demand shall be invalid and without effect.
10. Voting Entitlement of Shares. Except as otherwise provided in this
Section 10 of these bylaws with respect to the election of directors and in
Section 13.1-662 of the Code or in the Articles of Incorporation, each
outstanding share, regardless of class, is entitled to one vote on each matter
voted on at a shareholders' meeting. Unless the Articles of Incorporation
provide otherwise, in the election of directors each outstanding share,
regardless of class, is entitled to one vote for as many persons as there are
directors to be elected at that time and for whose election the shareholder has
a right to vote. No cumulative voting shall be permitted.
11. Proxies. A shareholder may vote his shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for him by signing an
appointment form, either personally or by his attorney-in-fact. An appointment
of a proxy is effective when received by
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the Secretary or other officer or agent authorized to tabulate votes. An
appointment is valid for eleven (11) months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy is revocable by the
shareholder unless the appointment is coupled with an interest. An appointment
made irrevocable by being coupled with an interest is revoked when such interest
is extinguished. The death or incapacity of the shareholder appointing a proxy
does not affect the right of the corporation to accept the proxy's authority
unless notice of the death or incapacity is received by the Secretary or other
officers or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment. A transferee for value of shares subject to an
irrevocable appointment may revoke the appointment if he did know of its
existence when he acquired the shares and the existence of the irrevocable
appointment was not noted conspicuously on the certificate representing the
shares.
12. Corporation's Acceptance of Votes. If the name signed on a vote,
consent, waiver or proxy appointment corresponds to the name of a shareholder,
the corporation, if acting in good faith, is entitled to accept the vote,
consent, waiver or proxy appointment and give it effect as the act of the
shareholder.
If the name signed on a vote, consent, waiver or proxy appointment does
not correspond to the name of its shareholder, the corporation, if acting in
good faith, is nevertheless entitled to accept the vote, consent, waiver or
proxy appointment and give it effect as the act of the shareholder in accordance
with Section 13.1-665 of the Code.
The corporation is entitled to reject a vote, consent, waiver or proxy
appointment if the Secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
Section 13.1-665 of the Code, as may be in effect from time to time,
shall apply with respect to any matters not specifically set forth in this
Section 12.
13. Quorum and Voting Requirements for Voting Groups. Shares entitled to
vote as a separate voting group, in the case of multiple voting groups, may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. Unless the Articles of Incorporation or the Act provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum for action on that matter. Less than a quorum
may adjourn a meeting.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or shall be set for that
adjournment meeting.
If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the Articles of Incorporation or the Act
requires a greater number of affirmative votes. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
14. Action by Single and Multiple Voting Groups. If the Articles of
Incorporation or the Act provides for voting by a single voting group on a
matter, action on that matter is taken when voted upon by that voting group as
provided in Section 13 of these bylaws.
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If the Articles of Incorporation or the Act provides for voting by two
(2) or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately as provided in
Section 13 of these bylaws. Action may be taken by one (1) voting group on a
matter even though no action is taken by another voting group entitled to vote
on the matter.
ARTICLE III
DIRECTORS
15. Number and Election. The Board of Directors shall consist of a
minimum of one (1) and maximum of five (5) persons, and, except for the
initial directors who will have been named in the Articles of Incorporation or
elected at the organizational meeting of directors or incorporators, shall be
elected at each annual meeting of the shareholders, unless the directors' terms
are staggered, or at any special meeting of the shareholders called for such
purpose. The number of directors may be increased or decreased from time to time
by amendment to these bylaws, unless the Articles of Incorporation provide that
a change in the number of directors shall be made only by amendment of the
Articles of Incorporation.
The shareholders may adopt a bylaw fixing the number of directors and
may direct that such bylaws not be amended by the Board of Directors. If a bylaw
states a fixed number of directors and the Board of Directors has the right to
amend the bylaw, it may by amendment to the bylaw increase or decreased by
thirty percent (30%) or less the number of directors last elected by the
shareholders, but only the shareholders may increase or decrease the number by
more than thirty percent (30%).
No individual shall be named or elected as a director without his prior
consent.
16. Election of Directors by Certain Classes of Shareholders. If the
Articles of Incorporation authorize dividing the stock into classes, the
Articles of Incorporation may also authorize the election of all or a specified
number of directors by the holders of one (1) or more authorized classes of
stock. Each class, or classes, of stock entitled to elect one (1) or more
directors is a separate voting group for purposes of election of directors.
17. Terms of Office. The terms of the initial directors of the
corporation expire at the first shareholders' meeting at which directors are
elected. The terms of all other directors expire at the next annual
shareholders' meeting following their election. A decrease in the number of
directors does not shorten an incumbent director's term. The term of a director
elected by the Board of Directors to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. Despite the expiration of
a director's term, he continues to serve until his successor is elected and
qualifies or until there is a decrease in the number of directors.
18. Resignation. A director may resign at any time by delivering written
notice to the Board of Directors, the President or the Secretary. A resignation
is effective when the notice is delivered, unless the notice specifies a later
effective date. If a resignation is made effective at a later date, the Board of
Directors may fill the pending vacancy before the effective date, provided,
however, the successor may not take office until the effective date.
19. Removal. The shareholders may remove one (1) or more directors with
or without cause, unless the Articles of Incorporation provide that directors
may be removed only with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. Unless the Articles of Incorporation
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require a greater vote, a director may be removed if the number of votes cast to
remove him constitutes a majority of the votes entitled to be cast at an
election of directors of the voting group or voting groups by which such
director was elected. A director may be removed by the shareholders only at a
meeting called for the purpose of removing him and the meeting notice must state
that the purpose, or one of the purposes, of the meeting is removal of the
director.
20. Vacancy. Unless the Articles of Incorporation provide otherwise, if
a vacancy occurs on the Board of Directors, including a vacancy resulting from
an increase in the number of directors:
(1) the shareholders may fill the vacancy;
(2) the Board of Directors may fill the vacancy; or
(3) if the directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of directors remaining in office.
Unless the Articles of Incorporation provide otherwise, if the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of that voting group are entitled to fill the vacancy if it is to be
filled by the shareholders.
A vacancy that will occur at a specific later date, by reason of a
resignation effective at a later date under Section 18 of these bylaws or
otherwise, may be filled before the vacancy occurs but the new director may not
take office until the vacancy occurs.
A vacancy shall be deemed to exist whenever the number of directors then
in office is less than the maximum number permitted under these bylaws.
21. Compensation. Directors shall not receive a stated salary for their
services, but directors may be paid a fixed sum and expenses for attendance at
any regular or special meeting of the Board of Directors or any meeting of any
committee. A director may serve or be employed by the corporation in any other
capacity and receive compensation therefor.
22. Meetings. Regular meetings of the Board of Directors may be held
without notice at such time and place, in or out of the Commonwealth of
Virginia, as the Board of Directors may designate from time to time. A regular
meeting of the Board of Directors shall be held immediately after the annual
meeting of the shareholders. Unless changed, that regular meeting shall be held
in Mechanicsville, Virginia. Special meetings may be called by the Board of
Directors, the President or the Secretary by giving reasonable notice of the
time and place thereof.
Unless the Articles of Incorporation provide otherwise, the Board of
Directors may permit any or all directors to participate on a regular or special
meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
23. Action Without Meeting. Unless the Articles of Incorporation provide
otherwise, action required or permitted by the Act to be taken at a Board of
Directors meeting may be taken without a meeting if the action is taken by all
members of the Board. The action shall be evidenced by one or more written
consents stating the action taken, signed by each
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director either before or after the action taken, and included in the minutes or
filed with the corporate records reflecting the action taken.
Action taken under this Section 23 of these bylaws is effective when the
last director signs the consent unless the consent specifies a different
effective date, in which event the action taken is effective as of the date
specified therein, provided the consent states the date of execution by each
director. A consent signed under this Section 23 of these bylaws has the effect
of a meeting vote and may be described as such in any document.
24. Notice of Meetings. Unless the Articles of Incorporation provide
otherwise, regular meetings of the Board of Directors may be held without notice
of the date, time, place or purpose of the meeting. Special meetings of the
Board of Directors may be called by resolution of the Board of Directors or any
officer or director by giving reasonable notice of the time and place thereof.
The notice need not describe the purpose of the special meeting.
25. Waiver of Notice. A director may waive any notice required by the
Act, the Articles of Incorporation or these bylaws before or after the date and
time stated in the notice, and such waiver shall be equivalent to such notice
having been given. Except as provided in the following paragraph, the waiver
shall be in writing, signed by the director entitled to the notice and filed
with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting or promptly upon his arrival objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
26. Quorum and Voting. Unless the Articles of Incorporation require a
greater number for the transaction of all business or any particular business, a
quorum of the Board of Directors consists of:
(1) a majority of the fixed number of directors if the
corporation has a fixed board size; or
(2) a majority of the number of directors prescribed, or if no
number is prescribed the number in office immediately before the meeting begins,
if the corporation has a variable-range sized board.
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors unless the
Articles of Incorporation require the vote of a greater number. A director who
is present at a meeting of the Board of Directors or a committee of the Board of
Directors when corporate action is taken is deemed to have assented to the
action taken unless:
(1) he objects at the beginning of the meeting, or promptly upon
his arrival, to holding it or transacting specified business at the meeting; or
(2) he votes against, or abstains from, the action taken.
Whenever the Act requires the Board of Directors to recommend or approve
any proposed corporate act, such recommendation or approval shall not be
required if the proposed corporate act is adopted by the unanimous consent of
shareholders.
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27. Committees. Unless the Articles of Incorporation provide otherwise,
the Board of Directors may create one or more committees, including an Executive
Committee, and appoint members of the Board of Directors to serve on them. Each
committee may have two or more members, who serve at the pleasure of the Board
of Directors. The creation of a committee and appointment of members to it shall
be approved by the greater number of (i) a majority of all the directors in
office when the action is taken or (ii) the number of directors required by the
Articles of Incorporation or these bylaws to take action under Section 26 of
these bylaws. Sections 22 through 26 of these bylaws, which govern meetings,
action without meetings, notice and waiver of notice and quorum and voting
requirements of the Board of Directors, apply to committees and their members as
well.
To the extent specified by the Board of Directors or in the Articles of
Incorporation or these bylaws, each committee may exercise all of the authority
permitted to be exercised by the board of Directors, except that a committee may
not:
(1) approve or recommend to shareholders action that is required
to be approved by shareholders;
(2) fill vacancies on the Board or on any of its committees;
(3) amend Articles of Incorporation pursuant to Section 13.1-706
of the Code;
(4) adopt, amend or repeal the bylaws;
(5) approve a plan of merger not requiring shareholder approval;
(6) authorized or approve a distribution, except according to a
general formula or method prescribed by the Board of Directors; or
(7) authorized or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the Board of
Directors may authorize a committee, or a senior executive officer of the
corporation, to do so within limits specifically prescribed by the Board of
Directors.
The creation of, delegation of authority to, or action by a committee
does not alone constitute by a director with the standards of conduct described
in Section 13.1-690 of the Code and Section 28 of these bylaws.
28. General Standards of Conduct. A director shall discharge his duties
as a director, including his duties as a member of a committee, in accordance
with his good faith business judgment of the best interests of the corporation.
A director shall not be liable for any action taken as a director, or any
failure to take any action, if he performs the duties of his office in
compliance with Section 13.1-690 of the Code.
29. Director Conflict of Interests. A conflict of interests transaction
is a transaction with the corporation in which a director or the corporation has
a direct or indirect personal interest. A conflict of interests transaction
shall not be voidable by the corporation solely because of the director's
interest in the transaction if any one of the following is true in accordance
with Section 13.1-691 of the Code:
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(1) the material facts of the transaction and the director's
interest were disclosed or known to the Board of Directors or a committee of the
Board of Directors and the Board of Directors or committee authorized, approved
or ratified the transaction;
(2) the material facts of the transaction and the director's
interest were disclosed to the shareholders entitled to vote and they
authorized, approved or ratified the transaction; or
(3) the transaction was fair to the corporation.
ARTICLE IV
OFFICERS
30. Officers. As a minimum, the officers of the corporation shall be a
President and a Secretary, each of whom shall be appointed by the Board of
Directors at its regular meeting following the annual meeting of the
shareholders. The Board of Directors may appoint such other officers and
assistant officers and fill any vacancy at any regular or special meeting of the
Board of Directors. A duly appointed officer may appoint one or more officers or
assistant officers as may be authorized by these bylaws or the Board of
Directors. The same individual may simultaneously hold more than one office.
Each officer shall be appointed to hold office until the next succeeding
regular meeting of the Board of Directors following the annual meeting of the
shareholders, or for such longer or shorter terms as the Board of Directors may
specify, and until his successor shall have been elected or such earlier time as
he shall resign, die or be removed. Each officer shall have the authority and
perform the duties set forth in these bylaws or, to the extent consistent with
these bylaws, the duties prescribed by the Board of Directors or by direction of
an officer authorized by the Board of Directors to prescribe the duties of other
officers.
31. President. The President shall preside at all meetings of the Board
of Directors and shareholders, shall have power to call special meetings of the
shareholders and directors for any purpose; may hire, appoint and discharge,
subject to the approval of the Board of Directors, employees and agents of the
corporation and fix their compensation; may make and sign deeds, leases,
contracts and agreements in the name and on behalf of the corporation; shall
have power to carry into effect all directions of the Board of Directors; and
shall have general supervision of the business of the corporation, except as may
be limited by the Board of Directors, the Articles of Incorporation or these
bylaws.
32. Secretary. The Secretary shall be the ex-officio clerk of the Board
of Directors, shall have the power to call special meetings of the shareholders
and directors for any purpose and shall give, or cause to be given, notices of
all meetings of shareholders and directors, and all other notices required by
these bylaws or by law. The Secretary shall record the proceedings of the
meetings of the shareholders and directors in a book kept for that purpose and
shall keep the seal of the corporation and attach it to all documents requiring
such impression unless some other officer is designated to do so by the Board of
Directors. The Secretary shall have responsibility for authenticating records of
the corporation and shall perform such other duties as may be assigned from time
to time by the Board of Directors.
33. Vice President. There may be one or more Vice Presidents who shall
exercise all of the functions of the President during the absence or incapacity
of the latter and such other duties as may be assigned from time to time by the
Board of Directors.
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34. Treasurer. There may be a Treasurer who shall keep or cause to be
kept full and accurate books of account, render a financial statement showing
all transactions of the Treasurer and the financial condition of the corporation
as may be required by the Board of Directors or the President and perform such
other duties as may be assigned from time to time by the Board of Directors.
35. Assistant Secretary. There may be one or more Assistant Secretaries
who shall exercise all of the functions of the Secretary during the absence or
incapacity of the latter and such other duties as may be assigned from time to
time by the Board of Directors.
36. Other Officers. There may be one or more Assistant Vice Presidents
or Assistant Treasurers and other officers and assistant officers who shall
perform such duties as may be assigned from time to time by the Board of
Directors.
37. Salaries. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors unless otherwise delegated to the
President by the Board of Directors.
38. Resignation and Removal. An officer may resign at any time by
delivering notice to the corporation. A resignation is effective when the notice
is delivered unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the corporation accepts the
future effective date, it may fill the pending vacancy before the effective date
if the successor does not take office until the effective date. The Board of
Directors may remove any officer at any time with or without cause and any
officer or assistant officer, if appointed by another officer, may likewise be
removed by such officer.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
39. Indemnification. The corporation shall indemnify an individual who
entirely prevails in the defense of any proceeding to which he was a party
because he is or was director of the corporation against reasonable expenses
incurred by him in connection with the proceeding. The corporation shall also
indemnify an individual made a party to a proceeding because he is or was a
director against liability incurred in the proceeding if:
(1) he conducted himself in good faith; and
(2) he believed;
(a) in the case of conduct in his official capacity with
the corporation, that his conduct was in its best interest; and
(b) in all other cases, that his conduct was at least
not opposed to its best interests; and
(3) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
A director's conduct with respect to an employee benefit plan for a
purpose he believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement that his
conduct was at least not opposed to the best interests of the corporation.
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10
The termination of a proceeding by judgement, order, settlement or
conviction is not, of itself, determinative that the director did not meet the
standard of conduct described in this Section 39 of these bylaws.
Notwithstanding the foregoing, the corporation shall not indemnify a
director under this Section 39 of these bylaws:
(1) in connection with a proceeding by or in the right of the
corporation in which the director is adjudged liable to the corporation; or
(2) in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his official
capacity, in which he is adjudged liable on the basis that personal benefit was
improperly received by him.
Indemnification granted under this Section 39 of these bylaws in
connection with a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding. The definitions
as set forth in Section 13.1-696 of the Code, as in effect from time to time,
shall apply with respect to Sections 39 through 44 of these bylaws.
40. Advance for Expenses. The corporation shall pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(1) the director furnishes the corporation a written statement
of his good faith belief that he has met the standard of conduct described in
Section 39 of these bylaws;
(2) the director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the advance if it is
ultimately determined that he did not meet the standard of conduct (which
undertaking shall be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make repayment); and
(3) a determination is made that the facts then known to those
making the determination would not preclude indemnification under Article 10 of
the Act or this Article V of these bylaws.
41. Determination and Authorization of Indemnification. The
corporation shall not indemnify a director under this Article V of these bylaws
unless authorized in the specific case after a determination has been made that
indemnification of the director is required under this Article V of these bylaws
because he has met the standard of conduct set forth hereunder. The
determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) if such a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors (in which directors who are
parties may participate in such designation), consisting solely of two or more
directors not at the time parties to the proceeding:
(3) by special legal counsel:
11
<PAGE>
(a) selected by the Board of Directors of its committee
in the manner prescribed in subsection (1) or (2) above;
(b) if such a quorum of the Board of Directors cannot be
obtained; and such a committee cannot be designated, selected by a majority vote
of the full Board of Directors, in which directors who are parties may
participate in such selection; or
(4) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (3)
of this Section 41 to select counsel.
42. Indemnification of Officers, Employees, Agents and Others.
Unless limited by the Articles of Incorporation, each officer, employee and
agent of the corporation shall be entitled to indemnification and advance
expenses to the same extent as to a director.
43. Insurance. The corporation may purchase and maintain insurance
on behalf of an individual who is or was a director, officer, employee or agent
of the corporation, or who, while a director, officer, employee or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee or agent,
whether or not the corporation would have power to indemnify him against the
same liability under Section 39 of these bylaws.
44. Application. The corporation shall have power to make any
further indemnity, including advance of expenses, to any director, officer,
employee or agent that may be authorized by the Articles of Incorporation or any
bylaw made by the shareholders or any resolution adopted, before or after the
event, by the shareholders, except an indemnity against his gross negligence or
willful misconduct. Unless the Articles of Incorporation or any such bylaw or
resolution provide otherwise, any determination as to any further indemnity
shall be made in accordance with Section 41 of these bylaws. Each such indemnity
may continue as to a person who has ceased to have the capacity referred to
above and may inure to the benefit of the heirs, executors and administrators of
such a person.
ARTICLE VI
CERTIFICATES OF STOCK
45. Form and Content. Each stock certificate shall state on its face
the name of the corporation and that it is organized under the law of
Commonwealth of Virginia, the name of the person to whom issued and the number
and class of stock and the designation of the series, if any, the certificate
represents. If the corporation is authorized to issue different classes of stock
or different series within a class, the designations, relative rights,
preferences and limitations applicable to each class and the variations in
rights, preferences and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future series)
shall be summarized on the front or back of each certificate for stock of such
class or series. Alternatively, each certificate may state conspicuously on its
front or back that the corporation
12
<PAGE>
will furnish the shareholder this information on request in writing and without
charge. Each stock certificate shall be signed by the President and the
Secretary or an Assistant Secretary and shall bear the corporate seal or its
facsimile. The signatures of the officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the corporation or an employee of the corporation.
46. Fractional Shares. The corporation may, if authorized by the
Board of Directors, issue fractions of a share or pay in money the value of
fractions of shares, arrange for disposition of fractional shares by the
shareholders or issue scrip in registered or bearer form entitling the holder to
receive a full share upon surrendering enough scrip to equal a full share. Each
certificate representing scrip shall be conspicuously labeled "Scrip" and shall
contain the information required by Section 45 of these bylaws. The holder of a
fractional share is entitled to exercise the rights of a shareholder, including
the right to vote, to receive dividends and to participate in the assets of the
corporation upon dissolution. The holder of scrip is not entitled to any of
these rights unless the scrip provides for them.
The Board of Directors may authorize the issuance of scrip subject to
any condition considered desirable by it, including that the scrip will become
void if not exchanged for full shares before a specified date and that the
shares for which the scrip is exchangeable may be sold by the corporation and
the proceeds paid to the scrip holders.
When the corporation is to pay in money the value of fractions of a
share, such value shall be determined by the Board of Directors. A good faith
judgment of the Board of Directors as to the value of a fractional share is
conclusive.
47. Lost Certificates. The Board of Directors may direct new
certificates to be issued in place of any lost or destroyed certificate or
certificates previously issued by the corporation if the person or persons who
claim the certificate or certificates make an affidavit stating that the
certificates of stock have been lost or destroyed. When authorizing the issuance
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificates, or the legal representative, to
advertise the same in such manner as the Board of Directors shall require and/or
to give the corporation a bond or other form of indemnification, in such sum,
and with or without surety, as the Board of Directors may direct, to indemnify
the corporation against any claim that may be made against the corporation with
respect to the certificate or certificates alleged to have been lost or
destroyed.
48. Transfer of Stock. Upon surrender to the corporation, or to the
transfer agent of the corporation, if any, of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate, and record the transaction
upon its books.
49. Registered Shareholders. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the owner thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person. The
corporation shall not be liable for registering any transfer of shares which are
registered in the name of a fiduciary unless done with actual knowledge that the
fiduciary is committing a breach of obligation as fiduciary in making the
transfer, or unless done with actual knowledge of such facts that the
corporation's action in registering the transfer amounts to bad faith.
13
<PAGE>
ARTICLE VII
RECORDS AND REPORTS
50. Corporate Records. The corporation shall keep as permanent
records its Articles of Incorporation or restated Articles of Incorporation and
all amendments thereto and bylaws or restated bylaws and all amendments thereto
currently in effect, all written communications to shareholders generally,
annual reports filed with the Virginia State Corporation Commission, minutes of
all meetings of its shareholders and Board of Directors, a record of all actions
taken by the shareholders of Board of Directors without a meeting and a record
of all actions taken by a committee of the Board of Directors in place of the
Board of Directors on behalf of the corporation. The corporation shall maintain
appropriate accounting records. The corporation or its agent shall maintain the
names and business addresses of its officers and directors and a record of its
shareholders, in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class and series, if
any, of shares showing the number and class and series, if any, of shares held
by each. The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
51. Inspection of Records by Shareholders. Subject to Section
13.1-772.C. of the Code, a shareholder of the corporation or his agent or
attorney is entitled to inspect and copy (at his expense), during regular
business hours at the corporation's principal office, any of the records of the
corporation described in Section 13.1-770.E. of the Code if he gives the
corporation written notice of his demand at least five (5) business days before
the date on which he wishes to inspect and copy.
A shareholder of the corporation or his agent or attorney is entitled to
inspect and copy (at his expense), during regular business hours at a reasonable
location specified by the corporation, any of the records of the corporation
described in Section 13.1-771.B. of the Code if the shareholder meets the
requirements set forth in Section 13.1-771.C. of the Code and gives the
corporation written notice of his demand at least five (5) business days before
the date on which he wishes to inspect and copy such records.
52. Financial Statements for Shareholders. If requested in writing
by any shareholder, the corporation shall furnish the shareholder with the
financial statements for the most recent fiscal year, which may be consolidated
or combined statements of the corporation and one or more of its subsidiaries,
as appropriate, that include a balance sheet as of the end of the fiscal year,
an income statement for that year and a statement of changes in shareholders'
equity for the year unless that information appears elsewhere in the financial
statements. If financial statements are prepared for the corporation on the
basis of generally accepted accounting principles, the annual financial
statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If the annual financial statements
are not reported upon by a public accountant, the President or the person
responsible for the corporation's accounting records shall provide the
shareholder with a statement of the basis of accounting used in preparation of
the annual financial statements and a description of any respects in which the
statements were not prepared on a basis of accounting consistent with the
statements prepared for the preceding year.
14
<PAGE>
ARTICLE VIII
MISCELLANEOUS
53. Registered Office and Agent. The corporation shall at all times
have a registered office and a registered agent.
54. Seal. The seal of the corporation shall be a flat faced circular
die containing the word "SEAL" in the center and the name of the corporation or
an appropriately abbreviated name around the circumference.
55. Amendment of Bylaws. The corporation's Board of Directors may
amend or repeal the corporation's bylaws except to the extent that:
(1) the Articles of Incorporation of the Act reserve this
power exclusively to the shareholders;
(2) the shareholders in adopting or amending particular
bylaws provide expressly that the Board of Directors may not amend or repeal
that bylaw;
(3) a corporation's shareholders may amend or repeal the
corporation's bylaws even though the bylaws also may be amended or repealed by
its Board of Directors.
56. General. Any matters not specifically covered by these bylaws
shall be governed by the applicable provisions of the code in force at the time.
The foregoing Bylaws for Lake Grove Centers, Inc., have been approved
and adopted pursuant to a Consent of Sole Director in Lieu of Organizational
Meeting dated November 13, 1997.
LAKE GROVE CENTER, INC.
/s/ Karen L. Everett
----------------------------
Karen L. Everett, Secretary
15
EXHIBIT 3.17
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "MBI NO. 1, LLC", FILED IN THIS OFFICE ON THE THIRTIETH DAY
OF DECEMBER, A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-------------------------
Edward J. Freel, Secretary of State
[SEAL] Secretary's Office
1793 Delaware 1855
AUTHENTICATION: 8913767
DATE: 02-10-98
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/30/1997
971453132-2840049
<PAGE>
CERTIFICATE OF FORMATION
OF
MBI No. 1, LLC
FIRST: The name of the limited liability company (the "Company") is MBI
No. 1, LLC.
SECOND: The registered office of the Company is 15 East North Street, in
the City of Dover, Kent County, State of Delaware 19901. The name of its
registered agent at that address is United Corporate Services, Inc.
IN WITNESSETH WHEREOF, I have signed my name to this Certificate of
Formation this 30th day of December, 1997.
/s/ Orlando Figueroa
---------------------
Orlando Figueroa
Authorized Person
EXHIBIT 3.18
Limited Liability Company Agreement
of
MBI No. 1, LLC
MoonliteBowl, Inc., a California corporation (the "Sole Member"), has
formed, on December 30, 1997, a limited liability company (the "Company"),
pursuant to and in accordance with the Delaware Limited Liability Company
Delaware Act, 6 Del. C. (section) 18-101, et seq. (the "Delaware Act"), and
hereby declares the following to be the Limited Liability Company Agreement (the
"Agreement") of the Company:
1. Formation. The Company was formed upon the filing of a Certificate of
Formation with the Delaware Secretary of State by an authorized agent of the
Company.
2. Name. The name of the Company formed is MBI No. 1, LLC.
3. Purpose. The Company is a single member limited liability company
formed for any purpose permitted under the Delaware Act.
4. Registered Office and Agent; Principal Office. The Company's
registered office and registered agent for service of process in Delaware
pursuant to Section 18-104 of the Delaware Act shall be United Corporate
Services, Inc., 15 East North Street, Dover, Delaware 19901, County of Kent. The
principal office of the Company shall be located at 2050 South Bundy Drive,
Suite 215, Los Angeles, California 90025. The identity of the Company's
registered office and agent, and the location of the Company's principal office,
may be changed at will by the Sole Member.
5. Powers of the Company. Subject to the limitations set forth in this
Agreement and the certificate of formation of the Company ("Certificate of
Formation"), the Company shall possess and may exercise all of the powers and
privileges granted to it by the Delaware Act, by any other law or by this
Agreement, together with all powers incidental thereto, so far as such powers
are necessary or convenient to the conduct, promotion or attainment of the
purposes of the Company set forth in the Certificate of Formation.
6. Powers of the Sole Member. The Sole Member shall have the power to
exercise any and all rights and powers granted to members of a limited liability
company pursuant to the Delaware Act and the express terms of this Agreement.
<PAGE>
7. Limited Liability. Except as otherwise provided by the Delaware Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and the Sole Member shall not be obligated for any
such debt, obligation or liability of the Company by reason of being a member of
the Company.
8. Contributions. Contributions to the capital of the Company shall be
made as determined by the Sole Member.
9. Distributions. Distributions shall be made to the Sole Member at the
times and in the aggregate amounts determined by the Sole Member.
10. Management. Management of the Company shall be vested exclusively in
the Sole Member. The Sole Member shall have the power to do any and all acts
necessary, convenient or incidental to or for the furtherance of the purposes of
the Company, including all powers, statutory or otherwise, possessed by members
of a limited liability company under the Delaware Act. The Sole Member shall
have the authority to bind the Company.
11. Assignments. The Sole Member may freely assign its membership
interest in the Company in whole or in part. If the Sole Member transfers all of
its membership interest in the Company pursuant to this Section, the transferee
shall be admitted to the Company as the Sole Member upon its execution of an
instrument signifying its agreement to be bound by the terms and conditions of
this Agreement. Such admission shall be deemed effective upon the transfer, and
upon such admission, the transferor Sole Member shall cease to be a member of
the Company.
12. Dissolution. The Company shall be dissolved and its affairs wound up
upon the occurrence of any of the following events:
(a) End of Term. January 1, 2050.
(b) Election of Sole Member. The written election of the Sole Member
to dissolve the Company, made at any time and for any reason.
(c) Dissolution Event. As otherwise provided under Delaware law.
13. Amendment. This Agreement may be amended only in a writing signed by
the Sole Member.
<PAGE>
14. Severability. Every term and provision of this Agreement is
intended to be severable, and if any term of provision of this Agreement is
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the legality or validity of the remainder of this Agreement.
15. No Third-Party Rights. No person other than the Sole Member shall
have any legal or equitable rights, remedies or claims under or in respect of
this Agreement, and no person other than the Sole Member shall be a beneficiary
of any provision of this Agreement.
16. Governing Law. This agreement shall be governed by and construed
under the laws of the State of Delaware, excluding any conflicts of laws rule or
principle that might refer the governance or construction of this agreement to
the law of another jurisdiction.
IN WITNESS WHEREOF, the Sole Member has caused this Agreement to be
executed by its authorized officer, as of the date first written above.
MOONLITE BOWL, INC.,
a California corporation
By: /s/ Mark A. Spiegel
----------------------
Mark A. Spiegel, Secretary
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "MBI NO. 1, LLC" IS DULY FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR AS THE RECORDS OF THIS
OFFICE SHOW, AS OF THE SIXTH DAY OF FEBRUARY, A.D. 1998.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE NOT BEEN
ASSESSED TO DATE.
[STATE OF DELAWARE SEAL] Great Seal of the State of Delaware
1793.1847.1907
/s/ Edward J. Freel
---------------------------------
Edward J. Freel, Secretary of State
[SEAL] Secretary's Office
1793 Delaware 1855
AUTHENTICATION: 8907746
DATE: 02-06-98
EXHIBIT 3.19
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
LIMITED LIABILITY COMPANY OF "AWI NO. 1, LLC", FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF DECEMBER, A.D. 1997, AT 9 O'CLOCK A.M.
[SEAL] Secretary's Office
1793 Delaware 1855
/s/ Edward J. Freel
-------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8913765
DATE: 02-10-98
<PAGE>
CERTIFICATE OF FORMATION
OF
AWI No. 1, LLC
FIRST: The name of the limited liability company (the "Company") is AWI
No. 1, LLC.
SECOND: The registered office of the Company is 15 East North Street,
in the City of Dover, Kent County, State of Delaware 19901. The name of its
registered agent at that address is United Corporate Services, Inc.
IN WITNESSETH WHEREOF, I have signed my name to this Certificate of
Formation this 30th day of December, 1997.
/s/ Orlando Figueroa
--------------------
Orlando Figueroa
Authorized Person
EXHIBIT 3.20
Limited Liability Company Agreement
of
AWI No. 1, LLC
Active West, Inc., a California corporation (the "Sole Member"), has
formed, on December 30, 1997, a limited liability company (the "Company"),
pursuant to and in accordance with the Delaware Limited Liability Company
Delaware Act, 6 Del. C. (section) 18-101, et seq. (the "Delaware Act"), and
hereby declares the following to be the Limited Liability Company Agreement (the
"Agreement") of the Company:
1. Formation. The Company was formed upon the filing of
a Certificate of Formation with the Delaware Secretary of State by an
authorized agent of the Company.
2. Name. The name of the Company formed is AWI No. 1, LLC.
3. Purpose. The Company is a single member limited
liability company formed for any purpose permitted under the Delaware Act.
4. Registered Office and Agent; Principal Office. The
Company's registered office and registered agent for service of process in
Delaware pursuant to Section 18-104 of the Delaware Act shall be United
Corporate Services, Inc., 15 East North Street, Dover, Delaware 19901,
County of Kent. The principal office of the Company shall be located at 2050
South Bundy Drive, Suite 215, Los Angeles, California 90025. The identity
of the Company's registered office and agent, and the location of the
Company's principal office, may be changed at will by the Sole Member.
5. Powers of the Company. Subject to the limitations set forth
in this Agreement and the certificate of formation of the Company
("Certificate of Formation"), the Company shall possess and may exercise all
of the powers and privileges granted to it by the Delaware Act, by any other
law or by this Agreement, together with all powers incidental thereto, so far
as such powers are necessary or convenient to the conduct, promotion or
attainment of the purposes of the Company set forth in the Certificate of
Formation.
6. Powers of the Sole Member. The Sole Member shall have
the power to exercise any and all rights and powers granted to members of a
limited liability company pursuant to the Delaware Act and the express terms
of this Agreement.
<PAGE>
7. Limited Liability. Except as otherwise provided by the Delaware Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and the Sole Member shall not be obligated for any
such debt, obligation or liability of the Company by reason of being a member of
the Company.
8. Contributions. Contributions to the capital of the Company
shall be made as determined by the Sole Member.
9. Distributions. Distributions shall be made to the Sole
Member at the times and in the aggregate amounts determined by the Sole
Member.
10. Management. Management of the Company shall be
vested exclusively in the Sole Member. The Sole Member shall have the
power to do any and all acts necessary, convenient or incidental to or for the
furtherance of the purposes of the Company, including all powers, statutory
or otherwise, possessed by members of a limited liability company under the
Delaware Act. The Sole Member shall have the authority to bind the
Company.
11. Assignments. The Sole Member may freely assign its
membership interest in the Company in whole or in part. If the Sole Member
transfers all of its membership interest in the Company pursuant to this
Section, the transferee shall be admitted to the Company as the Sole Member
upon its execution of an instrument signifying its agreement to be bound by
the terms and conditions of this Agreement. Such admission shall be deemed
effective upon the transfer, and upon such admission, the transferor Sole
Member shall cease to be a member of the Company.
12. Dissolution. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) End of Term. January 1, 2050.
(b) Election of Sole Member. The written election of the Sole Member
to dissolve the Company, made at any time and for any reason.
(c) Dissolution Event. As otherwise provided under Delaware law.
13. Amendment. This Agreement may be amended only in a
writing signed by the Sole Member.
<PAGE>
14. Severability. Every term and provision of this Agreement is intended
to be severable, and if any term of provision of this Agreement is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the legality or validity of the remainder of this Agreement.
15. No Third-Party Rights. No person other than the Sole
Member shall have any legal or equitable rights, remedies or claims under or
in respect of this Agreement, and no person other than the Sole Member
shall be a beneficiary of any provision of this Agreement.
16. Governing Law. This agreement shall be governed by and
construed under the laws of the State of Delaware, excluding any conflicts of
laws rule or principle that might refer the governance or construction of this
agreement to the law of another jurisdiction.
IN WITNESS WHEREOF, the Sole Member has caused this
Agreement to be executed by its authorized officer, as of the date first written
above.
ACTIVE WEST, INC.,
a California corporation
By: /s/ Mark A. Spiegel
----------------------
Mark A. Spiegel, Secretary
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY "AWI NO. 1, LLC" IS DULY FORMED UNDER THE LAWS OF THE STATE OF
DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR AS THE RECORDS
OF THIS OFFICE SHOW, AS OF THE SIXTH DAY OF FEBRUARY, A.D. 1998.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE NOT BEEN
ASSESSED TO DATE.
[SEAL] Great Seal of the State of Delaware
1793.1847.1907
/s/ Edward J. Freel
----------------------------------
Edward J. Freel, Secretary of State
[SEAL] Secretary's Office
1793 Delaware 1855
AUTHENTICATION: 8907745
DATE: 02-06-98
EXHIBIT 3.21
[logo]
Form 1
Certificate of Incorporation
[foreign text] 55-86698 [foreign text] 1919
No. 55-86698 of 19 97-98
[foreign text] 1956 (1956 [foreign text] 1)
I hereby certify that AMF BOWLING (INDIA) PRIVATE LIMITED
is this day incorporated under the Companies Act, 1956 (No. 1 of 1956) and that
the Company is limited.
Given under my hand at NEW DELHI this FIFTEENTH day of APRIL One thousand nine
hundred and NINETY SEVEN
NOTE: COMPLETE ENGLISH LANGUAGE TEXT IS DUPLICATED IN HINDI LANGUAGE THROUGHOUT
CERTIFICATE
(signature)
(SEAL)
(H.S. BAWA)
ASSTT. Registrar of Companies
N.C.T. of DELHI & HARYANA
<PAGE>
(THE COMPANIES ACT, 1956)
(COMPANY LIMITED BY SHARES)
MEMORANDUM OF ASSOCIATION
OF
AMF BOWLING (INDIA) PRIVATE LIMITED
I. The name of the Company is AMF Bowling (India) Private Limited.
II. The Registered Office of the Company will be situated in the National
Capital Territory of Delhi.
III. The objects for which the Company is established are:
A. The Main Objects to be pursued by the Company on its incorporation are:
1. To carry on the business of manufacturing, assembling, importing,
exporting, trading, distribution of and dealing in all kinds of Bowling
equipment, parts, components and other related products.
2. To carry on the business of owning and operating Bowling Centres in India
and abroad.
3. To carry on turnkey installation or to provide technical assistance in
installation of Bowling Centres in India and abroad.
4. To carry on the business of rendering service and maintenance of Bowling
Centres, in India and abroad.
5. To carry on the business of providing technical training of personnel in
the filed of installing and managing Bowling centres in India.
B. The Objects Ancillary or Incidental to the Attainment of Main objects are:
1. To form, incorporate or promote any Company or Companies, whether in India
or elsewhere, having amongst its or their objects the acquisition of all or
any of the assets or control, management of development of the Company or
any other objects or object which in the opinion of the Company could or
might directly or indirectly assist the Company in the management of its
business or the development of its properties or otherwise prove
advantageous to the Company and to pay all or any of the costs and expenses
incurred in connection with any such promotion or incorporation and to
remunerate any person or Company in any manner it shall think fit for
services rendered or to be rendered in obtaining subscriptions for or
placing or assisting to place or to obtain subscriptions of or for
guaranteeing the subscriptions of or for the placing of any shares in the
capital of the Company or any bonds, debentures, obligations or securities
of the Company or any stock, shares, bonds, debentures, obligations or
securities of the Company or any stock, shares, bonds, debentures,
obligations or securities of any other Company held or owned by the Company
or in which the Company may have an interest or in or about the
1
<PAGE>
information or promotion of the Company or the conduct of its business or
in or about the promotion or formation of any other Company in which the
Company may have an interest.
2. To act as agents or brokers and as trustees for any person or company and
to undertake and perform sub-contracts and to do all or any of the above
things in any part of the world, and either as principals, agents,
trustees, contractors or otherwise, and either alone or jointly with
others, and either by or through agents sub-contractors, trustees or
otherwise.
3. To establish, settle, promote, form, undertake or to execute any public
charitable or welfare trust for the benefit of employees, ex-employees,
directors, their dependants and general public or for the developments &
advancement of any activity in the field of education, healthcare, public
welfare, science, etc. for their benefit.
4. To purchase, charter, hire, build, or otherwise acquire vehicles of any or
every sort or description for use on or under land or water or in the air
and to employ the same in the main business of the company.
5. To establish, provide, maintain and conduct or otherwise, subsidise,
research, laboratories and experimental workshops for scientific and
technical research and experiments and to undertake and carry on with all
scientific and technical research, experiments and test of all kinds and to
promote studies and research both scientific and technical investigation
and invention by providing, subsidising, endowing or assisting
laboratories, workshops, libraries, lectures, meetings and conferences and
by providing remuneration to scientific and technical professors and
teachers and by providing for the award, scholarships, prizes, grants and
bursaries to students or independent students or otherwise and to
encourage, promote and award studies, investigations, experiments, tests
and inventions of any kind that may be considered likely to assist any of
the businesses which the Company is authorised to carry on.
6. To undertake, promote and sponsor or assist any activity for the promotion
and growth of national economy and for discharging what the Directors may
consider to be social and moral responsibilities of the Company to the
public or any section of the public as also any activity which the
Directors consider likely to promote national welfare or social, economic
or moral upliftment of the public or any section of the public and in such
manner and by such means as the Directors may think fit, and the Directors
may without prejudice to the generality of the foregoing undertake, carry
out, promote and sponsor any activity for publication of any books,
literature, newspaper, etc. or for organising lectures or seminars likely
to advance these objects or for giving merit award for giving scholarships,
loans or any other assistance to deserving students or other scholars or
persons to enable them to pursue their studies or academic pursuits or
researches and for establishing conducting or assisting any institution,
fund trust etc. having any of the aforesaid objects as one of its objects,
by giving donations or otherwise in any other manner, and the Directors may
at their discretion, in order to implement any of the above mentioned
concessional value as the Directors may think fit and divest the ownership
of any property of the Company to or in favour of any Public or Local Body
or Authority or Central or State
2
<PAGE>
Government or any Public or Institutions or Trusts or Funds whose object is
rural development or upliftment as the Directors may approve.
7. To acquire and undertake the whole or any part of the business, property
and liabilities of any person carrying on any business which the company is
authorised to carry on or possession of property suitable for the purpose
of the objects of the company.
8. To apply for, purchase or otherwise, acquire any patent, patent right,
copyright, trade marks, formulate, license, lease, concessions, conferring
any exclusive or limited right to use or other information as to any
invention which may seem capable of being used for any of the purposes of
the company or the acquisition of which may directly or indirectly benefit
the company; and to use, exercise, develop or grant licenses in respect of
the property, rights, or information so acquired.
9. To enter into any arrangement with any Government or authority whether
municipal, local or otherwise or any person, that may seem conducive to the
company's objects or any of them; and to obtain from any such Government or
authority any rights, privileges and concessions which the company may
think it desirable to obtain; and to carry out, exercise and comply with
any such arrangement, rights, privileges and concessions.
10. To establish or support or aid in the establishment and support of
associations, institutions, funds, trusts, and conveniences for the benefit
of past or present employees or directors of the company or the dependants
of such persons; and to grant pensions and allowances, to make payments
towards insurance; to subscribe or guarantee money for charitable or
benevolent objects or useful objects for the general public.
11. To purchase or import, take on lease or in exchange, hire or otherwise
acquire any movable or immovable property and any rights or privileges
which the company may think necessary or convenient for the purposes of its
business and in particular any land, buildings, easements, machinery, plant
and stock-in-trade and to render leasing, consultancy and advisory services
to clients in the field of leasing.
12. To subscribe for, absolutely or conditionally or otherwise acquire and to
hold and/or dispose of shares, stocks and securities or obligations of any
other Company whether Indian or foreign.
13. To invest monies of the company, not immediately required in such manner as
may, from time to time, be thought fit subject to provisions of the Act.
14. To advance money or give credit to any person or company; to give guarantee
or indemnify for the payment of money or the performance of contracts or
obligations by any person; to secure or undertake in any way the repayment
of moneys lent or advanced to, or the liabilities incurred by any person
subject to the provisions of the Act.
3
<PAGE>
15. To borrow or secure money in such manner as the company may think fit or to
make repayment of any debt, liability, perform any contract entered into or
the issue of debentures, perpetual or otherwise, charged upon all or any of
the company's property (both present and future), including its uncalled
capital, and to purchase, redeem, or pay off any such securities.
16. To establish subsidiary companies, amalgamate with, or enter into
partnership or into any arrangement for sharing profits, union of interest,
joint venture, reciprocal concession or co-operation with, any person or
company carrying on, engaged in, or proposing to carry on or engage in, any
business or transaction which the Company is authorised to carry on or
engage in, or which is capable of being conducted so as to, directly or
indirectly, benefit the Company, and to take or otherwise acquire and hold
shares, stock, securities, obligations or other interests in any such
person or company, and to subsidise or otherwise assist any such person or
company.
17. To remunerate any person for services rendered, or to be rendered, in
placing or assisting to place or guaranteeing the placing of any of the
shares in the company's capital or any debentures or other securities
issued by the company subject to the provision of section 314 of the Act.
18. To draw, make, accept, endorse, discount, execute, and issue promissory
notes, bill of exchange, bills of lading, and other negotiable or
transferable instruments.
19. To dispose of, to improve, manage, develop or exchange the undertaking,
property or rights of the company or any part thereof for such
consideration as the company may think fit.
20. To adopt such means of making known and advertising the business and
products of the company as may be expedient.
21. To apply for, promote, and obtain any order, regulation, or other
authorisation or enactment which may directly or indirectly benefit the
company.
22. To procure recognition of the company in any country or place outside
India.
23. To issue or allot fully or partly paid shares in the capital of the company
in payment or part payment for any movable or immovable property purchased
or otherwise acquired by the company or for any services rendered to the
company.
24. To take or hold mortgages, liens and charges to secure payment of the
purchase price, or any unpaid balance of the purchase price, of any part of
the company's property of any kind sold by the company, or any money due to
the company from buyer.
25. To pay out of the funds of the company all or any expenses which the
company may lawfully pay for services rendered for formation and
registration of the company and for promotion of any other company by it
subject to the Act.
4
<PAGE>
26. To insure any of the properties, undertakings, contracts, risk or
obligations of the company in any manner whatsoever.
27. To aid and support, any person, association, body or movement, whose object
is solution, settlement or surmounting of industrial or labour problems of
the promotion of science and technology, cultural activities, sports,
environment, rural development and other social, welfare and recreational
activities. To sponsor sports, entertainment and other leisure and
recreational activities to aid and promote the company's activities and
other interests.
28. To refer all questions, disputes or differences arising between the Company
and any other person (other than a Director of the Company) in connection
with or in respect of any matter relating to the business or affairs of the
Company to arbitration in such manner and upon such terms as the Company
and such other person may mutually agree upon in each case and such
reference to arbitration may be in accordance with the provisions of the
Arbitration Act, 1940 (10 of 1940) or the Rules of the International
Chamber of Commerce relating to arbitration, and to institute legal
proceedings or defend any proceedings and to appoint Advocates, Consultants
or Advisors in this behalf.
29. To create any depreciation fund, reserve, reserve fund, sinking fund,
insurance fund, or any special or other fund whether for repayment of
redeemable preference shares, redemption of debenture stock, for dividends,
for equalising dividends, for repairing, improving, extending and
maintaining any part of the property of the Company.
30. To open and operate any type of bank accounts with the Bank and obtain
credit facilities with or without securities for its business.
31. To train or pay for training in India or abroad of any of Company's
employees or officers or any candidate in the interest of or furtherance
of the company's objects.
32. To establish research and development centers for the business of the
Company.
33. To open retail stores and wholesalers for selling the goods manufactured or
imported by the Company and deal in as principals or as agents,
distributors or as commission agents.
34. To buy wholesale or retail, repair, alter and exchange, let on hire,
import, all kinds of articles and things which may be required for the
purpose of any of the main business or which is commonly manufactured,
imported, exported, supplied or dealt in by persons engaged in any such
business or which may seem capable of being dealt with in connection with
any of the main business.
C. The Other Objects are:
1. To engage in the business of production, buying, selling, exchange and
dealing in wholesale and in retail in handicrafts, handloom materials,
antiques, art goods, men's women's and children's clothing and apparel of
every kind, nature and description.
5
<PAGE>
2. To carry on General Insurance business including fire, marine or
miscellaneous insurance business and also issuing of policies of human
life, to act as principal agent, special agent, chief agent and ordinary
agent subject to provisions of The Insurance Act, 1938.
3. To carry on business as engineers, in all its branches, including civil,
mechanical, aeronautical, sanitary, electrical, building construction,
fabrication and consulting and also as contractors for any person or
person.
4. To carry on the business of photography, photomechanical process of
reproduction, representation, manufacture of photographic goods and
appliances, chemicals, lenses, cameras and other apparatus or scientific
goods in connection therewith and to import and export, sell or purchase
such goods.
5. To undertake and execute job orders of all kinds and descriptions.
6. To carry on the business of technical consultants in all the fields.
7. To purchase, sell, develop, take in exchange, lease hire or otherwise
acquire, whether for investment or sale, any real or personal estate
including lands, business, building, factories, mill, houses, shops,
depots, warehouses, machinery, plant, stock in trade, mineral rights,
concessions, privileges, licenses, easement or interest in or with respect
to any property whatsoever for the purpose of the Company in consideration
for a gross sum or rent or partly in one way and partly in the other or for
any other consideration and to carry on business as proprietors of flats
and buildings and to let on lease or otherwise apartments therein and to
provide for the conveniences commonly, provided in flats, suites and
residential and business quarters.
8. To carry on the business of finance and investment companies, subject to
the Banking Act and applicable laws.
9. To invest the funds of the company in any manner as is considered
appropriate including the setting up of subsidiaries, investing in the
equity of joint venture companies and to act as a financial and investment
and holding company.
10. To carry on the business of credit card.
11. To carry on the business of venture capital for all types of business
ventures and industries.
12. To carry on the business of hirers or lessors (with or without option of
purchase) of plant, machinery and goods of every description, and real
estate, interest or right therein or thereover.
13. To carry on the business as producers, importers, exporters, processors,
manufacturers, buyers, sellers, distributors, stockists agents and brokers
of coal, coke, charcoal, all types of minerals and mineral based products.
6
<PAGE>
14. To manufacture, deal in and process all kinds of medical and surgical
instruments and appliances, industrial instruments and appliances,
including meters, weighing machines and devices for indicating, recording
and regulating pressure, temperature, rate of flow, weights and levels,
scientific instruments, mathematical surveying and drawing instruments, as
well as items produced in miscellaneous mechanical and engineering
industries like plastic moulded goods, hand tools and small tools.
15. To carry on the business as manufacturers, producers, dealers, traders,
importers, stockists, distributors or agents of all types of bulbs, lamps
or tubes required or used for lighting for industrial, domestic or any
other purpose or commercial purposes and glass shells, fittings, tubes,
filaments, tungsten and molybdenum wires, caps and other material,
machineries, accessories and spares required or used for manufacture of
bulbs, lamps or tubes.
16. To carry on the business of manufacturers, fabricators, processors,
producers, growers, makers, importers, exporters, buyers, sellers,
suppliers, stockists, agents, merchants, distributors and concessionaires
of and dealers in all kinds of synthetics and chemicals including
petrochemicals and formulations thereof, inorganic chemicals, organic
chemicals, fine chemicals and mineral based chemicals.
17. To carry on the business of manufacturers, buyers, sellers, exporters of
tea, tea seed, coffee, rubber, cardamom, medicinal herbs, all types of
spices, herbs, shrubs, oils and any other produce of the soil and to
acquire or make machinery, implements and articles required to be used for
any such purposes.
18. To bring, buy, sell, prepare, convert, process, treat or manipulate in any
manner all kinds of tobacco leaves, jute, cotton, hemp, lac, cinchona,
rubber, sugarcane, beet, dal, oilseeds, vegetable products, foodgrains
and all other products of the soil.
19. To manufacture, produce, buy, sell, import, export, stock and deal in all
types of machine tools, planning machines, automatic lathe, drilling
machines, precision tools, electric motors, electrical equipment and all
other electrical items, all types of measuring instruments, electrical or
non-electrical, die castings, screws, hoists, elevators, gears, trolleys
and coaches, winches, air compressors, welders, refrigerators, domestic
washing machines, telephones, teleprinters, public address equipment,
lighting arrestors, rotavators, radar equipment, valves, resistors,
electronic equipment and instruments, conductors, magnetic materials,
transistors and allied items.
IV. The liability of the members is limited.
V. The Authorised Share Capital of the Company is Rs. 50,00,000/- (Rupees Fifty
Lakhs Only) divided into 5,00,000 (Five Lakh) Equity Shares of Rs. 10/-
(Rupees Ten each).
7
<PAGE>
We, the several persons, whose names, addresses and descriptions are hereunder
subscribed, are desirous of being formed into a Company in pursuance of these
Articles of Association and we respectively agree to take the number of shares
in the Capital of the Company set opposite to our respective names.
Name, description, Numbers of Signature Name, address,
occupation and address and type of of description, occupation
of each subscriber subscribed Subscriber and signature of
shares witness
Deep Kalra
S/o Krishan Kalra 10 Sd/- I witness the
E-369, Greater Kailash signatures of both the
Part- II subscribers who have
New Delhi - 110 048 signed in my presence
Service at New Delhi
Sanjay Chhabra
S/o Krishan Kumar 10 Sd/-
Chhabra
E-369, Greater Kailash Sd/-
Part - II R. Sridhar
New Delhi - 110 048 S/o P.G. Ramachandran
Service A5B-177A, Janakpuri
New Delhi - 110 058
Sandeep Paul 1 Sd/- Company Secretary
S/o J. M. Paul
EC-22 SFS Flats, G-8
Area,
Rajouri Garden,
P.O. Mayapuri
New Delhi - 110064
Chartered Accountant
Dated: 20 March 1997
Place: New Delhi
(THE COMPANIES ACT, 1956)
(COMPANY LIMITED BY SHARES)
ARTICLES OF ASSOCIATION
OF
AMF BOWLING (INDIA) PRIVATE LIMITED
1. Subject as hereinafter provided, the Regulations contained in Table
"A" in the First Schedule to the Companies Act, 1956 shall apply to
this Company. Clause 2 to 5, 9 to 35, 40 to 43, 57 to 60, 63 to 66,
76, of Table A shall not be applicable. All references herein
contained to any specified Regulations of Table "A" shall be
inclusive of the first and the last of Regulations referred to and in
case of any conflict between the provisions herein contained and the
incorporated Regulations of Table "A", the provisions herein shall
prevail.
I. INTERPRETATION
2. (a) In the interpretation of these Articles, the following words and
expressions, wherever used, shall have the meaning assigned to
hereinbelow, unless repugnant to the context or meaning thereof.
(i) "The Act" means the Companies Act, 1956 or statutory,
modification or re-enactment thereof and any other law for the
time being in force in India containing provisions relating to
or affecting private limited companies.
(ii) "The Seal" means the Common Seal of the Company.
(iii) "The Company" or "this Company" means AMF Bowling (India)
Private Limited.
(iv) "The Office" means the Registered Office, for the time being, of
the Company.
(v) "Register" means the Register of Members of the Company to be
kept pursuant to Section 150 of the Act.
(vi) "Month" means the Calendar Month.
(vii) "The Presents" or "These Regulations" or "These Articles" means
the Articles of Association of this Company as originally framed
or altered from time to time.
(viii) "AMFB" means AMF Bowling Inc., a company organised under the laws
of Richmond, Virginia, having its principal place of business at
8100, AMF Drive, Richmond, Virginia 23211, USA.
(ix) "Shareholder" means the first subscribers to the Memorandum and
Articles of Association of the Company and whose name is
subsequently entered in the Register of Members/Shareholders.
<PAGE>
1
(x) "Auditors" means and includes those persons appointed as such for
the time being by the Company.
(xi) "Board" means the Directors duly called and constituted or as the
case may be, the Directors assembled at a Board Meeting or the
requisite number of Directors entitled to pass a resolution by
post and/or circulation in accordance with these Articles.
(xii) "Capital" means the share capital for the time being raised or
authorised to be raised, for the purposes of the Company.
(xiii) "Directors" means the Directors for the time being of the Company
or as the case may be, the Directors assembled at a Board,
including Alternate Directors.
(xiv) "Meeting" or "General Meeting" means a meeting of the members
duly called or requisitioned.
(xv) "Annual General Meeting" means a general meeting of the members
duly convened in accordance with the provisions of the Act and
any adjourned meeting thereof.
(xvi) "Extraordinary General Meeting" means a General Meeting of the
members duly called and constituted and any adjourned meeting
thereof.
(xvii) "Persons" includes corporations and firms as well as individuals.
(xviii) "Shares" means the shares into which the capital is divided and
the interest corresponding with such share.
(xvix) Words importing singular number shall include the plural number
and vice versa.
(xx) Words importing the Masculine gender shall mean the Feminine
gender and vise versa.
II. PRIVATE COMPANY
3. The Company is a Private Company within the meaning of Section
3(1)(iii) and 2(35) of the Act, and accordingly:
(a) restricts the right to transfer its shares in the manner provided
in these Articles.
(b) limits the number of its members to 50, not including:
(i) persons who are in the employment of the company; and
<PAGE>
2
(ii) persons who having been formerly in the employment of the
company were members of the Company while in that employment
and have continued to be members after the employment ceased;
Provided that where two or more persons hold one or more
shares in a company jointly, they shall, for the purposes of
this definition be treated as a single member.
(c) prohibits any invitation to the public to subscribe for any shares
or debentures of the Company.
III. SHARE CAPITAL
4. (a) The Authorised Share Capital of the Company shall be such amount
and be divided into such shares as may, from time to time, be provided in clause
V of Memorandum of Association payable in the manner as may be determined by the
Directors from time to time, with powers to increase, reduce, sub-divide or
repay the same or to divide the same into several classes and to attach thereto
any rights and to consolidate or subdivide or reorganize the shares, subject to
section 106 of the Act to vary such rights as may be determined in accordance
with the regulations of the company.
(b) The shares shall be under the control of the Directors who shall
allot the shares as per the provisions of the Companies Act, 1956.
IV. TRANSFER OF SHARES
5. (a) The instrument of transfer of any share in the company shall be
executed by or on behalf of both the transferor and transferee.
(b) The transferor shall be deemed to remain a holder of the share
until the name of the transferee is entered in the register of members in
respect thereof.
(c) The Board shall be bound to register a transfer of shares made
in accordance with the provisions of these Articles and not otherwise.
6. If at any time, any shareholder ("the Selling Shareholder") wishes to
transfer any or all of their shares in the company then the "Selling
Shareholder" will be under an obligation to first offer these shares to the
other Shareholder(s) ("the Non-Selling Shareholder(s)"), in the manner specified
in these Articles.
In such event the Selling Shareholder shall serve a notice on the Non-selling
Shareholder(s) in writing to that effect.
7. Upon the service of a notice, the Non-Selling Shareholder shall be
entitled to purchase any or all shares offered by the Selling Shareholder at the
"Sale Price" to be mutually
<PAGE>
3
agreed by the Non-Selling Shareholder, purchasing the shares and the Selling
Shareholder.
8. Provided that in case there are more than one Non-Selling
Shareholder(s) options to purchase the shares offered, the entitlement of such
Non-Selling Shareholders shall be determined on the basis of their shareholding
in the Issued and Paid up Equity Capital of the Company.
9. In the event the Non-Selling shareholder is prohibited from
purchasing the shares of Selling Shareholder whether in whole or in part, due to
Governmental or any other Regulations in force, then the Non-Selling Shareholder
shall be entitled to have the shares of the Selling Shareholder purchased by any
third party as nominated by it, who executes the Deed of Undertaking mentioned
in Article 11 below.
10. In the event the Non-Selling Shareholder does not exercise its right
under the above-mentioned articles, then the Selling Shareholder shall be
entitled to transfer its shares to any third party acceptable to the Non-Selling
Shareholder, which acceptance shall not be unreasonably withheld or delayed.
However, such transfer shall be on terms not more favourable than those offered
to the Non-Selling Shareholder.
11. If the transfer of shares is made to a third party other than the
Non-Selling Shareholder(s), the documents delivered to the Company in respect of
transfer of shares shall include Deed of Undertaking from such party that it
shall be bound by the terms and conditions of the Articles to the same extent as
the Selling Shareholder; non-submission thereof would result in the transfer
documents being incomplete and liable to be rejected by the Company.
V. PROCEEDINGS AT GENERAL MEETINGS
12. (a) No business shall be transacted at any general meeting unless a
quorum of members is present at the time when the meeting proceeds to business
and throughout the meeting. Quorum shall not be attained without the presence of
a representative of AMFB.
(b) Quorum shall be at least two members present in person of which
at least one representative of AMFB, shall be present in each such meeting.
Presence of a validly appointed proxy and/or a representative appointed pursuant
to Section 187 of the Act shall be counted towards quorum of the Company. The
Shareholder company may limit the rights of voting of Proxy, appointed by it, in
the meeting of shareholders. The rights may be restricted by providing
instructions to that effect on the proxy instrument.
13. The Chairman of the Board or in his absence some other director
shall preside as Chairman of the meeting.
14. A General Meeting (whether annual or extraordinary) of the Company
may be called by not less than twenty one days' notice in writing but may be
called by giving shorter
<PAGE>
4
than that specified above if consent is accorded thereto in writing by all of
the shareholders for the time being of the Company.
15. If within half an hour from the time appointed for holding a general
meeting, a quorum is not present the meeting shall stand adjourned to the same
day in the next week at the same time and place or to such other day and at such
time and place as the Chairman may determine.
VI. BOARD OF DIRECTORS
16. The first Directors of the Company shall be:
(i) Mr. Douglas Stanard;
(ii) Mr. Sanjay Chhabra
(iii) Mr. Deep Kalra.
17. The Management of the Company shall be vested with the Board of
Directors consisting of not less than 2 (two) and not more than 12 (Twelve)
Directors.
18. The rights of nomination and/or appointment of the Directors
conferred on the shareholders shall include the right at any time to remove any
such persons nominated or appointed by it and from time to time determine the
period for which such persons shall hold office as Directors. On withdrawal of
nomination, the Director would be deemed to have retired.
19. The Board may appoint an Alternate Director to act for a director
(Original Director) during his absence for a period of not less than three
months from the State in which the meetings of the Board are ordinarily held.
The Original Director shall have a right to recommend any other person to be his
alternate. The Alternate Director shall not hold office for a period longer
than the term of the Original Director.
20. The Directors of Company shall be paid such sitting fee for each
Board Meeting or meetings or any committee thereof as may be prescribed by the
Board of Directors from time to time and subject to the ceiling laid down by the
Act.
21. No Director or the Alternate Director of the Company shall be
required to hold any qualification shares.
VII. PROCEEDINGS OF BOARD
22. The Board of directors may meet for the dispatch of business and
shall so meet atleast once in every three months and atleast four such meetings
shall be held in every year. Such meetings may be held in India or abroad. The
Directors may adjourn and otherwise regulate its meeting, as it thinks fit.
23. No meeting of the Board of the Company shall be held unless at least
seven days written notice or a shorter written notice if all the Directors
entitled to vote accord
<PAGE>
5
their written consent thereto, of that meeting has been given to each Director
(including Alternate Directors) of the Company and a quorum is present. In the
meetings, only such agenda will be placed as is specified in the notice or
shorter notice to the Directors and the agenda shall not be changed in any
manner unless prior written approval of all Directors nominated/appointed by
AMFB, is obtained. Agenda of each meeting shall require prior approval of the
Chairman of the Company.
24. Resolutions, other than those, which the Act, specifically requires
to be passed at board meetings, shall be deemed to have been duly passed by the
Board in circulation, if the resolutions have been circulated in draft, together
with all necessary papers, if any, to all the directors, whether in India or
abroad, and have been approved by all of them.
25. One third of the total strength of the Board or two directors
personally present shall constitute quorum.
VIII. MANAGEMENT
26. The business of the Company shall be managed and conducted by the
Board. The day to day management of the Company shall be vested with the
Managing Director of the Company. The delegation of powers to the Managing
Director shall be decided by the Board. The Managing Director shall be subject
to the direction and superintendence of the Board and shall be a representative
of AMFB.
IX. DIVIDENDS
27. Subject to the Act and to these Articles, the Company may by
Ordinary Resolution declare dividends in accordance with the respective rights
of the members, but no dividend shall exceed the amount recommended by the
Board. Unless otherwise agreed in writing the amount of dividend on the shares
recommended by the Board in respect of the financial period shall be the maximum
amount considered taking into account the requirements of the Companies Act,
cash flows, business needs, expansion plans.
Subject to the Act, the Board may, from time to time, pay such
interim dividends as appear to it to be justified by the distributable profits
of the Company.
The Company shall pay dividends in proportion to the amount paid up
or credited as paid up on each share. The Board may deduct from any dividend
payable to any member all sums of money, if any, presently payable by him to the
Company on account of calls or otherwise in relation to the Shares.
X. ACCOUNTS
28. The Company shall cause to be kept proper books of account in
accordance with Section 209 of the Act.
6
<PAGE>
XI. COMMON SEAL
29. The Board shall provide for the safe custody of the Seal and the
Seal shall not be affixed to any instrument except by the authority of a
resolution of the Board and except in the presence of atleast one Director
and/or the Company Secretary or such other person(s) as the Board may appoint
for the purpose.
XII. AUDITORS
30. The Company shall, at each Annual General Meeting, appoint an
Auditor(s) to hold office until the next Annual General Meeting. The rights and
duties of the Auditors shall be regulated in accordance with Sections 233 to 234
of the Act.
XIII. NOTICES
31. a) The notice for each board meeting shall be required to be given
to each director of the company, whether residing in India or abroad, at the
address given, by such director to the Company.
b) The notice for general meeting shall be given to all
shareholders, whether in India or abroad, existing on the date of such notice
viz whose name is appearing in the Register of Members. Such notice shall be
given to all shareholders, at the address specified in the Register of Members,
or at any other address, specified in writing, one month in advance, to the
Company by the shareholder(s).
(c) The notice as mentioned above, may be sent by facsimile, telex,
registered post or courier.
<PAGE>
7
<TABLE>
<CAPTION>
Name, description, Signature Name, address,
occupation and address of description, occupation
of each subscriber Subscriber and signature of
witness
<S> <C>
Deep Kalra I witness the signatures of both
S/o Krishan Kalra the subscribers who have signed in my
E-369, Greater Kailash Sd/- presence at New Delhi
Part - II
New Delhi - 110 048
Service Sd/-
R. Sridhar
S/o P.G. Ramachandran
A5B-177A, Janakpuri
Sanjay Chhabra New Delhi - 110 058
S/o Krishan Kumar Chhabra Company Secretary
E-369, Greater Kailash Sd/-
Part - II
New Delhi- 110 048
Service
Sandeep Paul
S/o J. M. Paul
EC-22 SFS Flats, G-8 Area, Sd/-
Rajouri Garden,
P.O. Mayapuri
New Delhi- 110 064
Chartered Accountant
</TABLE>
Dated: 20 March 1997
Place: New Delhi
<PAGE>
SHARE CERTIFICATE
AMF BOWLING (INDIA) PRIVATE LIMITED
(Incorporated under the Companies Act, 1956)
Regd. Office: E-369, Greater Kailash, Part-II, New Delhi - 110 048
This is to certify that the person(s) named in this Certificate is/are the
Registered Holder(s) of the within mentioned share(s) bearing the distinctive
number(s) herein specified in the above Company subject to the Memorandum and
Articles of Association of the Company and that the Amount endorsed on reverse
has been paid up on each such share(s).
Equity Shares Each of Rs. 10/-
Reg.Folio No. 01 Certificate No. 1
Name(s) of Holder(s) : Mr Sanjay Chhabra
No. of Shares held : 10 (ten)
Distinctive No.(s) From 01 to 10 (both inclusive)
Given under the Common Seal of the Company this 22nd day of April 1997.
Managing Director
Director
Authorised Signatory
No transfer of all or any portion of the above share(s) will be registered
without production of this certificate
<PAGE>
SHARE CERTIFICATE
AMF BOWLING (INDIA) PRIVATE LIMITED
(Incorporated under the Companies Act, 1956)
Regd. Office: E-369, Greater Kailash, Part-II, New Delhi - 110 048
This is to certify that the person(s) named in this Certificate is/are the
Registered Holder(s) of the within mentioned share(s) bearing the distinctive
number(s) herein specified in the above Company subject to the Memorandum and
Articles of Association of the Company and that the Amount endorsed on reverse
has been paid up on each such share(s).
Equity Shares Each of Rs. 10/-
Reg. Folio No. 01 Certificate No. 1
Name(s) of Holder(s) : Mr Deep Kalra
No. of Shares held : 10 (ten)
Distinctive No.(s) From 11 to 20 (both inclusive)
Given under the Common Seal of the Company this 22nd day of April 1997.
Managing Director
Director
Authorised Signatory
No transfer of all or any portion of the above share(s) will be registered
without production of this certificate
<PAGE>
SHARE CERTIFICATE
AMF BOWLING (INDIA) PRIVATE LIMITED
(Incorporated under the Companies Act, 1956)
Regd. Office: E-369, Greater Kailash, Part-II, New Delhi - 110 048
This is to certify that the person(s) named in this Certificate is/are the
Registered Holder(s) of the within mentioned share(s) bearing the distinctive
number(s) herein specified in the above Company subject to the Memorandum and
Articles of Association of the Company and that the Amount endorsed on reverse
has been paid up on each such share(s).
Equity Shares Each of Rs. 10/-
Reg.Folio No. 01 Certificate No. 1
Name(s) of Holder(s) : Sandeep Paul
No. of Shares held : 1 (one)
Distinctive No.(s) From 21 to 21 (both inclusive)
Given under the Common Seal of the Company this 22nd day of April 1997.
Managing Director
Director
Authorised Signatory
No transfer of all or any portion of the above share(s) will be registered
without production of this certificate
<PAGE>
PRESENT CAPITAL STRUCTURE OF AMF BOWLING INDIA PRIVATE
LIMITED
Authorised Capital Issued and Paid Up Capital
Rupees Number of shares Rupees Number of shares
(Rupees ten per share) (Rupees ten per share)
5,000,000 500,000 210 21
<PAGE>
BY REGISTERED POST
No. FC.II. :301(97)/160(97)
Government Of India
Ministry Of Industry
Department Of Industrial Policy & Promotion
Secretariat For Industrial Assistance
Foreign Collaboration - II Section
New Delhi, the May 29, 1997.
To
AMF BOWLING INC.
8800 AMF DRIVE
RICHMOND VA 23227
USA
SUBJECT : Application for setting up of a 100% wholly owned
subsidiary in India.
(SIA Regn. No. FC.I. 160 dated 03/03/97)
Dear Sir
I am directed to refer to the above mentioned application and to convey
approval of Government of India to your proposal, subject to the following terms
and conditions, in addition to those detailed in Annexure I :-
1 Item(s) of manufacture/ 1): TO ESTABLISH A WHOLLY OWNED SUBSIDIARY
activity covered by the COMPANY IN INDIA TO UNDERTAKE THE
foreign collaboration FOLLOWING ACTIVITIES :-
- CARRYING OUT TRUNKEY INSTALLATIONS
OF BOWLING CENTRES AND RENDERING AFTER
SALES SERVICE IN ALL LARGE AND MEDIUM
SIZED CITIES IN INDIA;
-TO DIRECTLY OR INDIRECTLY, IMPORT AND
MARKET BOWLING EQUIPMENT IN INDIA;
- ESTABLISHING, MANAGING AND OPERATING
BOWLING CENTRES EITHER INDIVIDUALLY OR
JOINTLY;
- SETTING UP AN ASSEMBLING UNIT IN INDIA
AT A LATER STAGE;
- STRATEGY FORMULATION FOR INDIAN BUSINESS
AND ACTING AS A NODAL OFFICE FOR ALL EXISTING
AND FUTURE OPERATIONS OF AMF GROUP COMPANIES
IN INDIA AND;
- SOURCING FROM INDIA, FOR ITS OPERATIONS
WORLD WIDE, COMPONENTS AND PARTS USED IN
BOWLING CENTRES SUCH AS BOWLING SHOES,
PLASTIC SHEETS, TABLES, PARTS OF PINSPOTTER,
MACHINE, ELECTRONIC COMPONENTS FOR COMPU-
TERISED SCORING AND SOFTWARE.
2 Proposed Location : NOT INDICATED
3 Foreign Equity Participation: 100.00% (One Hundred percent) amounting to US
$1,00,000 (US Dollar One Lakhs) which may be increased to US $ 1.00 Million
in the next 6 to 8 years depending upon the business needs.
<PAGE>
4 Condition No. 2, 3 & 5 of Annexure I are not applicable.
5 This approval letter is made a part of the foreign collaboration agreement
to be executed between you and the foreign collaborator and only those
provisions of the agreement which are covered by the said letter or which
are not in variance with the provisions or the said letter shall be binding
on the Government of India or Reserve Bank of India.
6 You may now proceed to finalise the agreement.
7 This approval is valid for a period of two years from the date of issue.
Within this period, you are required to file the collaboration agreement
with the Reserve Bank of India/Authorised Foreign Exchange Dealer.
8 In case the proposed activity is not exempted from the provisions of
Industrial (Development & Regulation) Act, 1951 and the Foreign Exchange
Regulation Act, 1973 it will be your responsibility to obtain such
clearances as may be required under said Acts.
9 You shall not manufacture items reserved for the Small Scale Sector without
prior approval of the Government as per the prescribed policy and
procedure.
10 The Administrative Ministry for this project is the: Department of Human
Resource Development, New Delhi.
II. You may approach your Regional Office of Exchange Control Deptt. of Reserve
Bank of India for necessary permission under Section 19 of FERA, 1973 for
allotment of shares to Non-Residents.
III. You are requested to send Foreign Investment Remittance Certificate (FIRC)
to the Regional Office, Reserve Bank of India immediately on receipt of
foreign remittance.
IV. You are requested to furnish the informations as per the questionnaire at
Annexure II on Ist January & Ist July every year till the receipt of
approved foreign equity and commencement of production to the Secretariat
for Industrial Assistance (FC. II Section), Udyog Bhawan, New Delhi.
V. You are requested to acknowledge and confirm acceptance of the above terms
and conditions to Secretariat for Industrial Approvals (FC. II Section) and
the Administrative Ministry.
VI. All future correspondence for amendments / changes in terms and conditions
of the approval letter or for extension of its validity, if required, etc
may be addressed to the Entrepreneurial Assistance Unit of the Secretariat
for Industrial Assistance Udyog Bhavan, New Deli-11.
Yours faithfully
[SEAL] Seal of the Ministry of Industry
Government of India
( P.C. BHATT )
UNDER SECRETARY TO THE GOV. OF INDIA.
PH NO : 3017227
FAX No. : 3011770
<PAGE>
ANNEXURE-I
ADDITIONAL CONDITIONS
1. The total non-resident shareholdings in the Indian company should not exceed
the amount as well as the percentage specified in the approval letter. For any
proposal, increase in the amount, as also the percentage of the Non-Resident
shareholdings, prior approval of the Government shall be obtained.
2. (a) The royalty will be calculated on the basis of the net ex-factory sale
price of the product exclusive of excise duties minus the cost of the standard
bought-out components and the landed cost of imported components irrespective of
the source of procurement, including ocean-freight, insurance, custom duties
etc. The payment of royalty will be restricted to the licensed capacity plus 25%
in excess thereof for such items requiring industrial licence. In case of
production in excess of the quantum, prior approval of Government will have to
be obtained regarding the terms of payment of royalty in respect of such excess
production.
(b) The royalty would not be payable beyond the period of the agreement, if
the orders had not been executed during the period of agreement. However, where
the order booked during the period of agreement, but executed after the period
of agreement would be payable only after chartered accountant certifies that the
orders in fact have been firmly looked and execution began during the period of
agreement and the technical assistance was available on a continuing basis even
after the period of agreement.
3. The lumpsum shall be paid in three instalments detailed below unless
otherwise stipulated in the approval letter. First 1/3rd after the agreement is
filed with RBI authorised Foreign Exchange Dealer. Second 1/3rd on delivery of
technical documentation. Third and final 1/3rd on commencement of commercial
production or four years after the agreement is filed with RBI authorised
Foreign Exchange Dealer, whichever is earlier. The lumpsum can be paid in more
than three instalments subject to completion of the activities as specified
above.
4. All remittances to the foreign collaborator shall be made as per the
exchange rates prevailing on the day of remittance.
5. For undertaking export obligation, if any, specified in the approval letter,
the requisite guarantee, i.e. legal undertaking / bank guarantee, as may be
required should be furnished according to the detailed instructions issued by
the Director General of Foreign Trade (EO Cell), Ministry of Commerce, and the
Administrative Ministry, who may be contacted in the matter.
6. (a) The location of the industrial projects, will be subject to Central or
State Environmental laws or regulations including local zoning and land use laws
and regulations.
Contd...
- 2 -
<PAGE>
(b) Adequate stage shall be taken to the satisfaction of the Government to
prevent air, water and soil pollution. Such anti-pollution measures to be
installed should conform to the effluent and emission standards prescribed by
the State Goverment in which the factory or the industrial undertaking is
located.
7. Import of capital equipments, components and raw materials will be allowed
as per the import policy prevailing from time to time.
8. The agreement shall be subject to Indian Laws.
9. A copy of the collaboration agreement, signed by both parties may be
furnished to the following authorities:-
a) Administrative Ministry / Department
b) Secretariat for Industrial Assistance (Foreign Collaboration II
Section), Department of Industrial Policy & Promotion, Udyog Bhavan, New
Delhi - 110 011.
c) Department of Scientific and Industrial Research, Technology Bhavan, New
Mehrauli Road, New Delhi.
******
<PAGE>
ANNEXURE-II
1. Name of the Indian Company/
Partner(s)
2. Name of the foreign
collaborator
3. Item(s) of manufacture/
activities
4. Location of the factory/
unit
5. Terms of aprovals
i) Foreign Equity (Amount
and %age of paid up Capital)
ii) lumpsm know-how fee etc.
iii) Royalty etc.
6. Has the foreign collaboration
agreement been finalised and
filed with RBI? If yes, date,
if not, indicate reason and
likely date
7. Has the foreign equity been
received ? If yes indicate
amount and date. if not,
indicate reasons and likely
time schedule
8. Details of payments, if any,
released to the foreign coll-
aborators
9. Indicate briefly the effective
steps taken towards implemen-
tation e.g. incorporation, of
new joint venture company,
acquisition of land/construc-
tion of factory, installation
of plant & machinery etc.
10. Likely date of commencement
of the production
11. Employment generated by the
project in terms of numbers
12. Specific problems, if any,
being faced in implementation,
the reason thereof, and the
agency/organisation concerned.
ARTICLE OF ASSOCIATION
COMPANY'S FORM
Article 1.
1.1. The attorney, appearing for and on behalf of AMF Bowling, Inc. and AMF
Bowling Holdings, Inc. hereby establishes a company under the laws of
Poland in the form of spolka z ograniczana odpowiedzialnoscia (hereinafter
referred to as the "Company").
1.2. The shareholders of the Company are not liable for the debts of the
Company except for taxes and other statutory charges similar in effect to
taxes for which the shareholders have unlimited liability, to the extent
provided for in relevant regulations.
THE NAME AND DOMICILE OF THE COMPANY
Article 2.
2.1. The Company shall carry its business activity under the name: AMF Bowling
Poland spolka z ograniczona odpowiedzialnoscia. The shortened version of
the name AMF Bowling Poland sp. z o.o. may also be used.
2.2. The Company's legal domicile shall be in Warsaw.
THE OBJECTS OF THE COMPANY'S BUSINESS
Article 3.
3.1. The object of the Company's business shall be:
1) the importation, export, sale, purchase and distribution of bowling and
billard equipment and related products;
2) operation of bowling centers;
3) servicing, maintenance and repair of bowling and billard equipment;
4) agency, commissionaire and distribution services with respect to bowling
and billard equipment;
5) training and providing instructions related to the above activities;
6) other business activity allowed by law, after obtaining all required
permits and licenses.
-1-
<PAGE>
3.2. The Company may establish subsidiaries, branch offices and other kinds of
representation both in Poland and abroad and participate in other legal
entities both in this country and abroad, in accordance with the
requirements of the appropriate law.
COMPANY'S CAPITAL
Article 4
4.1. The share capital of the Company shall be 4,000 zl and shall be divided
into 80 shares of nominal value 50 zlotys each.
4.2. The shares shall be equal and indivisible. Each shareholder may have more
than one share.
4.3. The shares of the Company shall be subscribed in the following way:
(a) AMF Bowling, Inc. subscribes for 79 shares in exchange for the
contribution in cash of 3950 zlotys obtained from selling convertible
currencies to a Polish foreign exchange bank;
(b) AMF Bowling Holdings, Inc. subscribes for 1 share in exchange for the
contribution in cash of 50 zlotys obtained from selling convertible
currencies to a Polish foreign exchange bank.
INCREASING THE SHARE CAPITAL
Article 5
The share capital of the Company may be increased with one or several
resolutions of shareholders by making monetary and non monetary contributions
(in-kind). The increase of the share capital up to 400,000 zlotys shall not be
considered as an amendment to this Act of Association.
TRANSFER AND PLEDGE OF SHARES
Article 6
No transfer of shares of the Company shall be permitted without the
unanimous written consent of the nontransferring shareholders.
-2-
<PAGE>
REDEMPTION OF SHARES
Article 7
Shares may be redeemed. The Company may purchase its own shares for the
purpose of their redemption without the consent of the nontransferring
shareholders.
PROFITS
Article 8
The net profits as set out in the annual accounts of the Company may be excluded
from distribution upon resolution of the Shareholder's Meeting. The distribution
of profits among shareholders shall require the resolution of a Shareholders'
Meeting and shall be made in proportion to the shares.
GOVERNING BODIES OF THE COMPANY
Article 9
The governing bodies of the Company shall be:
a) the Management Board,
b) the Shareholders' Meeting.
MANAGEMENT BOARD
Article 10
10.1 The Management Board shall consist of 1 (one) to 4 (four) members
appointed by a Shareholders' resolution.
10.2 The first Board of Management shall consist of:
1) Douglas J. Stanard
2) Andrew Philip Harris
3) Tomasz Zatorski
4) Bent Enok Petersen
10.3 The Management Board shall manage the Company and represent the Company
in respect of third parties.
-3-
<PAGE>
10.4 Joint signature of any two members of the Management Board is required
to represent the Company and to sign on behalf of the Company.
10.5 Members of the Management Board are appointed for undefinite term. They
may be removed at any time by a resolution of the Shareholders' Meeting.
10.6 A member of the Management Board may not involve himself in a competing
business or join a rival company either as a registered partner or as a
member of one of its governing bodies.
SHAREHOLDERS' MEETING
Article 11
11.1 The resolutions of the Shareholders shall be passed at the Shareholders'
Meetings. Resolutions may be adopted without convening a meeting if all
shareholders agree in writing upon a resolution which is to be passed, or
upon a written voting. This does not apply to those resolutions which,
under the Commercial Code, cannot be taken by vote in writing. Whenever
this Act refers to a resolution of the Shareholders' Meeting it should
also mean a resolution of the shareholders taken in writing without
holding a formal meeting.
11.2 The Shareholders' Meeting may be held as an ordinary meeting or an
extraordinary meeting.
11.3 An Ordinary Shareholders' Meeting shall be convened by the Management
Board within (6) six months upon expiry of each fiscal year. Any
shareholder of the Company shall be authorized to call an Ordinary
Shareholders' Meeting if the Management Board has not done so within the
time limit defined above.
11.4 An Extraordinary Shareholders' Meeting shall be called by the Management
Board upon its own initiative or at the request of any Shareholder.
11.5 A Shareholders' Meeting shall be called by registered letters containing
notice of a Shareholders' Meeting at least 14 (fourteen) days prior to the
date of the Meeting. The notice of the Meeting should indicate the date,
hour and place of the Meeting together with a detailed agenda.
11.6 A Shareholders' Meeting shall have the right to adopt resolutions only
with regard to the matters included in the agenda, unless the entire
capital is represented at a Shareholders' Meeting and no one from among
those present refuses to approve a resolution not included in the agenda.
11.7 All Shareholders' Meetings shall be held in Warsaw.
- 4 -
<PAGE>
11.8 The voting shall be open. A secret ballot shall be held for motions
concerning the election or removal or commencing legal proceedings against
the members of the Company authorities or the Company liquidators, as well
as for personal matters. Furthermore, a secret ballot shall ever be held
upon the request of a single present voter.
11.9 The following matters shall require the adoption of a resolution of a
Shareholders' Meeting:
(a) approval of the company report, balance sheet and profit and loss
account for the preceding year and confirmation of the actions of
the company's governing bodies performed in the fulfillment of
their duties.
(b) all decisions concerning claims for the reparation of any damage
caused during incorporation or through the actions of management.
(c) the disposal and leasing of a business as well as for establishing
the right of usufruct on it.
(d) other matters which are required by the Commercial Code to be
decided by the Shareholders' Meeting.
(e) other matters specified in this Agreement or in the Commercial
Code.
11.10 The Articles of Association cannot be amended without the unanimous
consent of all shareholders.
FINANCIAL MATTERS
Article 12
12.1 The Management Board shall be responsible for keeping the appropriate
books of accounts and other general financial business records.
12.2 The fiscal year of the Company shall be the calendar year. The first
fiscal year of the Company shall end on December 31, 1997.
12.3 Within three months of the end of the financial year, the Board of
Management shall be obliged to prepare and make available to the
shareholders a balance sheet up to the last day of the financial year, a
profit and loss account for the previous year, and a detailed written
report on the Company's activities during that period.
- 5 -
<PAGE>
DISSOLUTION OF THE COMPANY
Article 13
13.1 The Company may be dissolved upon the unanimous resolution of the
Shareholders' Meeting.
13.2 The Company shall be dissolved and liquidated if one or more of the
Company's shareholders is expelled or placed in liquidation, dissolved or
voluntarily or involuntarily declared bankrupt.
13.3 The transfer of shares of the Company in violation of art. 5 hereof
constitutes an event of dissolution and liquidation of the Company within
the meaning of art.262.1 of the Commercial Code.
13.4 In the events indicated in art.13.1 and 13.2 above no further action will
be required to commence the liquidation and dissolution of the Company in
compliance with the Commercial Code.
13.5 Books and documents belonging to the dissolved Company shall be kept by a
person nominated by the Registration Court and shall use their best
efforts to cause the dissolution and liquidation of the Company as
promptly as possible in compliance with the Commercial Code.
FINAL PROVISIONS
Article 14
14.1 With respect to the appointment of the first Management Board these
Articles are deemed to be the minutes of the Shareholders' Meeting.
14.2 In all matters not regulated by this Act of Association the provisions of
the Polish Commercial Code shall apply.
14.3 The cost of the preparation of the Act shall be borne by the Company.
- 6 -
JOINT VENTURE AGREEMENT
Between
AMERICAN RECREATION CENTERS, INC.
and
CLAIR L. EATOUGH
Table of Contents
Recitals of Fact............................................................. 1
1. Name..................................................................... 1
2. Purpose.................................................................. 1
3. Term..................................................................... 2
4. Place of Business........................................................ 2
5. Capital Contributions.................................................... 2
A. ARC Contribution...................................................... 2
B. Eatough's Contribution................................................ 2
6. Capital Account.......................................................... 3
7. Sharing of Profits and Losses, Cash Flow................................. 4
8. Books of the Partnership................................................. 5
9. Time Devoted to Partnership.............................................. 5
10. Salaries; Drawings....................................................... 6
11. Bank Accounts............................................................ 6
12. Management and Control................................................... 6
13. Dissolution Procedures................................................... 7
14. Right of First Refusal................................................... 8
15. Arbitration.............................................................. 9
16. Notices.................................................................. 9
17. Execution of Other Documents............................................. 10
18. Presumptions............................................................. 10
19. Amendments............................................................... 10
20. Heirs, Successors and Assigns............................................ 10
Signatures................................................................... 10
i
<PAGE>
JOINT VENTURE AGREEMENT
THIS AGREEMENT, executed in duplicate as of July 6, 1982, 1982 is by and
between AMERICAN RECREATION CENTERS, INC., a California corporation, and CLAIR
L. EATOUGH, hereinafter referred to as "ARC" and "EATOUGH", respectively, and
collectively referred to as "the Partners" or "the Partnership".
RECITALS OF FACT:
A. ARC is a publicly held bowling and recreational chain and EATOUGH is an
architect, both of whom desire to cooperate in the development and possible
eventual sale of an office building and other facilities on certain unimproved
property in the process of being acquired by ARC.
B. ARC has arranged for the acquisition through a third party exchange, of
an unimproved parcel of land known as Parcel 15, as shown on Parcel Map
DL-78-04/06, filed April 18, 1979 in Book 14 of Parcel Maps, at Page 77, Placer
County, California land records. Said land is hereafter called "the Property",
and the eventual improvements and the land, together, are called "the
Development".
C. ARC and EATOUGH have tentatively agreed upon joint venturing the
Development, and a division of responsibilities. The purpose of this Agreement
is to establish a general partnership for the limited purpose of the proposed
joint venture. For convenience of terminology, the legal entity utilized will be
a general partnership and the parties are referred to in that terminology.
THE PARTIES HERETO AGREE AS FOLLOWS:
1. Name. The name of this Partnership shall be RQP LTD. (Rocklin Quarry
Properties). Upon execution of this Agreement or subsequent change in the
membership of the Partnership, the Partners shall sign, cause to be filed and
published in Placer County a Certificate of Fictitious Name setting forth the
name and place of business of each Partner as required by the California
Business and Professions Code, and a Statement of Partnership, as authorized
by the California Corporations Code.
2. Purpose. The purpose of the Partnership shall be to acquire, plan and
develop the Property into an office building and other suitable improvements,
called the Development--both while in process and when completed. It is
understood, however, that if it is in the best financial interest of the
Partnership as a whole, all or part of the Development may be sold prior to
completion of any or all of the proposed improvements. The basic intent of the
Partners is to make money from the Development, and not necessarily to fully
build out the Development.
Page 1
<PAGE>
3. Term. The Partnership shall be deemed to have commenced on May 27, 1982
and shall continue until the Development is either completed or sold unless
sooner terminated. The Partnership may not be unilaterally terminated, unless
both of the Partners shall mutually agree to terminate this Agreement. Any such
termination of the Partnership shall be as provided in this Agreement, or if no
provisions are made therefor, in accordance with the existing California
Partnership Law at the time of dissolution.
4. Place of Business. The principal place of business of the Partnership
shall be c/o American Recreation Centers, Inc., 2135 Butano Drive, Suite 214,
P.O. Box 60729, Sacramento, California 95860, or at such other place or places
as the Partners shall hereafter determine. It is understood, however, that the
Property is physically located in the Rocklin, California area.
5. Capital Contributions.
A. ARC Contribution. ARC will complete the acquisition of the
Property and contribute it to the Partnership along with all funds reasonably
necessary to cover all costs (exclusive of EATOUGH's contribution) of
developing the Property, and carrying the property until it has a positive
cash flow. The Partnership contemplates borrowing funds for the actual building
construction, if any.
B. EATOUGH's Contribution. EATOUGH will provide his expertise in the
development process as an architect and planner for the purpose of planning and
completing the Development contemplated hereby. Without limiting the generality
of the foregoing, EATOUGH will, at a minimum, provide all the necessary plans
and coordination of approval of plans for the development of all improvements
on the Property. EATOUGH's services will be those services normally provided
by an architect under contract for accomplishing the design and construction
of a major building project and shall include:
(1) Schematic designs studies consisting of drawings and other
documents illustrating the scale and relationship of the building components
including studies of the site development, the building floor plans, exterior
elevations, recommendations for basic materials and preliminary studies of the
structural, mechanical and electrical systems for approval by the Partnership
and public agencies having jurisdiction.
(2) Construction documents for approval by the Partnership (owner)
and all public agencies having jurisdiction which shall include detailed working
drawings, specifications setting forth the requirements for the construction of
the entire project and all necessary bid documents, including bidding forms,
general conditions and agreements between owner and contractor.
Page 2
<PAGE>
(3) Assisting the Partnership (owner) in obtaining bids and/or
negotiating proposals for doing the work of construction and awarding and
preparing the various construction agreements.
(4) Provide administration of the contract, including periodic
visits to the site to observe the progress and quality of the work and its
compliance with the contract documents and on the basis of observations to take
necessary actions to guard the owner against defects and deficiencies in the
work of various contractors.
(5) Review and approval of shop drawings, material samples and
submissions of proposals for the installation and selection of various
appliances, hardware, fixtures and other manufactured components of
construction. And, the approval of change orders and the implementation of acts
of closing out the project, including notices of completion, obtaining
guarantees and the execution of other legal documents and notices.
(6) The administration of the contract accounts, including
determining monies eligible to be paid to the contractors based on the progress
of the work and issuing certificates for payment and maintaining project
accounts.
EATOUGH shall be entitled to reimbursement for all actual out-of-pocket
expenses, such as filing fees, the cost of civil engineering services,
structural and mechanical engineering services, but he shall receive no direct
compensation for his professional services except through the division of
profits as described in Paragraph 7 below. He shall bear the cost of his own
personal services and the full cost of maintaining his office, including
salaries of his employees, employee benefits, insurances, rent and other
office overhead. To further clarify the limits of EATOUGH's responsibilities,
if in the event the Partnership agrees that there are advantages to the
Partnership (owner) having the architect assume the role of general contractor
to accomplish the work of construction through a segregated bid procedure with
individual subcontractors and workmen, it shall be necessary for the
Partnership to develop a separate agreement with EATOUGH to accomplish this
purpose. However, if the work of construction should not proceed of if the
work of construction is accomplished by awarding the work of construction
to a general contractor, EATOUGH's contribution will be limited to the services
as outlined above.
6. Capital Account. A capital account shall be maintained for ARC to which
shall be credited, or from which shall be deducted, its capital contributions
and withdrawals, as the case may be. ARC shall be entitled to interest on its
capital at the rate of fifteen percent (15%) per annum computed on the balance
from time to time. The Property contributed by ARC shall be reflected on its
capital account at the acquisition price, plus all closing costs and
improvements which may be performed by third parties on behalf of ARC, as shown
in the third party
Page 3
<PAGE>
escrow papers, and such contribution shall be deemed to have been made by ARC
from the date on which the third party acquiring the property for ARC actually
closed escrow or advanced funds for improvements on behalf of ARC. The purpose
of this provision is to recognize the fact that the Property is being acquired
by a third party, and improved through construction of certain on-and-off-site
improvements required by the City of Rocklin, and then said party will convey
the property to ARC, who will then convey the same to the Partnership. Since the
transaction is being accomplished as a tax-free exchange, ARC is being charged
with expenditures by the third party as of the date the third party expends the
funds on behalf of ARC, and any interest due on ARC's capital shall commence
from each change in the capital account and shall be computed on the balance as
it may be from time to time. For purposes of computing ARC's interest on
capital, it shall be based upon book capital, undiminished by any depreciation,
losses or otherwise taken for tax purposes. The only deduction from the capital
account for Partnership purposes will be for any distributions of capital to
ARC, if any, prior to termination and dissolution of the Partnership. The
capital account of EATOUGH shall be set at zero (0) at the outset, and no
advances of funds by EATOUGH shall be considered a capital contribution except
by mutual agreement of the Partners, and EATOUGH shall be reimbursed promptly by
the Partnership for any such advances upon receipt by ARC of the necessary
reasonable documentation for such advances by EATOUGH, which would be in the
form of filing fees and other expenses.
7. Sharing of Profits and Losses; Cash Flow.
A. A separate income account shall be maintained for each Partner.
Partnership net profits shall be credited to the separate income accounts of
the Partners as earned.
B. Recognizing that the final profit for the Development cannot be
determined until completion of improvements and either the disposition of the
improvements by sale or commencement of the Partnership to operate the
improvements as rental property, the Partners have agreed not to divide and
distribute any profits until the occurrence of one or the other of the
foregoing events. At the time of first distribution such determination shall be
made. During the Development of the Property all expenditures shall be
capitalized and added to the basis of the Property for determination of eventual
profit or loss, commencing upon the occurrence of one of the above events.
C. As provided in Paragraph 6, ARC shall be entitled to a fifteen
percent (15%) return on its capital contributed to the Partnership prior to any
determination of profit or loss for the Partnership, and such sum shall be
deemed a guaranteed payment for purposes of the Internal Revenue Code, which,
however, payment shall not be due and payable by the Partnership until such
time as the Partnership commences to have a "cash flow" from either operations
or sale of all or a part of the Development. Where appropriate, the Partnership
shall accrue the fifteen
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percent (15%) return on ARC's capital balance, and if not repaid, add said sums
to ARC's capital account at the close of each fiscal year. Said sums shall show
on the Partnership return as a guaranteed payment to ARC, but shall not be
reflected as an expense but as part of development costs. Out of the first
available cash flow from the Development, ARC shall first receive the accrued
but unpaid interest on its capital contribution. If other funds are available
from sale of the property for the return of ARC's capital, that shall occur
next, and if funds are still available thereafter, as of such date, they shall
be divided on a basis of fifty percent (50%) to ARC and fifty percent (50%) to
EATOUGH. Should initial cash flow be inadequate to pay all of the above sums,
such sums shall be paid in the priority set forth above until ARC has received
its return on capital held by the Partnership over a period of time in full, and
its capital contribution in full, and then and thereafter all of available net
cash flow shall be divided between the Partners as provided above. Should the
Partnership elect not to sell the Development, but to operate the same as a
rental property, then, rather than returning ARC's capital, ARC shall simply be
entitled to its fifteen percent (15%) first out of all net cash available, and
then the book profits shall be divided fifty-fifty (50-50) between the Partners.
In such case, however, the term "net cash flow" shall take into consideration
the fact that any loans on the property, other than those made by ARC, shall be
paid first, and then all additional capital expenditures shall be deducted, and
distribution to the Partners shall reflect only actual net cash available, and
not necessarily book or tax profit, which may differ by reason of the foregoing
items.
D. If the Partnership is holding the Development for rental purposes,
then to the extent deductions for depreciation on the assets of the Partnership
are allowable to the Partnership, and for operating expenses including interest
and other holding expenses, such deductions shall at all times be allocated
among the Partners in the proportion of fifty percent (50%) to ARC and fifty
percent (50%) to EATOUGH.
8. Books of the Partnership. The Partnership books shall be maintained on
a fiscal year basis, ending on the last Wednesday in May of each year. For
income tax purposes, the Partnership shall be on an accrual basis. The books
shall be kept by ARC at the Partnership office. Each Partner shall have the
right, at any time, during the business hours, to examine the said books and to
compare the same with any statements prepared from them. Failure of a Partner to
object to the books and statements prepared therefrom within two (2) years after
the close of the said books and distribution of the statements based on them,
shall be deemed conclusive evidence of its agreement that they are correct and
may not be reopened for any purpose. Monthly statements of profit and loss shall
be provided each Partner by ARC.
9. Time Devoted to Partnership. EATOUGH and a competent employee of ARC
shall be assigned to devote such time to the operation of the business and
completion of the Partnership
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Development as may be necessary to successfully conclude it under the Management
obligations described in Paragraph 13 below. It is understood, however, that
each of the Partners has other business interests and each may devote
substantially full time to such other business interests, provided only that
this does not unnecessarily interfere with the completion of this Partnership
Development.
10. Salaries; Drawings. Neither Partner nor their employees shall be
entitled to a salary, sales commission, or other direct compensation for
services performed for the Partnership. ARC shall be entitled to interest on
and the eventual return of its capital contribution. The Partners shall
otherwise only be entitled to the net cash flow as set forth in Article 7 above.
Drawings for the Partners from available "net cash flow", as provided
in Paragraph 7.C., shall be made from time to time as agreed by the Partners,
if the Development is rented and held. To the extent that the Development is
sold and the Partnership is required to take back mortgages or other paper,
distributions of cash to the Partners shall be based upon the above proportions
and priorities, but shall be made only from cash proceeds received by the
Partnership in the form of payments on such paper. The Partners may in such
case, by mutual agreement, decide to terminate the Partnership and to place such
paper for collection with a bank to be divided in accordance with the above
formula described in detail in Paragraph 7.
11. Bank Accounts. The Partnership shall maintain a general commercial
bank account in such bank as agreed upon from time to time. There shall be
deposited into such bank account all funds received by the Partnership.
Withdrawals from the general commercial bank account shall be made upon the
signature of an authorized representative of either Partner.
12. Management and Control.
A. The general duties of ARC and EATOUGH are set forth in Paragraph
5 in some detail, but may be summarized as the fact that ARC shall provide all
capital reasonably necessary, exclusive of loans for the Development, and
EATOUGH will provide all necessary professional services to accomplish the
Development. Each recognizes that this is a joint venture and that, while
certain things can be accomplished by each independently of the other, all acts
of the Partners shall be coordinated and taken only after consultation and
concurrence of the other. The Partners shall meet from time to time, as
necessary, to coordinate their respective duties, and it is agreed that all
significant decisions of the Partnership require the consent of both Partners
and that if they are unable to agree, the matter shall be determined by
arbitration as provided in Paragraph 15. Since ARC's obligation to fund the
capital of the Partnership is essentially unlimited, ARC shall not have any
obligation to advance capital based upon any arbitration award, but only the
obligation to assist in obtaining financing for the Partnership, if available
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for that purpose. ARC will, however, advance all sums reasonably necessary on a
day-to-day basis for normal expenditures required to accomplish the purposes of
this Partnership.
B. ARC agrees to accept the responsibility of doing all of the
accounting for the Partnership, at no cost to the Partnership, and shall provide
EATOUGH with financial statements as provided in the preceding paragraphs.
C. Notwithstanding the foregoing paragraphs, neither Partner shall
have the power or right to do any of the following on behalf of the Partnership
without the consent of the other:
(1) Mortgage or voluntarily encumber the Partnership's real
property;
(2) Sell, lease or otherwise dispose of any of the Partnership
real property;
(3) Enter into a joint venture or Partnership on behalf of the
Partnership with any other person or entity; or
(4) Enter into any contract binding the Partnership to the
payment of money in excess of FIVE THOUSAND DOLLARS ($5,000,000).
13. Dissolution Procedures.
A. In the event of the voluntary or involuntary dissolution of the
Partnership for any reason, the remaining Partner shall become the winding-up
Partner and be charged with the responsibility of winding-up the affairs of the
Partnership in accordance with the provisions of the California Partnership Law.
The Partner acting as the winding-up Partner shall have the right to retain,
and withhold from distribution to the Partners, a working capital fund
sufficient to insure that all obligations of the Partnership are paid, prior to
final dissolution and accounting of the Partnership.
B. The proceeds of the realization of the assets of the Partnership
shall be applied and distributed in the following order of priority:
(1) To the payment of the debts and liabilities of the
Partnership (other than any loans or advances that may have been made by the
Partners to the Partnership) and the expenses of liquidation;
(2) To the setting up of any reserve which the liquidating
Partner may reasonably deem necessary for any contingent or unforeseen
liabilities or obligations of the Partnership or of the liquidating Partner
arising out of or in connection with the Partnership or its liquidation. Such
reserves shall be paid over by the liquidating Partner to an attorney-at-law
or certified public accountant practising in the State of
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California, as escrow holder, to be held for the purpose of disbursing such
reserves in payment of any of the aforementioned contingencies, and, at the
expiration of such period as the general Partner shall reasonably deem
advisable, to distribute the balance thereafter remaining in the manner provided
in the following subdivisions of this Paragraph 13;
(3) To the repayment of any loans or advances that may have been
made by the Partners;
(4) To the repayment to ARC of its capital contributions to the
extent not already repaid, such repayment to be in cash based on capital
account balances;
(5) To the payment to ARC of the equivalent of fifteen percent
(15%) interest as a guaranteed return on its capital contributed to the
Partnership, computed on the capital account of ARC from time to time, as
described above in this Agreement;
(6) Any balance remaining shall be distributed fifty percent-
fifty percent (50%-50%) to the Partners; provided however, that a reasonable
time shall be allowed for the orderly liquidation of the assets of the
Partnership so as to enable the liquidating Partner to minimize the normal
losses attendant upon liquidation. Each of the Partners shall be furnished with
a statement prepared by the Partnership's then accountants, which shall set
forth the assets and liabilities of the Partnership as of the date of complete
liquidation.
14. Right of First Refusal. Notwithstanding the provisions of Paragraph 3
concerning mutual termination of the Partnership, and the provisions of
Paragraph 13 concerning dissolution, the parties agree, that whether the
Partnership continues to exist beyond the original development period or not,
and so long as each (or its successor in interest) owns an interest in the
Development, that if a Partner or tenant-in-common desires to sell or transfer
its interest in the Partnership or in any successor tenancy-in-common, such
selling or transferring Partner or co-tenant shall, prior to disposing of the
interest, offer the interest on the same terms to the remaining partner or
co-tenant who shall have ten (10) business days in which to accept the same.
This is a covenant running with the land which expressly binds all successors in
interest. Said covenant shall be included in any deed of dissolution or
partition by which title is conveyed from the Partnership to the individual
partners.
If the right of first refusal is not accepted by the other Partner or
co-tenant within the ten (10) days after receipt, then the selling or
transferring parties shall be entitled to make the transfer, provided only (1)
that it shall be on no more favorable terms to the buyer; and (2) that
reasonable evidence of the financial responsibility of the transferee shall be
given to the remaining Partner or co-tenant. The intent of this paragraph is to
provide a reasonable means of Right of First
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Refusal, and to make transfers of the Partnership, or any successor co-tenancy
possible, after the Development is completed, if the Right of First Refusal is
not exercised and if the transfer is on the same terms offered to the Partner
(co-tenant). A transfer made as a result of a rejection of a Right of First
Refusal, must be completed within sixty (60) days of giving of notice of the
intended transfer, or a new Right of First Refusal must be granted.
15. Arbitration.
A. Except for the right of either party to apply to a court of
competent jurisdiction for a Temporary Restraining Order to preserve the status
quo pending arbitration or to prevent irreparable harm pending the selection
and confirmation of a panel of arbitrators, the parties agree that any dispute
between the Partners under this Agreement involving its interpretation or
the obligations of a party thereto shall be determined by binding arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association, in the County of Sacramento, State of California, the place of
execution and the place of performance of the Agreement by ARC.
B. Arbitration may be conducted by one (1) impartial arbitrator by
mutual agreement or by three (3) arbitrators if the parties are unable to agree
on a single arbitrator within thirty (30) days of first demand for arbitration.
All arbitrators are to be selected from a panel provided by the American
Arbitration Association.
C. The arbitrators shall have the authority to permit discovery, to
the extent deemed appropriate by the arbitrators, upon request of a party.
The arbitrators shall have no power or authority to add to or detract from the
agreements of the parties, and the cost of the arbitration shall be borne
equally. The arbitrators shall have the authority to grant injunctive relief
in a form substantially similar to that which would otherwise be granted by a
court of law. The arbitrators shall have no authority to award punitive or
consequential damages. The resulting arbitration award may be enforced, or
injunctive relief may be sought, in any court of competent jurisdiction. The
parties expressly stipulate that the Superior Court of the County of Sacramento,
California or the United States District Court for the Eastern District of
California are courts of competent jurisdiction for this purpose.
16. Notices. All notices provided in this Agreement shall be in writing
and shall be sufficient if sent by United States mail to the last recorded
address of the Partner (in the Partnership records) to whom such notice is to
be given; alternatively, delivery of a notice by personal service shall be
sufficient.
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ARC's address is:
2135 Butano Drive, Suite 214
P.O. Box 60729
Sacramento, California 95860
EATOUGH's address is:
4501 Dartmouth Drive
Sacramento, California 95841
17. Execution of Other Documents. The Partners agree that they will
execute any and all further documents required by law, upon request of any
Partner or legal counsel for the Partnership.
18. Presumptions.
A. Titles and captions are not part of this Agreement.
B. California law governs construction and interpretation of this
Agreement.
C. This Agreement has been reviewed by legal counsel for each Partner
so that no presumption shall be made or asserted against either Partner on the
grounds of authorship of the Agreement.
19. Amendments. This Agreement may be amended only by a written addendum
hereto, signed by all of the Partners.
20. Heirs, Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon, the heirs, successors and assigns of all
Partners except as specifically provided herein.
EXECUTED at Sacramento, California as of May 27, 1982.
AMERICAN RECREATION CENTERS, INC.,
a California corporation
By /s/Robert<<<<<illegible>>>>>
_________________________________
President
/s/ Clair L. Eatough
____________________________________
CLAIR L. EATOUGH
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BROADWAY-GRAND PLAZA ASSOCIATES
JOINT VENTURE AGREEMENT
THIS AGREEMENT, executed in duplicate as of January 1, 1981, is by and
between AMERICAN RECREATION CENTERS, INC., a California corporation, and BERNAL
INVESTMENT, INC., a California corporation, hereinafter referred to as "ARC" and
"BERNAL" respectively, and collectively referred to as "the Partners" or "the
Partnership".
RECITALS OF FACT:
A. ARC is a publicly held recreational chain and BERNAL is a developer of
real property projects, both of whom desire to cooperate in the development of a
parcel of commercial land, located at the corner of Broadway and Grand Avenues,
Oakland, Alameda County, California, sometimes called "the Broadway Bowl
property".
B. The real estate project contemplated is basically the redevelopment of
the land now occupied by the old Broadway Bowl Building, the Hertz Rent-a-Car
Downtown Agency and possibly the two adjacent parcels under third party
ownership, into an office building complex together with parking and related
facilities.
C. ARC and BERNAL have agreed to joint venture the project. The purpose of
this Agreement is to establish a general partnership for the limited purpose of
the proposed joint venture. For convenience of terminology, the legal entity
utilized will be a general partnership and the parties are referred to using
that terminology.
D. ARC and BERNAL have already contributed cash and services as described
below, as a preliminary to formation of this entity.
THE PARTIES HERETO AGREE AS FOLLOWS:
1. NAME. The name of this Partnership shall be BROADWAY-GRAND PLAZA
ASSOCIATES. Upon execution of this Agreement or subsequent change in the
membership of the Partnership, the Partners shall sign, cause to be filed and
published in Alameda County a Certificate of
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Fictitious Name setting forth the name and place of business of each Partner as
required by the California Business and Professions Code, and a Statement of
Partnerships, as authorized by the California Corporations Code.
2. PURPOSE. The primary purpose of the Partnership shall be to redevelop
the Broadway Bowl property, and to construct and lease to third parties office
and commercial facilities on the Broadway Bowl parcel, either by the Partnership
or in a joint venture with third parties. If the Partnership is unable to do the
project itself or by a joint venture, the project may be sold by mutual
agreement of the parties to a third party. The said real property is more
particularly described on Exhibit "A" attached hereto and a plot plan is
attached as Exhibit "B". This real estate is hereafter generally called "the
property" herein.
3. TERM. The partnership shall be deemed to have commenced on January 1,
1981 and shall continue until December 31, 2041, unless sooner terminated. The
Partnership may not be voluntarily terminated except by mutual consent, until
the property has been re-developed and completed, or until sold as a project; if
not sold after the development is complete, however, the Partnership shall be
continued until December 31, 2041, unless both the partners shall mutually agree
to terminate the Agreement on a prior date. This is a partnership for a fixed
term. Termination of the Partnership shall be as provided in this Agreement, or
if no provisions are made herein, shall be in accordance with the existing
California General Partnership Law at the time of termination.
4. PLACE OF BUSINESS. Initially, the principal place of business of the
Partnership shall be c/o BERNAL INVESTMENT, INC., P.O. Box 2434, Dublin, Alameda
County, California 94566, or at such other place or places as the Partners shall
hereafter determine. It is understood, however, that the Property is located in
Oakland, Alameda County.
5. CAPITAL CONTRIBUTIONS.
A. ARC CONTRIBUTIONS.
(i) INITIAL STEPS. In July, 1978, ARC acquired the improved property
consisting of the Broadway Bowl building and the Hertz
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Rent-a-Car lot from S. DWIGHT SKAGGS in a transaction for a total purchase price
of One Million One Hundred Thousand Dollars ($1,100,000.00) plus commissions,
transfer taxes, and other out-of-pocket costs. The adjoining properties in the
block, consisting of a parcel of approximately 25 X 100 feet owned by LOVI and
another parcel of approximately 75 X 75 feet owned by HUNT, have not been
acquired by the Partnership. The Partnership may attempt to acquire one or both
of these parcels. The Hertz Rent-a-Car facility is subject to a lease that does
not expire until 1986, and the Partnership will endeavor to terminate or
otherwise modify that lease at an earlier date if it is possible to arrive at an
agreement with Hertz.
(ii) AGREED VALUE. The Partners agree that ARC has contributed
initial capital, through loan payments, taxes, and other holding and
acquisition costs in an aggregate amount of $332,466.29, through December
31, 1980. Such amount shall be deemed ARC's permanent capital contribution,
returnable only upon dissolution of the Partnership as a result of the sale
or other disposition of the real property. ARC shall not be entitled to any
interest or other compensation for such contribution, beyond its percentage
of interest in the Partnership profits, as described below. Such capital
contributions shall be reflected in the opening entries of the books of the
Partnership, based upon a schedule of such amounts paid out by ARC.
(iii) PROPERTY AND OBLIGATIONS. ARC will hold title to the
real property in its name, on behalf of the Partnership, until requested
to Deed it to the Partnership or to any subsequent joint venture or
partnership which this Partnership may join.* Upon such request by BERNAL,
the Partnership will pay all costs of transfer, but ARC shall not be
entitled to any compensation for the transfer. In the meantime, the
Partnership shall be solely liable for all costs of acquisition, ownership,
holding and developing the property which are or were incurred after
December 31, 1980. ARC shall account regularly to the Partnership for all
sums expended on behalf of the Partnership for any authorized purpose,
which sums shall be treated as loans to the Partnership as provided in
Paragraph 6 below.
* When so deeded, title shall be held as a partnership of the two parties,
subject to all the terms of this Agreement.
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B. BERNAL'S CONTRIBUTION. BERNAL shall not be required to make any cash
contribution to the capital of the Partnership, but BERNAL agrees to contribute
its best efforts in the form of its professional services reasonably necessary
for the planning and development of the project, and through consultation with
the realtors, engineers and architects as necessary during construction of the
proposed office and commercial building, and any other property development of
the property. The sole contribution of BERNAL shall be in the form of its
services to the Partnership, and the Partnership shall not be responsible for
payment to BERNAL for any such services.
The general scope of such services required by BERNAL, without further
compensation, shall be all those services listed above which are reasonably
necessary in order to accomplish the purposes of this Agreement. Notwith-
standing anything herein provided to the contrary, BERNAL will not act as the
general contractor with respect to the development of the Partnership real
property.
C. OUT-OF-POCKET EXPENSES. Except as provided in Paragraphs 5.A. and
5.B., neither Partner shall be entitled to reimbursement for actual out-of-
pocket expenses for its own personnel, who work on the Project, which costs
shall be borne by each Partner individually. Each Partner shall pay all salaries
and other expenses of its own operations as part of its own unreimbursed
contribution.
D. INDIVIDUAL CAPITAL ACCOUNTS. Individual capital accounts shall be
maintained for each Partner to which shall be credited, or from which shall be
deducted, a Partner's capital contributions and withdrawals, as the case may be.
6. PROVISIONS FOR WORKING FUNDS BY ARC.
A. ADVANCES. In order to provide the necessary working funds for the
Partnership (hereafter called "operating advances"), ARC agrees to advance to
the Partnership as a non-interest bearing loan all sums, agreed upon by the
Partners as necessary, to pay Partnership obligations for the mortgage
(including principal and interest) on the property, for payment of taxes and
operating expenses for the existing building. In addition, ARC further agrees to
advance all of the funds reasonably necessary for the purpose of paying for
legal, accounting, planning,
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engineering, architectural and other similar so-called "front-end" costs on a
pre-development basis, the amount of which advances shall be added monthly to
its operating advances account.
Further, if the Partners agree on the necessity of doing so, ARC shall
advance, itself, or arrange a loan for the Partnership against the Property or
the Partnership assets in general, in the amount necessary to acquire or
terminate the Hertz lease, and to acquire the two adjoining parcels owned by
LOVI and HUNT. The purpose of these provisions is to provide a means by which
the Partnership can acquire the necessary working, acquisition and operational
capital during the pre-development stage of the property without BERNAL putting
up any money. In the event that any money is borrowed on behalf of the
Partnership or by ARC for the Partnership, ARC shall be entitled to recover only
its actual borrowing costs for the money.
B. RETURN OF ADVANCES. Except as provided below in this Subparagraph
6.B., ARC shall be entitled to have the entire amount of its operating advances
returned to it, without interest, before any distributions of net cash flow or
net profits to the Partners. As soon as cash flow, either from the sale of the
project or from operations of the building development when completed, exceeds
financing amortization, expenses and a reasonable reserve for contingencies, all
of such cash flow shall be paid over the ARC, at least monthly, until the entire
amount of operating advances funded by ARC has been returned. When all operating
advances have been returned to ARC, then net cash flow shall be divided on the
percentage provided in Paragraph 7.A.
Notwithstanding the preceding paragraph, ARC agrees to reduce the cash
flow operating advance repayment to it by that sum reasonably necessary to allow
BERNAL funds necessary to pay corporate taxes on any taxable income created by
the project allocable to BERNAL. Such share of the net cash flow shall be paid
to BERNAL from cash flow fifteen (15) days prior to the date on which the tax is
due and payable. Such payment to BERNAL shall be charged against its future
share of net cash flow otherwise distributable to it, and deducted from future
payments. The amount deemed necessary for payment of taxes shall be
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determined by ascertaining BERNAL's share of California and U.S. taxable income
from the project for its taxable year, and then computing its Franchise and
Income tax as though the taxable income from the Project were its only income
for that period, without regard to any deductions or expenses. If there is no
taxable income attributable to BERNAL from the project, then no amount shall be
paid BERNAL until ARC's reimbursement is complete.
7. SHARING OF PROFITS AND LOSSES; CASH FLOW.
A. The net profits and losses of the Partnership shall be shared on
the basis of Sixty (60%) percent of ARC and Forty (40%) percent to BERNAL. The
term "net profit" as used in this Agreement shall mean the net book profit
determined by the accountants employed for the Partnership at the close of each
fiscal year.
B. Notwithstanding the book or tax amount of "net profit" ARC and
BERNAL agree to divide only the actual "net cash flow" from the operation of the
Partnership on a Sixty percent - Forty percent (60% - 40%) basis, and to
distribute the same monthly, after the return of ARC's "operating advances" as
provided in Paragraph 6.B.
C. A separate income account shall be maintained for each partner.
Partnership net profits shall be credited to the separate income accounts of the
Partners as earned.
8. ADDITIONAL CAPITAL FOR ACTUAL CONSTRUCTION. The Partners agree in
advance that ARC is not responsible for advancing the necessary capital to
proceed with actual construction and development and that the provisions of
Paragraph 6 above apply only to pre-development expenses. The Partners realize
that due to the very large capital requirements of developing the Project beyond
the pre-development stage, it will require that the Project either be financed
through equity participation by a lender or through equity participation by a
third party with a substantial loan from a third party lender.
It is further agreed that in any such participation by third parties the
dilution of interest in the profits shall apply on a pro-rata basis so that, for
example, if the equity participant brought in
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to obtain development funds were to have a total participation of Thirty-Three
and 33/100 percent (33.3%), then ARC's interest in the profits or ownership of
the project would be reduced by Twenty percent (20%) to Forty percent (40%) and
that of BERNAL by Thirteen and 33/100 percent (13.33%) to Twenty-Six and 66/100
percent (26.66%), subject, however, to ARC's continuing rights to recover its
operating advances as described in Paragraph 6.B.
In the event that third parties are brought in as equity participants,
either this Partnership will form a new partnership with the equity participants
or this Partnership shall be amended to reflect the inclusion of the third party
or parties, but always subject to ARC's prior rights to recovery of its
operating advances as described in Paragraph 6.B.
The Partners agree to work in good faith to integrate such a partner
into the Project, but if they are unable to agree upon such equity partner or
the basis of its participation, then the Project will be sold, and out of the
proceeds of the sale, ARC shall first be entitled to recover its operating
advances; each party shall then recover the balance, if any, in its capital
account; and then the profit on the sale shall be divided by the Partners on the
basis of the Sixty - Forty percentage (60% - 40%) described in Paragraph 7
above.
9. BOOKS OF THE PARTNERSHIP. The Partnership books shall be maintained
on the same fiscal year basis as that of ARC (a 52-53 week year ending on the
last Wednesday of May of each year), and for income tax purposes, shall be on a
cash basis to the extent allowed by law. Initially, the books shall be kept by
BERNAL at its general offices under the supervision of ARC. Each Partner shall
have the right, at any time during business hours, to examine the said books and
to compare the same with any statements prepared from them. Failure of a Partner
to object to the books and statements prepared therefrom within two (2) years
after the close of the said books
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and distribution of the statements based on them, shall be deemed conclusive
evidence of its agreement that they are correct and may not be reopened for any
purpose, except fraud. Monthly statements of profit and loss shall be provided
each partner by BERNAL.
10. TIME DEVOTED TO PARTNERSHIP. Competent employees of each of the
Partners shall be assigned to devote such time to the operation of the business
and completion of the Partnership projects as may be reasonably necessary to
successfully conclude it under the Management obligations described in Paragraph
13 below. It is understood, however, that each of the Partners has other
business interests and each may devote its full time to such other business
interests, provided only that this does not unnecessarily interfere with the
timely completion of this Partnership project.
11. SALARIES; DRAWINGS. Neither partner nor its employees shall be
entitled to a salary, sales commission, or other direct compensation for
services performed for the Partnership. However, each Partner shall be entitled
from time to time to reimbursement for ordinary and necessary actual
out-of-pocket expenditures made on behalf of the Partnership business only after
completion of the development of the property.
Drawings for the Partners from available "net cash flow" shall be made
only as provided in paragraph 7. B. above.
12. BANK ACCOUNTS. The Partnership shall maintain a general commercial
bank account in such bank as may be agreed upon from time to time. There shall
be deposited into such bank account all funds received by the Partnership.
Withdrawals from the general commercial bank account shall be made upon the
signature of an authorized representative of either Partner, or as agreed from
time to time.
-8-
<PAGE>
13. MANAGEMENT AND CONTROL.
A. ARC had the responsibility of acquiring the property, and jointly
with BERNAL is carrying out the responsibilities of deciding on development
alternatives, as well as eventual financing. ARC shall continue to provide
direction as to the development of the Project and in general participate
in the project. The basic responsibility of BERNAL shall be to serve as the
lead in working up the development of the Project and the financing
alternatives, including working with the necessary professionals.
B. Upon completion of the Project, the Partners shall agree upon a
method of having all of the accounting done for the Partnership by themselves
or through a third party. Neither Partner has the authority, alone, to incur
obligations for financing on behalf of the Partnership, except by mutual
agreement.
C. Notwithstanding the foregoing paragraphs, neither Partner shall
have the power or right to do any of the following on behalf of the Partnership
without the consent of the other:
(1) Mortgage or voluntarily encumber the Partnership's real
property;
(2) Sell, lease or otherwise dispose of any of the Partnership
real property;
(3) Enter into a joint venture or Partnership on behalf of the
Partnership with any other person or entity; or
(4) Enter into any contract binding the Partnership to the
payment of money in excess of One Thousand ($1,000.00) Dollars, once the
improvements are complete, and Five Thousand ($5,000.00) Dollars prior to
that time.
14. DISSOLUTION PROCEDURES.
A. In the event of the voluntary or involuntary dissolution
of the Partnership for any reason, all remaining Partners or the surviving
Partner shall become the winding-up Partner and be charged with the
responsibility of winding up the affairs of the Partnership
-9-
<PAGE>
in accordance with the provisions of the California Partnership Law.
The Partner acting as the winding-up Partner shall have the right to retain,
and withhold from distribution to the Partners, a working capital fund
sufficient to insure that all obligations of the Partnership are paid, prior
to final dissolution and the final accounting and distribution of the
Partnership assets.
B. The proceeds of the disposition of the assets of the Partnership
shall be applied and distributed in the following order of priority:
(1) To the payment of the current debts and liabilities of the
Partnership (other than long-term financing of the improvements and any loans
or advances that may have been made by the Partners to the Partnership) and
to the expenses of liquidation;
(2) To the setting up of any reserve which the Liquidating
Partner may reasonably deem necessary for any contingent or unforeseen
liabilities or obligations of the Partnership or of the Liquidating Partner
arising out of or in connection with the Partnership or its liquidation.
Unless otherwise agreed by the Partners, such reserves shall be paid over
by the Liquidating Partner to an attorney-at-law or certified public accountant
practicing in the State of California, as escrow holder, to be held for the
purpose of disbursing such reserves in payment of any of the aforementioned
contingencies, and, at the expiration of such period as the General Partners
shall reasonably deem advisable, to distribute the balance thereafter remaining
in the manner provided in the following sub-divisions of this Paragraph B;
(3) To the repayment of any loans, or operating advances that
may have been made by the Partners, as provided above in Paragraph 6.A.
(4) Each party shall then recover the balance in its capital
account, if any; and
-10-
<PAGE>
(5) Any balance remaining shall be distributed Sixty percent -
Forty percent (60% - 40%) to the Partners; provided, however, that a
reasonable time shall be allowed for the orderly liquidation of the assets
of the Partnership so as to enable the Liquidating Partner to minimize
the losses possible upon liquidation. Each of the Partners shall be furnished
with a statement prepared by the Partnership's then accountants, which shall
set forth the assets and liabilities of the Partnership as of the date of
complete liquidation.
15. RESTRICTIONS ON TRANSFER; RIGHT OF FIRST REFUSAL. The interest
of a Partner may not be transferred, voluntarily or by operation of law,
except as provided in this Paragraph 15. Further, the provisions of this
paragraph shall continue to apply to any interest held by the Partners as
tenants in common or in any other successor entity, unless all Partners under
this Agreement agree to the contrary. These restrictions are covenants
running with the land to be owned by the Partnership, which shall be
incorporated in any deed to a successor entity so as to bind all successors
in interest, unless expressly waived by the then Partners.
Prior to commencement of construction or for a period of five (5)
years, whichever first occurs, no transfer may be made of an interest held
by a Partner. Once construction has commenced, a transfer may be made,
provided that if either Partner desires or proposes to sell or transfer all
or any portion of its interest in the Partnership (or any successor
entity) then such selling or transferring Partner shall first offer the
Partnership interest proposed to be transferred to the other Partner on the
same terms and conditions, and shall identify the proposed transferee;
provided, however, all Partners under this or any successor agreement may
agree to waive this right of first refusal. The non-selling Partner shall
then have ten (10) business days in which to accept or reject the offer. If
the offer is not accepted by the non-selling Partner within the ten (10)
day period, then the selling Partner shall be free to make the transfer,
provided that (1) it shall be to the party identified in the notice of sale;
(2) it shall be on no less favorable terms than offered to the non-selling
Partner;
-11-
<PAGE>
(3) the transferee shall be obligated to provide the non-selling Partner,
prior to the transfer, with reasonable evidence of comparable financial
responsibility to that of the selling Partner; and (4) the transferee shall
expressly assume all of the obligations hereunder of the transferor. A transfer
made as a result of a rejection of the right of first refusal by a Partner must
close, if at all, within sixty (60) days following the expiration of the ten
(10) day notice period, or new notice must be given to the non-selling Partner.
A "tax free exchange" is expressly prohibited under this Paragraph 15,
unless the proposed transferor has demonstrated to the non-selling
Partner that the values involved in the exchange are realistic and that
the exchange is not for the purpose of avoiding the restrictions of this
Paragraph 15. The non-selling Partner shall have the right to meet or
match the proposed transaction with the identical property within a
period of fifteen (15) days, and if unable to meet such terms, the
selling Partner shall be entitled to complete the exchange as proposed.
In all events the non-selling (or non-exchanging) Partner shall be
entitled to the same notice of intended transfer and to the same
transfer conditions being imposed on the new transferee, even though the
non-exchanging Partner cannot participate in the exchange.
Notwithstanding anything in this Paragraph 15 to the contrary, either
Partner shall have the right, at any time, upon ten (10) days' written
notice to the other to transfer, without the above restrictions, all or
any part of its interest in the Partnership to a wholly owned corporate
subsidiary, provided that (1) such transfer shall not relieve the
original Partner of any obligation hereunder; (2) the transferee
corporation shall expressly assume the obligations of the transferor,
without releasing the transferor; and (3) the transferee corporation
shall expressly agree in such assumption agreement that it has no such
further right to transfer to a subsidiary without the consent of the
other Partner, and such subsidiary shall have no right to transfer its
interest in the Partnership to any other person, firm or corporation
without complying with the terms of this Paragraph 15.
-12-
<PAGE>
16. ARBITRATION. Any controversy arising out of or related to this
Agreement or the breach of this Agreement shall be settled by arbitration at
Sacramento, California in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof; provided only, that an accounting may be obtained
by court proceedings in lieu of arbitration. The neutral arbitrator (or if only
one, then the only arbitrator) shall be an attorney at law, licensed to practice
in California. The Partners may agree to an informal arbitration, but only by
mutual agreement.
17. NOTICES. All notices provided in this Agreement shall be in writing
and shall be sufficient if sent by United States mail to the last recorded
address of the Partner (in the Partnership records) to whom such notice is to be
given; alternatively, delivery of a notice by personal service shall be
sufficient.
The address of each is:
AMERICAN RECREATION CENTERS, INC. BERNAL INVESTMENT, INC.
P.O. Box 60729 P.O. Box 2434
Sacramento, CA 95860 Dublin, CA 94566
18. EXECUTION OF OTHER DOCUMENTS. The Partners agree that they will,
from time to time, execute any and all further documents required by law, upon
request of any Partner or legal counsel for the Partnership.
19. PRESUMPTIONS. Title and captions are not part of this Agreement.
California law governs construction and interpretation of this Agreement. This
Agreement has been reviewed by legal counsel for each Partner so that no
presumption shall be made or asserted against either Partner on the grounds of
authorship of the Agreement.
20. AMENDMENTS. This Agreement may be amended only by a written addendum
hereto, signed by all of the Partners.
21. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, the heirs, successors
-13-
<PAGE>
and assigns of all Partners except as specifically provided herein.
EXECUTED at Sacramento, California as of January 1, 1981.
AMERICAN RECREATION CENTERS, INC.,
a California corporation
By /s/ illegible
-------------------------------
Officer
BERNAL INVESTMENT, INC.,
a California corporation
By /s/ illegible
---------------------------------
Officer
-14-
<PAGE>
That parcel of land in the City of Oakland, County of Alameda, State of
California, described as follows:
A portion of Block 9, "Map of Resubdivision of Block 9, Pacific Homestead",
filed May 23, 1873, Map Book 3, page 30, Alameda County Records, described as
follows:
Beginning at the point of intersection of the western line of Broadway with the
southern line of 23rd Street, formerly Locust Street, as said way and street are
shown on the map herein referred to; thence westerly along said line of 23rd
Street 219.63 feet, more or less, to a point 100 feet easterly from the eastern
line of Valley Street; thence at right angles southerly 100 feet; thence at
right angles westerly 25 feet; thence at right angles northerly 25 feet; thence
at right angles westerly 75 feet, more or less, to the easterly line of Valley
Street; thence southerly along said easterly line of Valley Street 115.18 feet,
more or less, to the northern line of West Grand Avenue, formerly 22nd Street as
said street was established by Final Decree of Condemnation in that certain
action entitled "City of Oakland, a municipal corporation, vs. Albert E. Kern,
et al.", Case No. 113095, a certified copy of which Decree was recorded March
28, 1932, in Book 2793 of Official Records of Alameda County at page 175; thence
south 77 degrees 18' 22" east along the last named line 270.18 feet to the point
of intersection with the western line of Broadway as said way is shown on said
Decree recorded in Book 2793 OR, at page 175; thence northerly along said line
of Broadway 200.17 feet, more or less, to the southern line of 23rd Street and
the point of beginning.
Legal Of Existing Broadway Bowl
EXHIBIT A
<PAGE>
[FIGURE OF PLOT]
Plot Plan Of Total Parcel Including Broadway Bowl Property
EXHIBIT B
<PAGE>
September 11, 1996
Mr. Gerald D. Eschen
Bernal Investments, Inc.
P.O. Box 2434
Dublin, CA 94568
Re: Union City Release Cancellation
Dear Jerry:
This letter confirms our agreement concerning the early termination of the lease
between us for Union Square Lanes located at 14 Union Square, Union City,
California.
The lease was originally entered into between Union City Associates, as
landlord, and American Recreation Centers, Inc. ("ARC"), as tenant, on March 1,
1980 for a term of 20 years ending on February 29, 2000.
Bernal Investment, Inc. ("Bernal") is now the successor to the original
landlord, and we have agreed to terminate the lease effective April 12, 1996
("effective date"). We have removed all of our personal property from the
premises, and you have accepted the premises back in its present "as is"
condition.
In return for this early termination, we have agreed to pay Bernal an early
termination fee of One Hundred Ninety One Thousand, Three Hundred Sixteen and
No/100 Dollars ($191,316).
This early termination fee ("fee") shall be payable out of ARC Properties,
Inc.'s ("ARCP") share of the gain on the sale of the real property owned with
you and commonly known as "Broadway-Grand" located in Oakland, California.
Until paid, the fee shall bear interest at 8% per annum, but may be prepaid by
ARC or ARCP at any time without penalty.
On the effective date Bernal and ARC shall be fully and unconditionally released
and discharged from their respective obligations arising from or connected with
the provisions of the lease. This letter agreement shall fully and finally
settle all demands, charges, claims, accounts, or causes of action of any
nature, including, without limitation, both known and unknown claims and causes
of action that arose out of or in connection with the lease, and it constitutes
a mutual release with respect to the lease. Bernal and ARC expressly waive the
provisions of Civil Code section 1542, which provides:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
If this meets with your approval, please acknowledge the bottom portion of this
letter and return an executed copy to me.
Sincerely,
AMERICAN RECREATION CENTERS, INC.
By: /s/ Robert A. Crist
------------------------------
Robert A. Crist, President and CEO
READ AND AGREED:
BERNAL INVESTMENTS, INC.
By: /s/ Gerald D. Eschen
------------------------------
Gerald D. Eschen, President
ARC PROPERTIES, INC.
By: /s/ Robert A. Crist
------------------------------
Robert A. Crist, President and CEO
EXHIBIT 4.1
NUMBER
AMF
COMMON STOCK COMMON STOCK
[LOGO] SHARES
THIS CERTIFICATE IS TRANSFERABLE IN
NEW YORK, N.Y. AND RIDGEFIELD PARK, N.J.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
CUSIP 03113V 10 9
[AMF SYMBOL] SEE REVERSE FOR CERTAIN DEFINITIONS
[AMF SEAL]
AMF Bowling, Inc.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF
CERTIFICATE OF STOCK
AMF Bowling, Inc. (hereinafter the "Corporation"), transferable on the books of
the Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate is not
valid until countersigned by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
(RIDGEFIELD PARK, N.J.)
BY /s/ Stephen E. Hare TRANSFER AGENT
-------------------------------- AND REGISTRAR
AUTHORIZED SIGNATURE
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
/s/ Douglas J. Stanard
- ------------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
AMF Bowling, Inc.
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof of the Corporation and the qualifications, limitations or restrictions
of such preferences and/or rights. Such request may be made to the Corporation
or the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- Custodian
--------------------- --------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
---------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received,the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------------------------------------------------------------------- shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________
(Signature)
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- -------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of
November 7, 1997 among AMF BOWLING WORLDWIDE, INC. (formerly known as AMF Group
Inc.), a Delaware corporation (the "Borrower"), the banks, financial
institutions and other institutional lenders listed on the signature pages
hereof as the Initial Lenders (the "Initial Lenders") and the banks listed on
the signature pages hereof as the Initial Issuing Banks (the "Initial Issuing
Banks"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("Goldman") and CITICORP SECURITIES,
INC., as arrangers (the "Arrangers"), GOLDMAN, as syndication agent (together
with any successor appointed pursuant to Article VII, the "Syndication Agent"),
CITIBANK, N.A. ("Citibank"), as administrative agent (together with any
successor appointed pursuant to Article VII, the "Administrative Agent") for the
Lender Parties (as hereinafter defined) and CITICORP USA, INC. ("Citicorp") as
collateral agent (together with any successor appointed pursuant to Article VII,
the "Collateral Agent", and together with the Syndication Agent and the
Administrative Agent, the "Agents").
PRELIMINARY STATEMENTS:
(1) The Borrower has previously entered into a Credit
Agreement dated as of May 1, 1996 (as amended, supplemented or otherwise
modified through but not including the Second Closing Date, the "Original Credit
Agreement") with certain Lender Parties and the Agents party thereto.
(2) The Borrower, certain Lender Parties and the Agents
amended and restated the Original Credit Agreement and entered into an Amended
and Restated Credit Agreement dated as of December 20, 1996 (as amended,
supplemented or otherwise modified through but not including the Third Closing
Date (as hereinafter defined), the "Second Credit Agreement").
(3) The Borrower, certain lenders (the "Existing Lenders"),
certain other Lender Parties and the Agents amended and restated the Second
Credit Agreement and entered into a Second Amended and Restated Credit Agreement
dated as of June 30, 1997 (as amended, supplemented or otherwise modified
through but not including the date hereof, the "Existing Credit Agreement").
(4) The Borrower is a direct, wholly owned Subsidiary (as
hereinafter defined) of AMF Group Holdings Inc., a Delaware corporation
("Holdings"), which is a direct, wholly owned Subsidiary of AMF Bowling, Inc.
(formerly known as AMF Holdings Inc.), a Delaware corporation ("Parent").
(5) Parent and Holdings were organized by GS Capital Partners
II, L.P., GS Capital Partners II Offshore, L.P. and Goldman, Sachs & Co.
Verwaltungs GmbH (collectively, together with The Goldman Sachs Group L.P.,
Stone Street Fund 1995 L.P., Stone Street Fund 1996 L.P., Bridge Street Fund
1995 L.P. and Bridge Street Fund 1996 L.P. and in each case any successor funds,
the "Goldman Investors") to acquire control, together with the other Equity
Investors (as hereinafter defined), of AMF Bowling, Inc., a Virginia
corporation, AMF Bowling Centers, Inc., a Virginia corporation, AMF Worldwide
Bowling Centers Group and their respective Subsidiaries (collectively, the
"Company").
(6) Pursuant to the Stock Purchase Agreement dated February
16, 1996 (as amended, supplemented or otherwise modified in accordance with its
terms, to the extent permitted in accordance with the Loan Documents (as
hereinafter defined), the "Purchase Agreement") between Holdings and the Sellers
(as defined therein), Holdings proposed to acquire all of the outstanding common
stock of the Company (the "Stock Acquisition"), in the case of AMF Bowling and
AMF Bowling Centers (each as hereinafter defined), through two intermediate
holding company Subsidiaries (the "Intermediate Companies"), and to acquire from
the Retained Entities and WBB (each as defined in the Purchase Agreement)
certain assets (the "Asset Acquisition", and together with the Stock
Acquisition, the "Acquisition"). Immediately upon the consummation of the
Acquisition, one of the Intermediate Companies was merged into AMF Bowling and
the other Intermediate Company was merged into AMF Bowling Centers.
(7) On August 21, 1997, Parent filed a Form S-1 with the
Securities and Exchange Commission (the "Form S-1") in connection with an
initial public offering (the "IPO") of its common stock for gross cash proceeds
of up to $250,000,000. Parent will use the Net Cash Proceeds from the IPO to
make a capital contribution to the Borrower. The Borrower has requested that the
Existing Lenders and the Agents amend the Existing Credit Agreement in order to,
among other things, permit the Borrower to convert the outstanding Acquisition
Commitments and Acquisition B Commitments and certain outstanding Term Loan
Commitments (each as defined in the Existing Credit Agreement) into Working
Capital Commitments, prepay a portion of outstanding Working Capital Advances on
a temporary basis and prepay a portion of the Subordinated Notes (as hereinafter
defined).
(8) The Existing Lenders and the Agents have agreed to amend
and restate the Existing Credit Agreement on the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquisition" has the meaning specified in the Preliminary
Statements.
"Adjusted EBITDA" means, at any time, in the case of any New
Center, the product of (a) the Average EBITDA Margin calculated as of
the end of the fiscal quarter immediately preceding the fiscal quarter
in which the time of the acquisition or construction of such New Center
(within the meaning of the definition of "New Center" contained in this
Section 1.01) occurs and (b) the Specified Revenues of such New Center.
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with
Citibank at its office at 399 Park Avenue, New York, New York 10043,
Account No. 3885-8061, Attention: Alexandra Lozovsky.
"Advance" means a Term Loan Advance, an AXELs Series A
Advance, an AXELs Series B Advance, a Working Capital Advance or a
Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling," "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agents" has the meaning specified in the recital of parties
to this Agreement.
"AMF Bowling Centers" means AMF Bowling Centers, Inc., a
Virginia corporation and an indirect wholly owned Subsidiary of the
Borrower.
"AMF Bowling Products" means AMF Bowling Products, Inc., a
Virginia corporation and an indirect wholly owned Subsidiary of the
Borrower.
"AMF Worldwide" means AMF Worldwide Bowling Centers Holdings
Inc., a Delaware corporation and an indirect wholly owned Subsidiary of
the Borrower.
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a
Base Rate Advance and such Lender Party's Eurodollar Lending Office in
the case of a Eurodollar Rate Advance.
"Applicable Margin" means (a) from the Fourth Closing Date
until the one-year anniversary of the Fourth Closing Date, a percentage
per annum determined by reference to the Total Debt/EBITDA Ratio as set
forth below:
<TABLE>
<CAPTION>
Applicable Margin
Facility Total for Base Applicable Margin for
Debt/EBITDA Ratio Rate Advances Eurodollar Rate Advances
-------------------------------------------------------------------------------------------
<S> <C>
Working Capital Level I
Facility and Term less than or equal to 0.750% 1.750%
Loan Facility 5.50:1
Level II
greater than 5.50:1 0.875% 1.875%
-------------------------------------------------------------------------------------------
AXELs Series Level I
A Facility less than or equal to 1.000% 2.000%
5.50:1
Level II
greater than 5.50:1 1.125% 2.125%
-------------------------------------------------------------------------------------------
AXELs Series Level I
B Facility and New less than or equal to 1.250% 2.250%
AXELs Series B 5.50:1
Facility
Level II
greater than 5.50:1 1.375% 2.375%
===========================================================================================
</TABLE>
and (b) thereafter, a percentage per annum determined by reference to
the Total Debt/EBITDA Ratio as set forth below:
<TABLE>
<CAPTION>
Facility Total Debt/ Applicable Margin for Applicable Margin for
EBITDA Ratio Base Rate Advances Eurodollar Rate Advances
=============================================================================================
<S> <C>
Working Level I
Capital Facility less than or equal 0.000% 0.750%
and Term Loan to 3.5:1
Facility
Level II
greater than 3.5:1 0.000% 1.000%
but less than or
equal to 4.25:1
Level III
greater than 4.25:1 0.500% 1.500%
but less than or
equal to 4.75:1
Level IV
greater than 4.75:1 0.750% 1.750%
but less than or
equal to 5.50:1
Level V
greater than 5.50:1 0.875% 1.875%
===================================================================================
</TABLE>
<TABLE>
<S> <C>
AXELs Series A Level I
Facility less than or equal 0.875% 1.875%
to 4.00:1
Level II
greater than 4.00:1
but less than or 1.000% 2.000%
equal to 5.50:1
Level III
greater than 5.50:1
1.125% 2.125%
===================================================================================
AXELs Series B Level I
Facility and New less than or equal 1.125% 2.125%
AXELs Series B to 4.00:1
Facility
Level II
greater than 4.00:1
but less than or 1.250% 2.250%
equal to 5.50:1
Level III
greater than 5.50:1
1.375% 2.375%
===================================================================================
</TABLE>
The Applicable Margin for each Base Rate Advance shall be determined by
reference to the ratio in effect from time to time and the Applicable
Margin for each Eurodollar Rate Advance shall be determined by
reference to the ratio in effect on the first day of each Interest
Period for such Advance; provided, however, that (A) no change in the
Applicable Margin shall be effective until three Business Days after
the date on which the Administrative Agent receives the relevant
Financial Statements and a certificate of a Designated Financial
Officer demonstrating such ratio, and (B) the Applicable Margin shall
be at the numerically highest level then applicable for so long as the
Borrower has not submitted to the Administrative Agent the information
described in clause (A) of this proviso as and when required under
Section 5.03(b) or (c), as the case may be, and provided further, that
for purposes of determining the Applicable Margin based on the
financial statements delivered pursuant to Section 5.03(b) for the nine
months ended September 30, 1997, the Total Debt/EBITDA Ratio shall be
determined after giving pro forma effect to the application of proceeds
from the IPO to the prepayment or redemption, as the case may be, of
the Advances hereunder and of the Subordinated Notes on or prior to
December 31, 1997 pursuant to Sections 2.06(b)(ii)(B) and 5.02(k).
"Appropriate Lender" means, at any time, with respect to (a)
any of the Term Loan Facility, the AXELs Series A Facility or the
Working Capital Facility, a Lender that has a Commitment with respect
to such Facility at such time, (b) the AXELs Series B Facility, (i) on
and prior to the making of the New AXELs Series B Advances, an Existing
AXELs Series B Lender or a New AXELs Series B Lender, as the context
may require, and (ii) thereafter, an AXELs Series B Lender and (c) the
Letter of Credit Facility, (i) any Issuing Bank and (ii) if the other
Working Capital Lenders have made Letter of Credit Advances pursuant to
Section 2.03(c) that are outstanding at such time, each such other
Working Capital Lender.
"Arrangers" has the meaning specified in the recital of
parties to this Agreement.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted
by the Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time,
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to
drawing).
"Average EBITDA Margin" means, at any time of determination,
an amount equal to (a) the sum of Consolidated EBITDA of AMF Bowling
Centers and its Subsidiaries and Consolidated EBITDA of AMF Worldwide
and its Subsidiaries divided by (b) the sum of Consolidated revenues of
AMF Bowling Centers and its Subsidiaries and Consolidated revenues of
AMF Worldwide and its Subsidiaries, in each case for the 12-month
period reflected in the most recent Financial Statements.
"AXELs Series A Advance" has the meaning specified in Section
2.01(b).
"AXELs Series A Borrowing" means a borrowing consisting of
simultaneous AXELs Series A Advances of the same Type made by the AXELs
Series A Lenders.
"AXELs Series A Commitment" means, with respect to any AXELs
Series A Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "AXELs Series A
Commitment" or, if such Lender has entered into one or more Assignments
and Acceptances, set forth for such Lender in the Register maintained
by the Administrative Agent pursuant to Section 8.07(d) as such
Lender's "AXELs Series A Commitment", as such amount may be reduced at
or prior to such time pursuant to Section 2.05.
"AXELs Series A Facility" means, at any time, the aggregate
amount of the AXELs Series A Lenders' AXELs Series A Commitments at
such time.
"AXELs Series A Lender" means any Lender that has an AXELs
Series A Commitment.
"AXELs Series A Note" means a promissory note of the Borrower
payable to the order of any AXELs Series A Lender, in substantially the
form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower
to such Lender resulting from the AXELs Series A Advance made by such
Lender.
"AXELs Series B Advance" means any Existing AXELs Series B
Advance or any New AXELs Series B Advance.
"AXELs Series B Borrowing" means a borrowing consisting of
simultaneous AXELs Series B Advances of the same Type made by the AXELs
Series B Lenders.
"AXELs Series B Commitment" means, with respect to any AXELs
Series B Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "AXELs Series B
Commitment" or, if such Lender has entered into one or more Assignments
and Acceptances, set forth for such Lender in the Register maintained
by the Administrative Agent pursuant to Section 8.07(d) as such
Lender's "AXELs Series B Commitment", as such amount may be reduced at
or prior to such time pursuant to Section 2.05.
"AXELs Series B Facility" means, at any time, the aggregate
amount of the AXELs Series B Lenders' AXELs Series B Commitments at
such time.
"AXELs Series B Lender" means any Existing AXELs Series B
Lender or any New AXELs Series B Lender.
"AXELs Series B Note" means a promissory note of the Borrower
payable to the order of any AXELs Series B Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the indebtedness of the Borrower
to such Lender resulting from the AXELs Series B Advance made by such
Lender.
"Bank Hedge Agreement" means any Hedge Agreement required or
permitted under Article V that is entered into by and between the
Borrower and any Hedge Bank.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if
there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%)
of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by
dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for
three-month certificates of deposit of major United States
money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending
on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected
by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
non-personal time deposits in the United States, plus (iii)
the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United
States; and
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(i).
"Blocked Accounts" has the meaning specified in the Security
Agreement.
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with The Chase Manhattan Bank, N.A. at its
office at One Chase Plaza, New York, New York 10081, Account No.
001-71281-9-01 or such other account of the Borrower maintained by the
Borrower in the United States as the Borrower shall designate in
writing to the Administrative Agent.
"Borrowing" means a Term Loan Borrowing, an AXELs Series A
Borrowing, an AXELs Series B Borrowing or a Working Capital Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings in U.S. dollar deposits are carried on in the London
interbank market.
"Capital Expenditures" means, for any Person for any period,
the sum of (a) all expenditures made, directly or indirectly, by such
Person or any of its Subsidiaries during such period for equipment,
fixed assets, real property or improvements, or for replacements or
substitutions therefor or additions thereto, that have been or should
be, in accordance with GAAP, reflected as additions to property, plant
or equipment on a Consolidated balance sheet of such Person or have a
useful life of more than one year plus (b) the aggregate principal
amount of all Debt (including Obligations under Capitalized Leases)
assumed or incurred in connection with any such expenditures; provided,
however, that the following shall in any event be excluded from the
definition of Capital Expenditures: any such expenditures made with, or
subsequently reimbursed out of, the proceeds of insurance, condemnation
awards (or payments in lieu thereof), indemnity payments or payments in
respect of judgments or settlements received from third parties for
purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received, so long as such
expenditures are commenced within 3 months of the later of the
occurrence of the damage to or loss of the assets being replaced or
repaired and the receipt of such proceeds, awards or payments in
respect thereof; provided further, however, that notwithstanding
anything contained herein, Capital Expenditures shall not include any
Investments.
"Capitalized Leases" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"Cash Collateral Account" has the meaning specified in the
Security Agreement.
"Cash Equivalents" means any of the following, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all
Liens other than Liens created under the Collateral Documents and
having a maturity of not greater than 90 days from the date of
acquisition thereof: (a) readily marketable direct obligations of the
Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith and
credit of the Government of the United States, (b) insured certificates
of deposit of or time deposits with any commercial bank that is a
Lender Party or a member of the Federal Reserve System, issues (or the
parent of which issues) commercial paper rated as described in clause
(c), is organized under the laws of the United States or any State
thereof and has combined capital and surplus of at least $1 billion,
(c) commercial paper in an aggregate amount of no more than $10,000,000
per issuer outstanding at any time, issued by any corporation organized
under the laws of any State of the United States and rated at least
"Prime-1" (or the then equivalent grade) by Moody's Investors Service,
Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's
Ratings Group or (d) Investments in money market funds that invest
primarily in Cash Equivalents of the types described in clauses (a),
(b) and (c) above.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Change of Control" means the occurrence of any of the
following: (a) at any time prior to an IPO, the Goldman Investors shall
at any time for any reason cease to own beneficially Voting Stock of
Parent representing 51% or more of the combined voting power of all
Voting Stock of Parent; (b) at any time after an IPO, the Goldman
Investors shall at any time for any reason cease to own beneficially
Voting Stock of Parent representing 35% or more of the combined voting
power of all Voting Stock of Parent; (c) at any time after an IPO, any
Person or two or more Persons acting in concert other than the Goldman
Investors shall have acquired at any time beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934), directly or indirectly, of
Voting Stock of Parent (or other securities convertible into such
Voting Stock) representing more of the combined voting power of all
Voting Stock of Parent than is beneficially owned by the Goldman
Investors at such time; (d) during any period of up to 24 consecutive
months, commencing after the First Closing Date, individuals who at the
beginning of such 24-month period were directors of Parent shall cease
for any reason to constitute a majority of the board of directors of
Parent (except to the extent that individuals who at the beginning of
such 24-month period were replaced by individuals (x) elected by a
majority of the remaining members of the board of directors of Parent
or (y) nominated for election by a majority of the remaining members of
the board of directors of Parent and thereafter elected as directors by
the shareholders of Parent); or (e) a "Change of Control" as defined in
the Senior Subordinated Notes Indenture or the Senior Subordinated
Discount Notes Indenture.
"China Joint Venture" means AMF Garden Hotel Bowling Center
Company, a company organized under the laws of the People's Republic of
China by AMF Bowling Centers (China) Company, a Subsidiary of the
Borrower, and the Guangzhou Garden Hotel.
"Citibank" has the meaning specified in the recital of parties
to this Agreement.
"Citicorp" has the meaning specified in the recital of parties
to this Agreement.
"Collateral" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is intended to
be subject to any Lien in favor of the Collateral Agent for the benefit
of the Secured Parties.
"Collateral Agent" has the meaning specified in the recital of
parties to this Agreement.
"Collateral Documents" means the Security Agreement, the
Intellectual Property Security Agreement, the Mortgages and any other
agreement that creates or purports to create a Lien in favor of the
Collateral Agent for the benefit of the Secured Parties.
"Commitment" means a Term Loan Commitment, an AXELs Series A
Commitment, an AXELs Series B Commitment, a Working Capital Commitment
or a Letter of Credit Commitment.
"Company" has the meaning specified in the Preliminary
Statements.
"Confidential Information" means information that the Borrower
furnishes to any Agent or any Lender Party in a writing designated as
confidential but does not include any such information that is or
becomes generally available to the public other than as a result of a
breach by any Agent or any Lender Party of its obligations hereunder or
that is or becomes available to such Agent or such Lender Party from a
source other than the Borrower that is not, to the best of such Agent's
or such Lender Party's knowledge, acting in violation of a
confidentiality agreement with the Borrower.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Conversion", "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"Current Assets" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets of
a company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a
reserve is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one
year after the date of determination (excluding any Debt renewable or
extendible, at the option of such Person, to a date more than one year
from such date or arising under a revolving credit or similar agreement
that obligates the lender or lenders to extend credit during a period
of more than one year from such date), (b) all amounts of Funded Debt
of such Person required to be paid or prepaid within one year after
such date and (c) all other items (including taxes accrued as
estimated) that in accordance with GAAP would be classified as current
liabilities of such Person.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 60 days incurred in
the ordinary course of such Person's business), (c) all Obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
Obligations of such Person as lessee under Capitalized Leases, (f) all
Obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (g) all Obligations, contingent
or otherwise, of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any capital stock of or other
ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock, valued, in
the case of Redeemable Preferred Stock, at the greater of its voluntary
or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Obligations of such Person in respect of Hedge
Agreements, (i) all Obligations of such Person in respect of long-term
non-competition agreements or arrangements, (j) all Debt of others
referred to in clauses (a) through (i) above or clause (k) below
guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(iv) otherwise to assure a creditor against loss, and (k) all Debt
referred to in clauses (a) through (j) above of another Person secured
by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at
any time, the portion of any Advance required to be made by such Lender
Party to the Borrower pursuant to Section 2.01 or 2.02 at or prior to
such time which has not been made by such Lender Party or by the
Administrative Agent for the account of such Lender Party pursuant to
Section 2.02(d) as of such time. In the event that a portion of a
Defaulted Advance shall be deemed made pursuant to Section 2.15(a), the
remaining portion of such Defaulted Advance shall be considered a
Defaulted Advance originally required to be made pursuant to Section
2.01 on the same date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at
any time, any amount required to be paid by such Lender Party to any
Agent or any other Lender Party hereunder or under any other Loan
Document at or prior to such time which has not been so paid as of such
time, including, without limitation, any amount required to be paid by
such Lender Party to (a) any Issuing Bank pursuant to Section 2.03(c)
to purchase a portion of a Letter of Credit Advance made by such
Issuing Bank, (b) the Administrative Agent pursuant to Section 2.02(d)
to reimburse the Administrative Agent for the amount of any Advance
made by the Administrative Agent for the account of such Lender Party,
(c) any other Lender Party pursuant to Section 2.13 to purchase any
participation in Advances owing to such other Lender Party and (d) any
Agent or any Issuing Bank pursuant to Section 7.05 to reimburse such
Agent or such Issuing Bank for such Lender Party's ratable share of any
amount required to be paid by the Lender Parties to such Agent or such
Issuing Bank as provided therein. In the event that a portion of a
Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the
remaining portion of such Defaulted Amount shall be considered a
Defaulted Amount originally required to be paid hereunder or under any
other Loan Document on the same date as the Defaulted Amount so deemed
paid in part.
"Defaulting Lender" means, at any time, any Lender Party that,
at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take any action or be the subject of any action or proceeding of
a type described in Section 6.01(f).
"Designated Financial Officer" means any of the President or
Vice President-Finance of AMF Bowling Products or AMF Bowling Centers
or the chief financial officer of the Borrower.
"Domestic Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party,
as the case may be, or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Administrative Agent.
"EBITDA" means, for any Person, for any period, the sum,
determined on a Consolidated basis and without duplication, of (a) net
income (or net loss), (b) interest expense, (c) income tax expense, (d)
depreciation expense, (e) amortization expense, (f) the aggregate
amount of a one-time bonus and "phantom" stock payments (and payroll
taxes associated therewith) made, in each case, to employees, former
employees, former owners and former consultants of the Company and its
Subsidiaries and the aggregate amount of professional and similar fees
incurred by the Sellers in connection with the Acquisition, provided
that, in each case, such amount shall have been funded by the Sellers
at or prior to the consummation of the Acquisition, (g) non-cash
foreign exchange losses, if any, (h) extraordinary or non-recurring
losses, if any, included in determining such net income (or net loss),
(i) non-cash expenses, if any, incurred in connection with the issuance
of warrants or other equity by such Person with respect to the
acquisition by the Borrower of MJ Golf, to the extent included in
determining such net income (or net loss), (j) other non-operating
expense, if any, included in determining such net income (or net loss)
and (k) Other Additions for such period, less the sum of (i) non-cash
foreign exchange gains, if any, (ii) extraordinary or non-recurring
gains, if any, included in determining such net income (or net loss),
and (iii) other non-operating income, if any, included in determining
such net income (or net loss), in each case of such Person and its
Subsidiaries, determined, except in the case of clause (j) above, in
accordance with GAAP for such period.
"EBITDA Adjustment Amount" means, at any time of
determination, an amount equal to 80% of the aggregate amount of the
EBITDA of each bowling center acquired or constructed by the Borrower
or any of its Subsidiaries after the First Closing Date and acquired or
constructed at least 15 months prior to such time of determination, as
reflected in the certificate most recently required to be furnished to
the Lender Parties pursuant to Section 5.03(b) or (c), as the case may
be, provided that for purposes hereof, the time of any such acquisition
shall be the date of consummation of such acquisition and the time of
any such construction shall be the date of the opening of such bowling
center for business.
"Eligible Assignee" means (a) with respect to any Facility
(other than the Letter of Credit Facility), (i) a Lender; (ii) an
Affiliate of a Lender; (iii) a commercial bank organized under the laws
of the United States, or any State thereof, and having a combined
capital and surplus of at least $500,000,000, in the case of the
Working Capital Facility, and at least $100,000,000, in the case of the
Term Loan Facility, the AXELs Series A Facility and the AXELs Series B
Facility; (iv) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having a
combined capital and surplus of at least $500,000,000, in the case of
the Working Capital Facility, and at least $100,000,000, in the case of
the Term Loan Facility, the AXELs Series A Facility and the AXELs
Series B Facility; (v) a commercial bank organized under the laws of
any other country that is a member of the OECD or has concluded special
lending arrangements with the International Monetary Fund associated
with its General Arrangements to Borrow, or a political subdivision of
any such country, and having a combined capital and surplus of at least
$500,000,000, in the case of the Working Capital Facility, and at least
$100,000,000, in the case of the Term Loan Facility, the AXELs Series A
Facility and the AXELs Series B Facility, so long as such bank is
acting through a branch or agency located in the United States; (vi)
the central bank of any country that is a member of the OECD; (vii) a
finance company, insurance company or other financial institution or
fund (whether a corporation, partnership, trust or other entity) that
is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business and having a combined
capital and surplus of at least $500,000,000, in the case of the
Working Capital Facility, and at least $100,000,000, in the case of the
Term Loan Facility, the AXELs Series A Facility and the AXELs Series B
Facility; and (viii) any other Person approved by the Administrative
Agent and the Borrower, such approval not to be unreasonably withheld
or delayed, and (b) with respect to the Letter of Credit Facility, a
Person that is an Eligible Assignee under subclause (iii) or (v) of
clause (a) of this definition and is approved by the Administrative
Agent and, so long as no Default shall have occurred and be continuing,
by the Borrower, such approval not to be unreasonably withheld or
delayed; provided, however, that neither any Loan Party nor any
Affiliate of a Loan Party shall qualify as an Eligible Assignee under
this definition.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement pursuant to any Environmental Law or any
Environmental Permit or relating to any Hazardous Material, including,
without limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any applicable federal, state, local
or foreign statute, law, ordinance, rule, regulation, code, order,
writ, judgment, injunction, decree, judicial decision, or agency
interpretation, policy or guidance that has the force and effect of
law, relating to pollution or protection of the environment, public
health, safety or natural resources, including, without limitation,
those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization from any
governmental or regulatory authority required under any Environmental
Law.
"Equity Investors" means the Persons listed under the caption
"Equity Investors" on Schedule 4.01(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the controlled group of any Loan Party, or
under common control with any Loan Party, within the meaning of Section
414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (d) the cessation
of operations at a facility of any Loan Party or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in llSection 4001(a)(2) of ERISA; (f) the
conditions for imposition of a lien under Section 302(f) of ERISA shall
have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender Party as such Lender Party may from
time to time specify to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars are
offered by the principal office of Citibank in London, England to prime
banks in the London interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
substantially equal to Citibank's Eurodollar Rate Advance comprising
part of such Borrowing to be outstanding during such Interest Period
(or, if Citibank shall not have such a Eurodollar Rate Advance,
$1,000,000) and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances comprising part of the same Borrowing
means the reserve percentage applicable two Business Days before the
first day of such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which
the interest rate on Eurodollar Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any Fiscal Year (which, in the
case of the Fiscal Year ending December 31, 1996, shall mean the period
from May 1, 1996 to December 31, 1996 for purposes of this definition),
determined in accordance with GAAP for the Borrower and its
Subsidiaries on a Consolidated basis and without duplication:
(a) Consolidated EBITDA of the Borrower and its
Subsidiaries for such Fiscal Year less (to the extent included
in the calculation of EBITDA) any Extraordinary Receipts
received by the Borrower or any of its Subsidiaries during
such Fiscal Year less extraordinary or non-recurring cash
losses in such Fiscal Year plus extraordinary or non-recurring
cash gains in such Fiscal Year, less
(b) the sum of
(i) Consolidated cash interest expense
payable by the Borrower and its Subsidiaries in such
Fiscal Year plus
(ii) the aggregate amount of Capital
Expenditures made pursuant to Section 5.02(q) by the
Borrower and its Subsidiaries during such Fiscal Year
(but not exceeding the amount permitted to be made in
such Fiscal Year pursuant to Section 5.02(q)) plus
(iii) optional prepayments and scheduled
payments of principal of Debt of the Borrower and its
Subsidiaries in such Fiscal Year (including, without
limitation, prepayments of the Working Capital
Facility to the extent that the Working Capital
Facility is permanently reduced) plus
(iv) cash taxes paid by the Borrower and its
Subsidiaries in such Fiscal Year plus
(c) if there was a net increase in Consolidated
Current Liabilities of the Borrower and its Subsidiaries
during such Fiscal Year, the amount of such net increase plus
(d) if there was a net decrease in Consolidated
Current Assets (excluding cash and Cash Equivalents) of the
Borrower and its Subsidiaries during such Fiscal Year, the
amount of such net decrease less
(e) if there was a net decrease in Consolidated
Current Liabilities of the Borrower and its Subsidiaries
during such Fiscal Year, the amount of such net decrease less
(f) if there was a net increase in Consolidated
Current Assets (excluding cash and Cash Equivalents) of the
Borrower and its Subsidiaries during such Fiscal Year, the
amount of such net increase less
(g) (i) for any Fiscal Year ending on or prior to
December 31, 1997, an amount equal to the product of (A) the
Support Amount for such Fiscal Year and (B) 0.803654, but not,
under this clause (g)(i), to exceed $14,063,946.68 in the
aggregate from and after the First Closing Date, and (ii) for
any Fiscal Year ending thereafter, zero.
"Excess Cash Flow Amount" means (a) for each of the first two
Fiscal Years ending after the First Closing Date, an amount equal to
the lesser of (i) the amount by which Excess Cash Flow for such Fiscal
Year exceeds $10,000,000 and (ii) an amount equal to 50% of Excess Cash
Flow for such Fiscal Year, (b) for the third Fiscal Year ending after
the First Closing Date, an amount equal to the lesser of (i) the amount
by which Excess Cash Flow for such Fiscal Year exceeds $20,000,000 and
(ii) an amount equal to 50% of Excess Cash Flow for such Fiscal Year
and (c) for each Fiscal Year ending thereafter, an amount equal to 50%
of Excess Cash Flow for such Fiscal Year.
"Existing Advance" means, for each Existing Lender, all of
such Existing Lender's rights in and to, and all of its obligations
under, the Advances (as defined in the Existing Credit Agreement)
evidenced by the Existing Notes and owing to it under the Existing
Credit Agreement immediately preceding the Fourth Closing Date.
"Existing AXELs Series B Advance" has the meaning specified in
Section 2.01(c).
"Existing AXELs Series B Commitment" means, with respect to
any Existing AXELs Series B Lender at any time, the amount committed by
such Existing AXELs Series B Lender as an "Existing AXELs Series B
Commitment" pursuant to the Original Credit Agreement or, if such
Lender entered into one or more Assignments and Acceptances, set forth
for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(d) of the Existing Credit Agreement as such
Lender's "Existing AXELs Series B Commitment", as such amount may have
been reduced at or prior to such time pursuant to Section 2.05 of the
Existing Credit Agreement.
"Existing AXELs Series B Lender" means any Lender that has an
Existing AXELs Series B Commitment.
"Existing Commitment" means, for each Existing Lender, all of
such Existing Lender's rights in and to, and all of its obligations
under, the Commitments (as defined in the Existing Credit Agreement)
held by it under the Existing Credit Agreement immediately preceding
the Fourth Closing Date.
"Existing Credit Agreement" has the meaning specified in the
Preliminary Statements.
"Existing Debt" means Debt of the Company and its Subsidiaries
outstanding immediately before giving effect to the Acquisition.
"Existing Lenders" has the meaning specified in the
Preliminary Statements.
"Existing Notes" means the Notes as defined in, and issued
pursuant to, the Existing Credit Agreement.
"Extraordinary Receipt" means any cash received by or paid to
or for the account of any Person consisting of tax refunds, pension
plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute
compensation for lost earnings), condemnation awards (and payments in
lieu thereof), indemnity payments and payments in respect of judgments
(including, without limitation, punitive damages); provided, however,
that an Extraordinary Receipt shall not include cash receipts received
from proceeds of insurance, condemnation awards (or payments in lieu
thereof), indemnity payments or payments in respect of judgments or
settlements (i) to the extent that such proceeds, awards or payments in
respect of loss or damage to equipment, fixed assets or real property
are applied to replace or repair such equipment, fixed assets or real
property to the extent such replacement or repair is not prohibited
under the terms of the Collateral Documents, so long as such
application is commenced within 3 months after the later of the
occurrence of such loss or damage and the receipt of such proceeds,
awards or payments in respect thereof or (ii) to the extent that such
proceeds, awards or payments reimburse such Person for the prior
payment of out-of-pocket costs.
"Facility" means the Term Loan Facility, the AXELs Series A
Facility, the AXELs Series B Facility, the Working Capital Facility or
the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Financial Statements" means, at any time, the most recent
financial statements furnished, or required to be furnished, by the
Borrower to the Lender Parties pursuant to Section 5.03(b) or (c), as
the case may be.
"First Amendment" means Amendment No. 3 to the Original Credit
Agreement dated as of December 20, 1996 among the Borrower, the Lenders
parties thereto and the Agents, and the Consent thereto dated as of
December 20, 1996 by the Loan Parties (other than the Borrower).
"First Amendment Documents" means (a) the First Amendment, (b)
the AXELs Series B Notes payable to the New AXELs Series B Lenders and
(c) the First Mortgage Amendments, in each case as amended,
supplemented or otherwise modified from time to time.
"First Closing Date" means May 1, 1996, the date on which the
Initial Extension of Credit occurred following satisfaction or waiver
of the conditions set forth in Sections 3.01 and 3.02.
"First Mortgage Amendments" means the mortgage amendments
executed in connection with the First Amendment.
"First Prepayment Date" has the meaning specified in Section
2.06(b)(iv).
"Fiscal Year" means (except as otherwise stated in the
definition of Excess Cash Flow in this Section 1.01 and in Section
5.02(q)) a fiscal year of the Borrower and its Consolidated
Subsidiaries ending on December 31 in any calendar year.
"Foreign Subsidiary" means a Subsidiary of the Borrower
organized under the laws of a country other than the United States or
any State thereof.
"Form S-1" has the meaning specified in the Preliminary
Statements.
"Fourth Closing Date" means the first date on which the
conditions set forth in Section 3.05 have been satisfied but in no
event later than November 30, 1997.
"Funded Debt" of any Person means Debt in respect of the
Advances, in the case of the Borrower, and all other Debt of such
Person that by its terms matures more than one year after the date of
its creation or matures within one year from such date but is renewable
or extendible, at the option of such Person, to a date more than one
year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during
a period of more than one year after such date, including, without
limitation, all amounts of Funded Debt of such Person required to be
paid or prepaid within one year after the date of determination.
"GAAP" has the meaning specified in Section 1.03.
"Goldman" has the meaning specified in the recital of parties
to this Agreement.
"Goldman Investors" has the meaning specified in the
Preliminary Statements.
"Gross Cash Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset or the sale or issuance of
any Debt or capital stock or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other
ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit
interest by any Person, or any Extraordinary Receipt received by or
paid to or for the account of any Person, the aggregate amount of cash
proceeds receivable (whether as initial consideration or through
payment or disposition of deferred consideration) by or on behalf of
such Person in connection with such transaction, prior to deduction for
brokerage commissions, underwriting fees, legal fees, finder's fees and
other similar fees and commissions, discounts and other expenses.
"Guaranties" means the Holdings Guaranty, the Subsidiary
Guaranty and any other guaranty delivered pursuant to Section 5.01(n).
"Guarantors" means Holdings and the Subsidiary Guarantors.
"Hazardous Materials" means (a) petroleum or petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Hedge Bank" means any Lender Party or any of its Affiliates
in its capacity as a party to a Bank Hedge Agreement.
"Holdings" has the meaning specified in the Preliminary
Statements.
"Holdings Guaranty" has the meaning specified in Section
3.01(p)(x).
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Information Memorandum" means collectively, the information
memorandum dated February 1996 and the information memorandum dated
August, 1997, each relating to the Borrower and the Company and used by
the Arrangers and the Syndication Agent in connection with the original
syndication of the Commitments and the Third Amendment, respectively,
each as amended or supplemented from time to time in writing.
"Initial Extension of Credit" means the earlier to occur of
the initial Borrowing and the initial issuance of a Letter of Credit
under the Original Credit Agreement.
"Initial Issuing Banks" has the meaning specified in the
recital of parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Intellectual Property Security Agreement" has the meaning
specified in Section 3.01(p)(viii).
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Borrower may, upon notice
received by the Administrative Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to the first day of
such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period
with respect to any Eurodollar Rate Advance under a Facility
that ends after any principal repayment installment date for
such Facility unless, after giving effect to such selection,
the aggregate principal amount of Base Rate Advances and of
Eurodollar Rate Advances having Interest Periods that end on
or prior to such principal repayment installment date for such
Facility shall be at least equal to the aggregate principal
amount of Advances under such Facility due and payable on or
prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Inventory" has the meaning specified in the Security
Agreement.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities or all or substantially all of the assets of such
Person, any capital contribution to such Person or any other direct or
indirect investment in such Person, including, without limitation, any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clause (j) or (k) of the definition of "Debt" in respect
of such Person, any acquisition by way of a merger or consolidation and
any purchase or other acquisition or construction of bowling centers.
"IPO" has the meaning specified in the Preliminary Statements.
"Issuing Banks" means each Initial Issuing Bank, any other
Working Capital Lender that has a Letter of Credit Commitment set forth
opposite its name on Schedule I hereto, any other Working Capital
Lender approved as an Issuing Bank by the Administrative Agent and, so
long as no Default shall have occurred and be continuing, by the
Borrower (such approval not to be unreasonably withheld or delayed) and
each Eligible Assignee to which a Letter of Credit Commitment hereunder
has been assigned pursuant to Section 8.07 so long as each such Working
Capital Lender or Eligible Assignee expressly agrees to perform in
accordance with their terms all of the obligations that by the terms of
this Agreement are required to be performed by it as an Issuing Bank
and notifies the Administrative Agent of its Applicable Lending Office
and the amount of its Letter of Credit Commitment (which information
shall be recorded by the Administrative Agent in the Register).
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(e)(ii).
"Lender Party" means any Lender or any Issuing Bank.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 8.07.
"Letter of Credit Advance" means an advance made by any
Issuing Bank or any Working Capital Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in
Section 2.03(a).
"Letter of Credit Commitment" means, with respect to any
Issuing Bank at any time, the amount set forth opposite such Issuing
Bank's name on Schedule I hereto under the caption "Letter of Credit
Commitment" or, if such Issuing Bank has entered into one or more
Assignments and Acceptances, set forth for such Issuing Bank in the
Register maintained by the Administrative Agent pursuant to Section
8.07(d) as such Issuing Bank's "Letter of Credit Commitment", as such
amount may be reduced at or prior to such time pursuant to Section
2.05.
"Letter of Credit Facility" means, at any time, an amount
equal to the lesser of (a) the aggregate amount of the Issuing Banks'
Letter of Credit Commitments at such time and (b) $10,000,000, as such
amount may be reduced at or prior to such time pursuant to Section
2.05.
"Letters of Credit" has the meaning specified in Section
2.01(e).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means (a) for purposes of this Agreement and
the Notes and any amendment or modification hereof or thereof and for
all other purposes other than for purposes of the Guaranties and the
Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the
Guaranties, (iv) the Collateral Documents, (v) the First Amendment
Documents, (vi) the Second Amendment Documents, (vii) the Third
Amendment Documents and (viii) each Letter of Credit Agreement and (b)
for purposes of the Guaranties and the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral
Documents, (v) the First Amendment Documents, (vi) the Second Amendment
Documents, (vii) the Third Amendment Documents, (viii) each Letter of
Credit Agreement and (ix) each Bank Hedge Agreement, in each case as
amended, supplemented or otherwise modified from time to time.
"Loan Parties" means the Company, the Borrower and the
Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of Holdings or the Borrower, in
each case together with its respective Subsidiaries, taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of Holdings or the Borrower, in
each case together with its respective Subsidiaries, taken as a whole,
(b) the rights and remedies of any Agent or any Lender Party under any
Loan Document or Related Document or (c) the ability of any Loan Party
to perform its Obligations under any Loan Document (excluding Mortgages
covering Collateral which, in the aggregate, is immaterial) or Related
Document to which it is or is to be a party.
"Material Subsidiary" means, at any time, a Subsidiary of the
Borrower having at least 5% of the total Consolidated assets of the
Borrower and its Subsidiaries (determined as of the last day of the
most recent fiscal quarter of the Borrower) or at least 5% of the total
Consolidated revenues or net income of the Borrower and its
Subsidiaries for the 12-month period ending on the last day of the most
recent fiscal quarter of the Borrower; provided, however, that any
Subsidiary formed or acquired after the last day of the most recent
fiscal quarter of the Borrower that would have been a Material
Subsidiary if it had been formed or acquired on or prior to the last
day of such fiscal quarter shall be a Material Subsidiary for purposes
hereof from and after the date of its formation or acquisition.
"MJ Golf" means Michael Jordan Golf, Inc., a Delaware
corporation.
"Modified Consolidated EBITDA" means, for any Rolling Period,
Consolidated EBITDA of the Borrower and its Subsidiaries for such
Rolling Period, provided, however, that at any time of determination,
(i) solely with respect to any constructed New Center, Modified
Consolidated EBITDA shall be calculated using Adjusted EBITDA of such
New Center and (ii) solely with respect to any New Center acquired
within the immediately preceding 15 months, Modified Consolidated
EBITDA shall be calculated using the actual EBITDA of such New Center
for such Rolling Period (including, without limitation, for any portion
of such Rolling Period that is prior to the date of acquisition of such
New Center).
"Mortgage Policy" has the meaning specified in Section
3.01(p)(ix).
"Mortgages" has the meaning specified in Section 3.01(p)(ix).
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, that is subject to ERISA and to which any
Loan Party or any ERISA Affiliate is making or accruing an obligation
to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that is subject to ERISA and
that (a) is maintained for employees of any Loan Party or any ERISA
Affiliate and at least one Person other than the Loan Parties and the
ERISA Affiliates or (b) was so maintained and in respect of which any
Loan Party or any ERISA Affiliate could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Net Cash Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset or the sale or issuance of
any Debt or capital stock or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other
ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit
interest by any Person, or any Extraordinary Receipt received by or
paid to or for the account of any Person, the aggregate amount of cash
received from time to time (whether as initial consideration or through
payment or disposition of deferred consideration) by or on behalf of
such Person in connection with such transaction after deducting
therefrom only (without duplication) (a) reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and commissions and other
reasonable and customary expenses incurred in connection with such
transaction and (b) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only
to the extent, that the amounts so deducted are, at or prior to the
time of receipt of such cash, actually paid or payable to a Person that
is not an Affiliate of such Person or any Loan Party or any Affiliate
of any Loan Party and are properly attributable to such transaction or
to the asset that is the subject thereof; provided, however, that in
the case of taxes that are deductible under clause (b) but for the fact
that at the time of receipt of such cash, such taxes have not been
actually paid or are not then payable, such Person may deduct an amount
(the "Reserved Amount") equal to the amount reserved in accordance with
GAAP for such Person's reasonable estimate of such taxes, other than
taxes for which such Person is indemnified, provided further, however,
that at the time such taxes are paid, the Borrower shall prepay the
Advances outstanding hereunder, in accordance with the terms of Section
2.06(b)(ii), in an amount equal to the amount, if any, by which the
Reserved Amount exceeds the amount of taxes actually paid.
"New AXELs Series B Advance" has the meaning specified in
Section 2.01(c).
"New AXELs Series B Commitment" means, with respect to any New
AXELs Series B Lender at any time, the amount committed by such New
AXELs Series B Lender as a "New AXELs Series B Commitment" pursuant to
the Second Credit Agreement or, if such Lender entered into one or more
Assignments and Acceptances, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(d) of
the Existing Credit Agreement as such Lender's "New AXELs Series B
Commitment", as such amount may have been reduced at or prior to such
time pursuant to Section 2.05 of the Existing Credit Agreement.
"New AXELs Series B Lender" means any Lender that has a New
AXELs Series B Commitment.
"New Center" means, at any time of determination, any bowling
center acquired (whether by means of a stock or asset acquisition) or
constructed by the Borrower or any of its Subsidiaries after the First
Closing Date and less than 15 months prior to such date of
determination, provided that for purposes hereof, the time of any such
acquisition shall be the date of consummation of such acquisition and
the time of any such construction shall be the date of the opening of
such bowling center for business.
"Note" means a Term Loan Note, an AXELs Series A Note, an
AXELs Series B Note or a Working Capital Note.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Issuance" has the meaning specified in Section
2.03(a).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents include (a) the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts
payable by any Loan Party under any Loan Document and (b) the
obligation of any Loan Party to reimburse any amount in respect of any
of the foregoing that any Lender Party, in its sole discretion, may
elect to pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" has the meaning specified in Section 4.01(bb).
"Other Additions" means, for any fiscal quarter of the
Borrower, (a) during the period from the First Closing Date through
December 31, 1997, an amount equal to the sum of (i) the Support Amount
for such fiscal quarter and (ii) extraordinary, unusual or
non-recurring, or expected to be non-recurring, expenses and expenses
resulting from changes in the Borrower's accounting or management
policies or practices, in each case of the Borrower and its
Subsidiaries for such fiscal quarter, all as determined in the judgment
of a Designated Financial Officer, in an aggregate amount, under this
clause (ii), not to exceed $20,000,000 from and after the First Closing
Date, and (b) thereafter, zero.
"Other Taxes" has the meaning specified in Section 2.12(b).
"Parent" has the meaning specified in the Preliminary
Statements.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"Permitted Encumbrances" means, with respect to any real
property, minor survey exceptions, minor title irregularities,
easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering with the ordinary conduct of the business
of the Loan Parties and their Subsidiaries which were not incurred in
connection with and do not secure Debt or other extensions of credit
and which do not individually or in the aggregate materially adversely
affect the value of the properties of the Loan Parties and their
Subsidiaries taken as a whole or materially impair its use, taken as a
whole with all other properties of the Loan Parties and their
Subsidiaries, in the operation of the business of the Loan Parties and
their Subsidiaries.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b); (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', landlords', workmen's and repairmen's Liens and
other similar Liens arising in the ordinary course of business securing
obligations that are not overdue for a period of more than 30 days or
are being contested in good faith by proper proceedings and as to which
appropriate reserves are being maintained; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; and (d)
Permitted Encumbrances, provided, however, that no Lien in favor of the
PBGC shall, in any event, be a Permitted Lien.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Play Center Joint Venture" means AMF Play Center S.A., a
corporation organized under the laws of Brazil, and its successors and
Subsidiaries, 50% of the Voting Stock of which corporation is to be
owned directly or indirectly by the Borrower.
"Preferred Stock" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Pro Rata Share" of any amount means with respect to any
Working Capital Lender at any time, the product of such amount times a
fraction the numerator of which is the amount of such Lender's Working
Capital Commitment at such time and the denominator of which is the
Working Capital Facility at such time.
"Purchase Agreement" has the meaning specified in the
Preliminary Statements.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any
such right or Obligation that (a) the issuer has undertaken to redeem
at a fixed or determinable date or dates, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable at the
option of the holder.
"Reduction Amount" has the meaning specified in Section
2.06(b)(vii).
"Register" has the meaning specified in Section 8.07(d).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Related Documents" means the Purchase Agreement, the
Subordinated Debt Documents, the Tax Agreement, the Stockholders'
Agreement and the Support Agreement.
"Required Lenders" means, at any time, (i) Lenders owed or
holding at least a majority in interest of the sum of (a) the aggregate
principal amount of the Term Loan Advances and Working Capital Advances
outstanding at such time, (b) the aggregate Available Amount of all
Letters of Credit outstanding at such time, (c) the aggregate unused
Commitments under the Term Loan Facility at such time and (d) the
aggregate Unused Working Capital Commitments at such time and (ii)
Lenders owed or holding at least a majority in interest of the sum of
(a) the aggregate principal amount of the AXELs Series A Advances and
AXELs Series B Advances outstanding at such time and (b) the aggregate
unused Commitments under the AXELs Series A Facility and AXELs Series B
Facility at such time; provided, however, that if any Lender shall be a
Defaulting Lender at such time, there shall be excluded from the
determination of Required Lenders at such time (A) the aggregate
principal amount of the Advances owing to such Lender (in its capacity
as a Lender) and outstanding at such time, (B) such Lender's Pro Rata
Share of the aggregate Available Amount of all Letters of Credit
outstanding at such time, (C) the aggregate unused Term Loan, AXELs
Series A and AXELs Series B Commitments of such Lender at such time and
(D) the Unused Working Capital Commitment of such Lender at such time.
For purposes of this definition, the aggregate principal amount of
Letter of Credit Advances owing to any Issuing Bank and the Available
Amount of each Letter of Credit shall be considered to be owed to the
Working Capital Lenders ratably in accordance with their respective
Working Capital Commitments.
"Responsible Officer" means any officer of any Loan Party or
any of its Subsidiaries.
"Rolling Period" means, with respect to any fiscal quarter of
the Borrower and its Subsidiaries, such fiscal quarter and the three
consecutive immediately preceding fiscal quarters.
"Second Amendment" means Amendment No. 2 to the Second Credit
Agreement dated as of June 30, 1997 among the Borrower, the Lenders
parties thereto and the Agents, and the Consent thereto dated as of
June 30, 1997 by the Loan Parties (other than the Borrower).
"Second Amendment Documents" means (a) the Second Amendment,
(b) the Notes executed in connection therewith and (c) the Second
Mortgage Amendments, in each case as amended, supplemented or otherwise
modified from time to time.
"Second Closing Date" means the date on which the New AXELs
Series B Advances are made by the New AXELs Series B Lenders following
satisfaction or waiver of the conditions set forth in Sections 3.02 and
3.04.
"Second Credit Agreement" has the meaning specified in the
Preliminary Statements.
"Second Mortgage Amendments" means the mortgage amendments
executed in connection with the Second Amendment.
"Second Prepayment Date" has the meaning specified in Section
2.06(b)(iv).
"Secured Parties" means the Arrangers, the Agents, the Lender
Parties and the Hedge Banks.
"Security Agreement" has the meaning specified in Section
3.01(p)(vii).
"Sellers" has the meaning specified in the Preliminary
Statements.
"Senior Subordinated Discount Notes" means the senior
subordinated discounted notes of the Borrower in an aggregate principal
amount of $452,000,000 issued pursuant to the Senior Subordinated
Discount Notes Indenture.
"Senior Subordinated Discount Notes Indenture" means the
Indenture dated as of March 21, 1996 among the Borrower, the guarantors
party thereto and American Bank National Association, as Trustee,
pursuant to which the Senior Subordinated Discount Notes are issued, as
amended, supplemented or otherwise modified from time to time in
accordance with its terms, to the extent permitted in accordance with
the Loan Documents.
"Senior Subordinated Notes" means the senior subordinated
notes of the Borrower in an aggregate principal amount of $250,000,000
issued pursuant to the Senior Subordinated Notes Indenture.
"Senior Subordinated Notes Indenture" means the Indenture
dated as of March 21, 1996 among the Borrower, the guarantors party
thereto and IBJ Schroder Bank & Trust Company, as Trustee, pursuant to
which the Senior Subordinated Notes are issued, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms, to the extent permitted in accordance with the Loan
Documents.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that is subject to ERISA and
that (a) is maintained for employees of any Loan Party or any ERISA
Affiliate and no Person other than the Loan Parties and the ERISA
Affiliates or (b) was so maintained and in respect of which any Loan
Party or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (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
liability 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
such debts and liabilities as they 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 property would
constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the
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.
"Specified Revenues" means at any time (a) in the case of any
acquisition of a New Center, aggregate revenues of such New Center for
the immediately preceding 12-month period, and (b) in the case of any
construction of a New Center, an amount equal to (i) at any time during
its first 12 full months of operations, the aggregate revenues of such
New Center for each full month it has operated times twelve divided by
the number of full months such New Center has operated and (ii) at any
time thereafter, aggregate revenues of such New Center for the
immediately preceding 12-month period.
"Standby Letter of Credit" means any Letter of Credit issued
under the Letter of Credit Facility, other than a Trade Letter of
Credit.
"Stockholders' Agreement" means the Stockholders' Agreement
set forth on Schedule III hereto, as amended, supplemented or otherwise
modified from time to time in accordance with its terms, to the extent
permitted in accordance with the Loan Documents.
"Subordinated Debt" means the Subordinated Notes and any other
Debt of any Loan Party that is subordinated to the Obligations of such
Loan Party under the Loan Documents on, and that otherwise contains,
terms and conditions satisfactory to the Required Lenders.
"Subordinated Debt Documents" means the Subordinated Notes
Indentures and all other agreements, indentures and instruments
pursuant to which Subordinated Debt is issued.
"Subordinated Notes" means the Senior Subordinated Notes and
the Senior Subordinated Discount Notes.
"Subordinated Notes Indentures" means the Senior Subordinated
Notes Indenture and the Senior Subordinated Discount Notes Indenture.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Subsidiary Guarantors" means the Subsidiaries of the Borrower
listed on Schedule II hereto and each other Subsidiary of the Borrower
that shall be required to execute and deliver a guaranty pursuant to
Section 5.01(n).
"Subsidiary Guaranty" has the meaning specified in Section
3.01(p)(xi).
"Support Agreement" means the letter agreement dated April 11,
1996 between the Sellers and Holdings, as amended, supplemented or
otherwise modified from time to time in accordance with its terms, to
the extent permitted in accordance with the Loan Documents.
"Support Amount" means, for any period, the amount that, in
the judgment of a Designated Financial Officer, would have been payable
to the Borrower by the Sellers during such period pursuant to the
Support Agreement if the Support Agreement were then still in effect,
provided, however, that the aggregate of such amounts shall not in any
event exceed $17,500,000 from and after the First Closing Date.
"Surviving Debt" has the meaning specified in Section 3.01(e).
"Syndication Agent" has the meaning specified in the recital
of parties to this Agreement.
"Tax Agreement" means the Tax Allocation Agreement dated as of
May 1, 1996 among Parent, the Borrower and the Borrower's Subsidiaries
(other than Foreign Subsidiaries), as amended, supplemented or
otherwise modified from time to time in accordance with its terms, to
the extent permitted in accordance with the Loan Documents.
"Tax Certificate" has the meaning specified in Section
5.03(o).
"Taxes" has the meaning specified in Section 2.12(a).
"Term Facilities" means the Term Loan Facility, the AXELs
Series A Facility and the AXELs Series B Facility.
"Term Loan Advance" has the meaning specified in Section
2.01(a).
"Term Loan Borrowing" means a borrowing consisting of
simultaneous Term Loan Advances of the same Type made by the Term Loan
Lenders.
"Term Loan Commitment" means, with respect to any Term Loan
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Term Loan Commitment" or, if such
Lender has entered into one or more Assignments and Acceptances, set
forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 8.07(d) as such Lender's "Term Loan
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Term Loan Facility" means, at any time, the aggregate amount
of the Term Loan Lenders' Term Loan Commitments at such time.
"Term Loan Lender" means any Lender that has a Term Loan
Commitment.
"Term Loan Note" means a promissory note of the Borrower
payable to the order of any Term Loan Lender, in substantially the form
of Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to
such Lender resulting from the Term Loan Advance made by such Lender.
"Termination Date" means (a) with respect to the Term Loan
Facility, the Working Capital Facility and the Letter of Credit
Facility, the earlier of March 31, 2002 and the date of termination in
whole of the Term Loan Commitments, the Working Capital Commitments and
the Letter of Credit Commitments pursuant to Section 2.05 or 6.01, (b)
with respect to the AXELs Series A Facility, the earlier of March 31,
2003 and the date of termination in whole of the AXELs Series A
Commitments pursuant to Section 2.05 or 6.01 and (c) with respect to
the AXELs Series B Facility, the earlier of March 31, 2004 and the date
of termination in whole of the AXELs Series B Commitments pursuant to
Section 2.05 or 6.01.
"Third Amendment" means Amendment No. 1 dated November 7, 1997
to the Existing Credit Agreement among the Borrower, the Lenders
parties thereto and the Agents, and the Consent thereto dated as of
November 7, 1997 by the Loan Parties (other than the Borrower).
"Third Amendment Documents" means (a) the Third Amendment, (b)
the Working Capital Notes issued pursuant to Section 3.05(f)(i) and (c)
the Third Mortgage Amendments.
"Third Closing Date" means June 30, 1997.
"Third Mortgage Amendments" means the mortgage amendments, if
any, executed in connection with the Third Amendment.
"Total Debt/EBITDA Ratio" means, at any date of determination,
the ratio of Consolidated total Debt (other than Hedge Agreements) of
the Borrower and its Subsidiaries as at the end of the immediately
preceding Rolling Period to Modified Consolidated EBITDA of the
Borrower and its Subsidiaries for such Rolling Period.
"Trade Letter of Credit" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a
supplier of Inventory to the Borrower or any of its Subsidiaries to
effect payment for such Inventory, the conditions to drawing under
which include the presentation to the Issuing Bank that issued such
Letter of Credit of negotiable bills of lading, invoices and related
documents sufficient, in the judgment of such Issuing Bank, to create a
valid and perfected lien on or security interest in such Inventory,
bills of lading, invoices and related documents in favor of such
Issuing Bank.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Working Capital Commitment" means, with respect to any
Working Capital Lender at any time, (a) such Lender's Working Capital
Commitment at such time minus (b) the sum of (i) the aggregate
principal amount of all Working Capital Advances and Letter of Credit
Advances made by such Lender (in its capacity as a Lender) and
outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A)
the aggregate Available Amount of all Letters of Credit outstanding at
such time and (B) the aggregate principal amount of all Letter of
Credit Advances made by the Issuing Banks pursuant to Section 2.03(c)
and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section
3(1) of ERISA, that is subject to ERISA and is maintained for employees
of any Loan Party or in respect of which any Loan Party could have
liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in Section
2.01(d).
"Working Capital Borrowing" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the
Working Capital Lenders.
"Working Capital Commitment" means, with respect to any
Working Capital Lender at any time, the amount set forth opposite such
Lender's name on Schedule I hereto under the caption "Working Capital
Commitment" or, if such Lender has entered into one or more Assignments
and Acceptances, set forth for such Lender in the Register maintained
by the Administrative Agent pursuant to Section 8.07(d) as such
Lender's "Working Capital Commitment", as such amount may be reduced at
or prior to such time pursuant to Section 2.05.
"Working Capital Facility" means, at any time, the aggregate
amount of the Working Capital Lenders' Working Capital Commitments at
such time.
"Working Capital Lender" means any Lender that has a Working
Capital Commitment.
"Working Capital Note" means a promissory note of the Borrower
payable to the order of any Working Capital Lender, in substantially
the form of Exhibit A-4 hereto, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from the Working Capital
Advances made by such Lender.
SECTION 1.02. Computation of Time Periods.02. Computation of
Time Periods. In this Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms.03. Accounting Terms. All
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred to in Section
4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Term Loan Advances. Each
Term Loan Lender severally agrees, on the terms and conditions hereinafter set
forth, to make a single advance (a "Term Loan Advance") to the Borrower on the
First Closing Date in an amount not to exceed such Lender's Term Loan Commitment
at such time. The Term Loan Borrowing shall consist of Term Loan Advances made
simultaneously by the Term Loan Lenders ratably according to their Term Loan
Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid
may not be reborrowed.
(b) The AXELs Series A Advances. Each AXELs Series A Lender
severally agrees, on the terms and conditions hereinafter set forth, to make a
single advance (an "AXELs Series A Advance") to the Borrower on the First
Closing Date in an amount not to exceed such Lender's AXELs Series A Commitment
at such time. The AXELs Series A Borrowing shall consist of AXELs Series A
Advances made simultaneously by the AXELs Series A Lenders ratably according to
their AXELs Series A Commitments. Amounts borrowed under this Section 2.01(b)
and repaid or prepaid may not be reborrowed.
(c) The AXELs Series B Advances. (i) Each Existing AXELs
Series B Lender severally agrees, on the terms and conditions hereinafter set
forth, to make a single advance (an "Existing AXELs Series B Advance") to the
Borrower on the First Closing Date in an amount not to exceed such Lender's
Existing AXELs Series B Commitment at such time. The AXELs Series B Borrowing
made on the First Closing Date shall consist of Existing AXELs Series B Advances
made simultaneously by the Existing AXELs Series B Lenders ratably according to
their Existing AXELs Series B Commitments.
(ii) Each New AXELs Series B Lender severally agrees, on the
terms and conditions hereinafter set forth, to make a single advance (a "New
AXELs Series B Advance") to the Borrower on the Second Closing Date in an amount
not to exceed such Lender's New AXELs Series B Commitment at such time. The
AXELs Series B Borrowing made on the Second Closing Date shall consist of New
AXELs Series B Advances made simultaneously by the New AXELs Series B Lenders
ratably according to their New AXELs Series B Commitments. On the Second Closing
Date, all Existing AXELs Series B Advances then outstanding shall automatically
Convert to Advances with Interest Periods ending on the same day or days as the
Interest Period or Periods selected by the Borrower for the New AXELs Series B
Advances, in such amounts such that after giving effect to such Conversion,
AXELs Series B Advances comprising part of the same Borrowing shall be owing to
the AXELs Series B Lenders ratably according to their AXELs Series B
Commitments. The Borrower shall, on the Second Closing Date, pay any amounts
owing pursuant to Section 8.04(c) as a result of such Conversion.
(iii) Amounts borrowed under this Section 2.01(c) and repaid
or prepaid may not be reborrowed.
(d) The Working Capital Advances. (i) Effective as of the
Fourth Closing Date, all Acquisition Advances and Acquisition B Advances (each
as defined in the Existing Credit Agreement) outstanding under the Existing
Credit Agreement and all but $130,000,000 of the Term Loan Advances (as defined
in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement (the aggregate amount of all such Advances less the aggregate amount
of Advances prepaid pursuant to Section 2.06(b)(ii)(B) being the "Outstanding
Amount") shall automatically be converted into Working Capital Advances
hereunder and paid in full as hereinafter set forth. In connection therewith, on
the Fourth Closing Date, each Working Capital Lender shall, in accordance with
Section 2.02(a), make available for the account of its Applicable Lending Office
to the Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's Pro Rata Share of the Outstanding Amount. Promptly upon the
Administrative Agent's receipt of the funds referred to in the immediately
preceding sentence, the Administrative Agent shall cause to be distributed like
funds to prepay the Acquisition Lenders, the Acquisition B Lenders and the Term
Lenders (each as defined in the Existing Credit Agreement) in such amounts as
may be necessary such that after giving effect thereto, the Working Capital
Advances that were, prior to conversion in accordance with the first sentence of
this Section 2.01(d)(i), Acquisition Advances, Acquisition B Advances and Term
Loan Advances shall have been paid in full. The Borrower shall, on the Fourth
Closing Date, pay any amounts owing pursuant to Section 8.04(c) as a result of
such prepayment.
(ii) Each Working Capital Lender severally agrees, on the
terms and conditions hereinafter set forth, to make advances (each a "Working
Capital Advance") to the Borrower from time to time on any Business Day during
the period from the First Closing Date until the Termination Date in an amount
for each such Advance not to exceed such Lender's Unused Working Capital
Commitment at such time (subject, however, to the terms of Section 2.01(f)).
Each Working Capital Borrowing shall be in an aggregate amount of $1,000,000 or
an integral multiple of $500,000 in excess thereof and shall consist of Working
Capital Advances made simultaneously by the Working Capital Lenders ratably
according to their Working Capital Commitments. Within the limits of each
Working Capital Lender's Unused Working Capital Commitment in effect from time
to time, the Borrower may borrow under this Section 2.01(d)(ii), prepay pursuant
to Section 2.06(a) and reborrow under this Section 2.01(d)(ii).
(e) Letters of Credit. Each Issuing Bank severally agrees, on
the terms and conditions hereinafter set forth, to issue (or cause its Affiliate
to issue on its behalf) letters of credit (the "Letters of Credit") for the
account of the Borrower from time to time on any Business Day during the period
from the First Closing Date until 60 days before the Termination Date (i) in an
aggregate Available Amount for all Letters of Credit issued by such Issuing Bank
not to exceed at any time such Issuing Bank's Letter of Credit Commitment at
such time and (ii) in an Available Amount for each such Letter of Credit not to
exceed the lesser of (x) the Letter of Credit Facility at such time and (y) the
Unused Working Capital Commitments of the Working Capital Lenders at such time.
No Letter of Credit shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than the earlier of 30
days before the Termination Date and (A) in the case of a Standby Letter of
Credit, one year after the date of issuance thereof and (B) in the case of a
Trade Letter of Credit, 60 days after the date of issuance thereof. Within the
limits of the Letter of Credit Facility, and subject to the limits referred to
above, the Borrower may request the issuance of Letters of Credit under this
Section 2.01(e), repay any Letter of Credit Advances resulting from drawings
thereunder pursuant to Section 2.03(c) and request the issuance of additional
Letters of Credit under this Section 2.01(e).
(f) Set Aside of Working Capital Commitments. Each Working
Capital Lender's Pro Rata Share of the aggregate Unused Working Capital
Commitments shall be reserved and shall not be available to be borrowed except
for the purpose set forth below in an amount equal to the aggregate amount of
Obligations guaranteed by the Borrower pursuant to Section 5.02(b)(i)(C) during
any time that such guaranteed Obligations exceed $1,000,000 outstanding and the
aggregate Unused Working Capital Commitments shall be less than $15,000,000, and
shall be available to be borrowed solely for purposes of financing such
guaranteed Obligations of the Borrower.
(g) Assignment. Effective as of the Fourth Closing Date, each
Existing Lender (other than the AXELs Series A Lenders and the AXELs Series B
Lenders) hereby sells and assigns all of its rights in and to, and all of its
obligations under, each Existing Advance owing to it and the Existing Commitment
held by it to the Initial Lenders (other than the AXELs Series A Lenders and the
AXELs Series B Lenders) and each such Initial Lender hereby purchases and
assumes, pro rata based on such Initial Lender's Commitments, all of such
Existing Lenders' rights in and to, and all of their obligations under, the
Existing Advances and the Existing Commitments, such that after giving effect to
all such assignments, each such Initial Lender's Commitment under each Facility
is in an amount equal to the amount specified as such Initial Lender's
Commitment under each such Facility on Schedule I hereto. As of the Fourth
Closing Date, immediately prior to giving effect to any assignment under this
Agreement as of such date pursuant to this Section 2.01(g), each such Existing
Lender represents and warrants, as to the assignment effected by such Existing
Lender by this Agreement, that as of the Fourth Closing Date such Existing
Lender is the legal and beneficial owner of such interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim created
by such Existing Lender.
SECTION 2.02. Making the Advances. (a) Except as otherwise
provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice,
given not later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Borrowing in the case of a Borrowing
consisting of Eurodollar Rate Advances, or not later than 9:00 A.M. (New York
City time) on the date of the proposed Borrowing in the case of a Borrowing
consisting of Base Rate Advances, by the Borrower to the Administrative Agent,
which shall give to each Appropriate Lender prompt notice thereof by telex or
telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be
by telephone, confirmed immediately in writing, or telex or telecopier, in
substantially the form of Exhibit B hereto, specifying therein the requested (i)
date of such Borrowing, (ii) Facility under which such Borrowing is to be made,
(iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 1:00 P.M. (New York City time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Administrative
Agent at the Administrative Agent's Account, in same day funds, such Lender's
ratable portion of such Borrowing in accordance with the respective Commitments
under the applicable Facility of such Lender and the other Appropriate Lenders.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower by crediting the Borrower's
Account; provided, however, that, in the case of any Working Capital Borrowing,
the Administrative Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Letter of Credit Advances made by any Issuing
Bank and by any other Working Capital Lender and outstanding on the date of such
Working Capital Borrowing, plus interest accrued and unpaid thereon to and as of
such date, available to such Issuing Bank and such other Working Capital Lenders
for repayment of such Letter of Credit Advances.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
the initial Borrowing hereunder unless the Borrower shall have agreed, in
writing, prior to or concurrently with the giving of the applicable Notice of
Borrowing, to be bound by the terms of Section 2.02(c) or for any Borrowing if
the aggregate amount of such Borrowing is less than $5,000,000 or if the
obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall
then be suspended pursuant to Section 2.09 or Section 2.10 and (ii) the Term
Loan Advances may not be outstanding as part of more than 5 separate Borrowings,
the AXELs Series A Advances may not be outstanding as part of more than 5
separate Borrowings, the AXELs Series B Advances may not be outstanding as part
of more than 5 separate Borrowings and the Working Capital Advances made on any
date may not be outstanding as part of more than 25 separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Appropriate Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill on or before the
date specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from an Appropriate Lender prior to the date of any Borrowing under a Facility
under which such Lender has a Commitment that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) or (b) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay or
pay to the Administrative Agent forthwith on demand such corresponding amount
and to pay interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid or paid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at such time under Section 2.07 to Advances comprising such Borrowing
and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such corresponding amount, such amount so
paid shall constitute such Lender's Advance as part of such Borrowing for all
purposes.
(e) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
fifth Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to any Issuing Bank, which shall give to the
Administrative Agent and each Working Capital Lender prompt notice thereof by
telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letter of credit
as such Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the
requested form of such Letter of Credit is acceptable to such Issuing Bank in
its sole discretion and (y) it has not received notice of objection to such
issuance from the Agents, such Issuing Bank will, upon fulfillment of the
applicable conditions set forth in Article III, make such Letter of Credit
available to the Borrower at its office referred to in Section 8.02 or as
otherwise agreed with the Borrower in connection with such issuance. In the
event and to the extent that the provisions of any Letter of Credit Agreement
shall conflict with this Agreement, the provisions of this Agreement shall
govern.
(b) Letter of Credit Reports. Each Issuing Bank shall furnish
(A) to the Administrative Agent on the first Business Day of each month a
written report summarizing issuance and expiration dates of Letters of Credit
issued by such Issuing Bank during the previous month and drawings during such
month under all Letters of Credit issued by such Issuing Bank, (B) to each
Working Capital Lender on the first Business Day of each month a written report
summarizing issuance and expiration dates of Letters of Credit issued by such
Issuing Bank during the preceding month and drawings during such month under all
Letters of Credit issued by such Issuing Bank and (C) to the Administrative
Agent and each Working Capital Lender on the first Business Day of each calendar
quarter a written report setting forth the average daily aggregate Available
Amount during the preceding calendar quarter of all Letters of Credit issued by
such Issuing Bank.
(c) Drawing and Reimbursement. The payment by any Issuing Bank
of a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by such Issuing Bank of a Letter of Credit Advance,
which shall be a Base Rate Advance, in the amount of such draft. Upon payment by
any Issuing Bank of a draft drawn under any Letter of Credit, such Issuing Bank
shall give prompt notice thereof to the Borrower and the Administrative Agent.
Upon written demand by any Issuing Bank with an outstanding Letter of Credit
Advance, with a copy of such demand to the Administrative Agent, each Working
Capital Lender shall purchase from such Issuing Bank, and such Issuing Bank
shall sell and assign to each such Working Capital Lender, such Lender's Pro
Rata Share of such outstanding Letter of Credit Advance as of the date of such
purchase, by making available for the account of its Applicable Lending Office
to the Administrative Agent for the account of such Issuing Bank, by deposit to
the Administrative Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Letter of Credit Advance to
be purchased by such Lender. Promptly after receipt thereof, the Administrative
Agent shall transfer such funds to such Issuing Bank. The Borrower hereby agrees
to each such sale and assignment. Each Working Capital Lender agrees to purchase
its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the
Business Day on which demand therefor is made by the Issuing Bank which made
such Advance, provided notice of such demand is given not later than 11:00 A.M.
(New York City time) on such Business Day or (ii) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by an Issuing Bank to any other Working Capital Lender of a
portion of a Letter of Credit Advance, such Issuing Bank represents and warrants
to such other Lender that such Issuing Bank is the legal and beneficial owner of
such interest being assigned by it, free and clear of any liens, but makes no
other representation or warranty and assumes no responsibility with respect to
such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to
the extent that any Working Capital Lender shall not have so made the amount of
such Letter of Credit Advance available to the Administrative Agent, such
Working Capital Lender agrees to pay to the Administrative Agent forthwith on
demand such amount together with interest thereon, for each day from the date of
demand by such Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account or the account
of such Issuing Bank, as applicable. If any Lender shall pay to the
Administrative Agent such amount for the account of such Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Lender on such Business Day for purposes
of this Agreement, and the outstanding principal amount of the Letter of Credit
Advance made by such Issuing Bank shall be reduced by such amount on such
Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of
any Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Term Loan Advances.
The Borrower shall repay to the Administrative Agent for the ratable account of
the Term Loan Lenders the aggregate outstanding principal amount of the Term
Loan Advances on the following dates in the amounts indicated (which amounts
shall be reduced as a result of the application of prepayments in accordance
with the order of priority set forth in Section 2.06):
Date Amount
---- ------
December 31, 1997 $7,500,000
March 31, 1998 $7,500,000
June 30, 1998 $3,125,000
September 30, 1998 $3,125,000
December 31, 1998 $9,375,000
March 31, 1999 $9,375,000
June 30, 1999 $3,750,000
September 30, 1999 $3,750,000
December 31, 1999 $11,250,000
March 31, 2000 $11,250,000
June 30, 2000 $3,750,000
September 30, 2000 $3,750,000
December 31, 2000 $11,250,000
March 31, 2001 $11,250,000
June 30, 2001 $3,750,000
September 30, 2001 $3,750,000
December 31, 2001 $11,250,000
March 31, 2002 $11,250,000
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term Loan Advances outstanding on such date.
(b) AXELs Series A Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the AXELs Series A Lenders the
aggregate outstanding principal amount of the AXELs Series A Advances on the
following dates in the amounts indicated (which amounts shall be reduced as a
result of the application of prepayments in accordance with the order of
priority set forth in Section 2.06):
Date Amount
---- ------
June 30, 1996 $250,000
September 30, 1996 $250,000
December 31, 1996 $750,000
March 31, 1997 $750,000
June 30, 1997 $250,000
September 30, 1997 $250,000
December 31, 1997 $750,000
March 31, 1998 $750,000
June 30, 1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $750,000
March 31, 1999 $750,000
June 30, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $750,000
March 31, 2000 $750,000
June 30, 2000 $250,000
September 30, 2000 $250,000
December 31, 2000 $750,000
March 31, 2001 $750,000
June 30, 2001 $10,000,000
September 30, 2001 $10,000,000
December 31, 2001 $30,000,000
March 31, 2002 $30,000,000
June 30, 2002 $12,500,000
September 30, 2002 $12,500,000
December 31, 2002 $37,500,000
March 31, 2003 $37,500,000
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the AXELs Series A Advances outstanding on such date.
(c) AXELs Series B Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the AXELs Series B Lenders the
aggregate outstanding principal amount of the AXELs Series B Advances on the
following dates in the amounts indicated (which amounts shall be reduced as a
result of the application of prepayments in accordance with the order of
priority set forth in Section 2.06):
Date Amount
---- ------
June 30, 1996 $150,000
September 30, 1996 $150,000
December 31, 1996 $450,000
March 31, 1997 $843,940
June 30, 1997 $281,310
September 30, 1997 $281,310
December 31, 1997 $843,940
March 31, 1998 $843,940
June 30, 1998 $281,310
September 30, 1998 $281,310
December 31, 1998 $843,940
March 31, 1999 $843,940
June 30, 1999 $281,310
September 30, 1999 $281,310
December 31, 1999 $843,940
March 31, 2000 $843,940
June 30, 2000 $281,310
September 30, 2000 $281,310
December 31, 2000 $843,940
March 31, 2001 $843,940
June 30, 2001 $281,310
September 30, 2001 $281,310
December 31, 2001 $843,940
March 31, 2002 $843,940
June 30, 2002 $281,310
September 30, 2002 $281,310
December 31, 2002 $843,940
March 31, 2003 $843,940
June 30, 2003 $15,612,880
September 30, 2003 $15,612,880
December 31, 2003 $46,838,640
March 31, 2004 $46,838,640
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the AXELs Series B Advances outstanding on such date.
(d) Working Capital Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Working Capital Lenders on
the Termination Date the aggregate outstanding principal amount of the Working
Capital Advances then outstanding.
(e) Letter of Credit Advances. (i) The Borrower shall repay to
the Administrative Agent for the account of each Issuing Bank and each other
Working Capital Lender that has made a Letter of Credit Advance on the earlier
of the second Business Day following the date on which such Letter of Credit is
drawn and the Termination Date the outstanding principal amount of each Letter
of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by the Borrower is without prejudice to, and does not
constitute a waiver of, any rights the Borrower might have or might acquire as a
result of the payment by any Issuing Bank of any draft or the reimbursement by
the Borrower thereof):
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(C) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Bank or
any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) payment by any Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from any Guaranty or any other guarantee, for all
or any of the Obligations of the Borrower in respect of the L/C Related
Documents; or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the unused portions
of the Term Loan Commitments, the AXELs Series A Commitments, the AXELs Series B
Commitments, the Letter of Credit Facility or the Unused Working Capital
Commitments; provided, however, that each partial reduction of a Facility (i)
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and (ii) shall be made ratably among the
Appropriate Lenders in accordance with their Commitments with respect to such
Facility.
(b) Mandatory. (i) On the date of the Term Loan Borrowing,
after giving effect to such Term Loan Borrowing, and from time to time
thereafter upon each repayment or prepayment of the Term Loan Advances, the
aggregate Term Loan Commitments of the Term Loan Lenders shall be automatically
and permanently reduced, on a pro rata basis, by an amount equal to the amount
by which the aggregate Term Loan Commitments immediately prior to such reduction
exceed the aggregate unpaid principal amount of the Term Loan Advances then
outstanding.
(ii) On the date of the AXELs Series A Borrowing, after giving
effect to such AXELs Series A Borrowing, and from time to time thereafter upon
each repayment or prepayment of the AXELs Series A Advances, the aggregate AXELs
Series A Commitments of the AXELs Series A Lenders shall be automatically and
permanently reduced, on a pro rata basis, by an amount equal to the amount by
which the aggregate AXELs Series A Commitments immediately prior to such
reduction exceed the aggregate unpaid principal amount of the AXELs Series A
Advances then outstanding.
(iii) On the date of each AXELs Series B Borrowing, after
giving effect to such AXELs Series B Borrowing, and from time to time thereafter
upon each repayment or prepayment of the AXELs Series B Advances, the aggregate
AXELs Series B Commitments of the AXELs Series B Lenders shall be automatically
and permanently reduced, on a pro rata basis, by an amount equal to the amount
by which the aggregate AXELs Series B Commitments immediately prior to such
reduction exceed the aggregate unpaid principal amount of the AXELs Series B
Advances then outstanding.
(iv) The Working Capital Facility shall be automatically and
permanently reduced on a pro rata basis on each date on which prepayment thereof
is required to be made pursuant to Section 2.06(b)(i), (ii), (iii) or (iv)
(other than pursuant to Section 2.06(b)(i)(B) and 2.06(b)(ii)(B)) in an amount
equal to the applicable Reduction Amount, provided that each such reduction of
the Working Capital Facility shall be made ratably among the Working Capital
Lenders in accordance with their Working Capital Commitments.
(v) The Letter of Credit Facility shall be permanently reduced
from time to time on the date of each reduction in the Working Capital Facility
by the amount, if any, by which the amount of the Letter of Credit Facility
exceeds the Working Capital Facility after giving effect to such reduction of
the Working Capital Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may,
upon at least five Business Days' notice to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment (including,
without limitation, as a result of any refinancing in part or in whole of
amounts outstanding under the Loan Documents), and if such notice is given the
Borrower shall, prepay the outstanding aggregate principal amount of the
Advances comprising part of the same Borrowing in whole or ratably in part,
together with (i) accrued interest to the date of such prepayment on the
aggregate principal amount prepaid and (ii) in the case of any such prepayment
of any Advances other than Term Loan Advances, Working Capital Advances and
Letter of Credit Advances prior to the first anniversary of the First Closing
Date, a premium of 1-3/4% of the aggregate principal amount so prepaid, or on or
after the first anniversary of the First Closing Date but prior to the first
anniversary of the Fourth Closing Date, a premium of 1% of the aggregate
principal amount so prepaid; provided, however, that (x) each partial prepayment
shall be in an aggregate principal amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof, (y) if any prepayment of a Eurodollar Rate
Advance shall be made on a date other than the last day of an Interest Period
therefor the Borrower shall also pay any amounts owing pursuant to Section
8.04(c) and (z) prepayments of the Term Facilities shall be made ratably among
such Facilities, to be applied to the installments of each such Facility on a
pro rata basis.
(b) Mandatory. (i) The Borrower shall, on the 90th day
following the end of each Fiscal Year, (A) if the Total Debt/EBITDA Ratio is
greater than or equal to 5.50:1.00, prepay an aggregate principal amount of the
Advances comprising part of the same Borrowings outstanding under the Term
Facilities in an amount equal to the Excess Cash Flow Amount for such Fiscal
Year and (B) if the Total Debt/EBITDA Ratio is less than 5.50:1.00, prepay an
aggregate principal amount of the Working Capital Advances outstanding on such
date in an amount equal to the Excess Cash Flow Amount for such Fiscal Year.
Each prepayment made pursuant to clause (A) above shall be applied ratably to
the Term Facilities in accordance with, and subject to the terms of, clause (iv)
below and each prepayment made pursuant to clause (B) above shall be applied to
the Working Capital Facility as set forth in clause (vii) below.
(ii) (A) The Borrower shall, on the date of receipt of the Net
Cash Proceeds by any Loan Party or any of its Subsidiaries from (I) the sale,
lease, transfer or other disposition of any assets of any Loan Party or any of
its Subsidiaries (other than any sale, lease, transfer or other disposition of
assets pursuant to clause (i), (ii), (iii), (iv) or (v) of Section 5.02(e) and
other than the sale of assets pursuant to clause (vi) of Section 5.02(e) to the
extent that the Net Cash Proceeds of such sale do not exceed, in the aggregate
from the First Closing Date, $10,000,000), (II) the incurrence or issuance by
any Loan Party or any of its Subsidiaries of any Debt (other than Debt incurred
or issued pursuant to clause (i), (ii) or (iii) of Section 5.02(b)) and (III)
any Extraordinary Receipt received by or paid to or for the account of any Loan
Party or any of its Subsidiaries and not otherwise included in clause (I) or
(II) above, prepay an aggregate principal amount of the Advances comprising part
of the same Borrowings equal to the amount of such Net Cash Proceeds. Each such
prepayment shall be applied first ratably to the Term Facilities in accordance
with, and subject to the terms of, clause (iv) below and second to the Working
Capital Facility as set forth in clause (vii) below.
(B) The Borrower shall, on the date of receipt of the Net Cash Proceeds
by Parent from the sale or issuance by Parent of any capital stock or other
ownership or profit interest, any securities convertible into or exchangeable
for capital stock or other ownership or profit interest or any warrants, rights
or options to acquire capital stock or other ownership or profit interest, in
each case from the IPO, prepay an aggregate principal amount of the Working
Capital Advances comprising part of the same Borrowings in an amount equal to
sum of (I) the lesser of (x) $150,000,000 and (y) the sum of (1) $100,000,000
plus (2) to the extent such Net Cash Proceeds exceed $275,000,000 (such amount
being the "Excess Amount") an amount equal to 50% of the Excess Amount plus (II)
any Net Cash Proceeds not otherwise applied to prepay the Subordinated Notes as
provided in Section 5.02(k). Each such prepayment shall be applied to the
Working Capital Facility as set forth in clause (vii) below.
(C) The Borrower shall, on the date of receipt (or such later date as
may be specified below) of the Net Cash Proceeds by Parent from the sale or
issuance by Parent of any capital stock or other ownership or profit interest,
any securities convertible into or exchangeable for capital stock or other
ownership or profit interest or any warrants, rights or options to acquire
capital stock or other ownership or profit interest, in each case as a result of
an equity offering following the IPO, prepay an aggregate principal amount of
the Advances comprising part of the same Borrowings in an amount equal to (1) if
Total Debt/EBITDA Ratio at such time is greater than or equal to 4.00:1.00, 50%
of the amount of such Net Cash Proceeds, (2) if Total Debt/EBITDA Ratio at such
time is less than 4.00:1.00 but greater than or equal to 3.00:1.00, 50% of the
amount by which such Net Cash Proceeds exceed the amount of such Net Cash
Proceeds used by the Borrower and its Subsidiaries to make Investments in
accordance with the provisions of Section 5.02(f) during the nine months
immediately following such date, payable 30 days after the nine month
anniversary of such date and (3) if the Total Debt/EBITDA Ratio at such time is
less than 3.00:1.00, zero. Each such prepayment, if any, shall be applied first
ratably to the Term Facilities in accordance with, and subject to the terms of,
clause (iv) below and second to the Working Capital Facility as set forth in
clause (vii) below.
(iii) Anything contained in this Section 2.06(b) to the
contrary notwithstanding, (A) if, following the occurrence of any "Asset Sale"
(as such term is defined in the Senior Subordinated Notes Indenture or the
Senior Subordinated Discount Notes Indenture) by any Loan Party or any of its
Subsidiaries, the Borrower is required to commit by a particular date (a
"Commitment Date") to apply or cause its Subsidiaries to apply an amount equal
to any of the "Net Proceeds" (as defined in the Senior Subordinated Notes
Indenture or the Senior Subordinated Discount Notes Indenture, as the case may
be) thereof in a particular manner, or to apply by a particular date (an
"Application Date") an amount equal to any such "Net Proceeds" in a particular
manner, in either case in order to excuse the Borrower from being required to
make an "Asset Sale Offer" (as defined in the Senior Subordinated Notes
Indenture or the Senior Subordinated Discount Notes Indenture, as the case may
be) in connection with such "Asset Sale," and the Borrower shall have failed to
so commit or to so apply an amount equal to such "Net Proceeds" at least 60 days
before the Commitment Date or the Application Date, as the case may be, or (B)
if the Borrower at any other time shall have failed to apply or commit or cause
to be applied an amount equal to any such "Net Proceeds," and, within 60 days
thereafter assuming no further application or commitment of an amount equal to
such "Net Proceeds" the Borrower would otherwise be required to make an "Asset
Sale Offer" in respect thereof, then in either such case the Borrower shall
immediately apply or cause to be applied an amount equal to such "Net Proceeds"
to the payment of the Advances in the manner set forth in Section 2.06(b)(ii) in
such amounts as shall excuse the Borrower from making any such "Asset Sale
Offer".
(iv) Prepayments of the Term Facilities pursuant to Section
2.06(b)(i), (ii) or (iii) shall be made ratably among such Facilities, to be
applied to the installments of each such Facility on a pro rata basis until such
installments are paid in full; provided, however, that with respect to
prepayments made prior to or on the second anniversary of the First Closing
Date, once prepayments in a principal amount of $25,000,000 or more in the
aggregate since the First Closing Date shall have been applied to the AXELs
Series A Facility and the AXELs Series B Facility then the Lenders under such
Facilities, at each such Lender's option, may elect not to accept such
prepayment, in which event the provisions of the next sentence shall apply. With
respect to such prepayments made prior to or on the second anniversary of the
First Closing Date, once the AXELs Series A Facility and the AXELs Series B
Facility shall have been prepaid in a principal amount of $25,000,000 in the
aggregate since the First Closing Date, then upon receipt by the Administrative
Agent of such prepayment, the amount of the prepayment that is available to
prepay such Facilities (subject to the proviso to the immediately preceding
sentence) shall be deposited in the Cash Collateral Account (the "First
Prepayment Amount"), pending application of such amount on the First Prepayment
Date and the Second Prepayment Date as set forth below and promptly after such
receipt (the date of such receipt being the "Receipt Date"), the Administrative
Agent shall give written notice to the AXELs Series A Lenders and the AXELs
Series B Lenders of the amount available to prepay the Advances and the date on
which such prepayment shall be made (the "First Prepayment Date"), which date
shall be 10 days after the Receipt Date. Any Lender declining such prepayment (a
"First Declining Lender") shall give written notice to the Administrative Agent
by 12:00 Noon (New York City time) on the Business Day immediately preceding the
First Prepayment Date. On the First Prepayment Date, an amount equal to that
portion of the First Prepayment Amount accepted by the AXELs Series A Lenders
and the AXELs Series B Lenders other than the First Declining Lenders (such
Lenders being the "First Accepting Lenders") to prepay Advances owing to such
First Accepting Lenders shall be withdrawn from the Cash Collateral Account and
applied to prepay Advances owing to such First Accepting Lenders on a pro rata
basis and any amounts that would otherwise have been applied to prepay Advances
owing to the First Declining Lenders (the "Second Prepayment Amount") shall
instead be retained in the Cash Collateral Account and offered to the First
Accepting Lenders to prepay Advances owing to such First Accepting Lenders. The
Administrative Agent shall, on or prior to the First Prepayment Date, give
written notice to the First Accepting Lenders of the Second Prepayment Amount
that is available to prepay the Advances owing to such First Accepting Lenders
and the date on which such prepayment shall be made (the "Second Prepayment
Date"), which date shall be 10 days after the First Prepayment Date. Any First
Accepting Lender declining such prepayment (a "Second Declining Lender") shall
give written notice to the Administrative Agent by 12:00 Noon (New York City
time) on the Business Day immediately preceding the Second Prepayment Date. On
the Second Prepayment Date, an amount equal to the Second Prepayment Amount
shall be withdrawn from the Cash Collateral Account and applied to prepay
Advances owing to the First Accepting Lenders other than the Second Declining
Lenders (such Lenders being the "Second Accepting Lenders") on a pro rata basis
and any amounts that would otherwise have been applied to prepay Advances owing
to Second Declining Lenders shall instead be applied first to prepay Advances
owing to the Term Loan Lenders on a pro rata basis and to the installments
thereof on a pro rata basis and second ratably to prepay the Working Capital
Facility as set forth in clause (vii) below and, if the Term Loan Facility and
Working Capital Facility shall have been paid in full and terminated, amounts
that would have been otherwise applied to prepay Advances under such Facilities
shall be applied instead to prepay Advances owing to the Second Accepting
Lenders.
(v) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Working Capital Advances comprising part of
the same Borrowings and the Letter of Credit Advances equal to the amount by
which (A) the sum of the aggregate principal amount of (x) the Working Capital
Advances and (y) the Letter of Credit Advances then outstanding plus the
aggregate Available Amount of all Letters of Credit then outstanding exceeds (B)
the Working Capital Facility on such Business Day.
(vi) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in such Account to equal the
amount by which the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Letter of Credit Facility on such Business Day.
(vii) Prepayments of the Working Capital Facility made
pursuant to clause (i), (ii), (iii) or (iv) above shall be first applied to
prepay Letter of Credit Advances then outstanding until such Advances are paid
in full, second applied to prepay Working Capital Advances then outstanding
comprising part of the same Borrowings until such Advances are paid in full and
third, other than with respect to amounts prepaid pursuant to Section
2.06(b)(i)(B) or Section 2.06(b)(ii)(B), deposited in the L/C Cash Collateral
Account to cash collateralize 100% of the Available Amount of the Letters of
Credit then outstanding; and, in the case of prepayments of the Working Capital
Facility required pursuant to clause (i), (ii), (iii) or (iv) above, the amount
remaining (if any) after the prepayment in full of the Advances then outstanding
and the 100% cash collateralization of the aggregate Available Amount of Letters
of Credit then outstanding (the sum of such prepayment amounts, cash
collateralization amounts and remaining amount being referred to herein as the
"Reduction Amount") may be retained by the Borrower and, other than with respect
to amounts prepaid pursuant to Section 2.06(b)(i)(B) or Section 2.06(b)(ii)(B),
the Working Capital Facility shall be permanently reduced as set forth in
Section 2.05(b)(iv). Upon the drawing of any Letter of Credit for which funds
are on deposit in the L/C Cash Collateral Account, such funds shall be applied
to reimburse the relevant Issuing Bank or Working Capital Lenders, as
applicable.
(viii) Notwithstanding anything to the contrary contained in
subsection (b)(ii) of this Section 2.06, so long as no Default shall have
occurred and be continuing, if, on any date on which a prepayment of Advances
would otherwise be required pursuant to subsection (b)(ii) of this Section 2.06,
the aggregate amount of Net Cash Proceeds or other amounts otherwise required by
such subsection to be applied to prepay Advances on such date are less than or
equal to $1,000,000, the Borrower may defer such prepayment until the date on
which the aggregate amount of Net Cash Proceeds or other amounts otherwise
required by such subsection to be applied to prepay Advances exceeds $1,000,000.
During such deferral period, the Borrower may apply all or any part of such
aggregate amount to prepay Working Capital Advances and may, subject to the
fulfillment of the conditions set forth in Section 3.02, reborrow such amounts
(which amounts, to the extent originally constituting Net Cash Proceeds, shall
be deemed to retain their original character as Net Cash Proceeds when so
reborrowed) for application as required by this Section 2.06. Upon the
occurrence of a Default, the Borrower shall immediately prepay Advances in the
amount of all Net Cash Proceeds received by the Borrower and other amounts, as
applicable, that are required to be applied to prepay Advances by this Section
2.06 (without giving effect to the first and second sentences of this subsection
(b)(viii)) but which have not previously been so applied.
(ix) All prepayments under this subsection (b) shall be made
together with accrued interest to the date of such prepayment on the principal
amount prepaid.
SECTION 2.07. Interest. (a) Scheduled Interest. The
Borrower shall pay interest on the unpaid principal amount of each Advance owing
to each Lender from the date of such Advance until such principal amount shall
be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(A) the Base Rate in effect from time to time plus (B) the Applicable
Margin in effect from time to time, payable in arrears quarterly on the
first day of each July, October, January and April during such periods
and on the date such Base Rate Advance shall be Converted or paid in
full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A)
the Eurodollar Rate for such Interest Period for such Advance plus (B)
the Applicable Margin in effect on the first day of such Interest
Period, payable in arrears on the last day of such Interest Period and,
if such Interest Period has a duration of more than three months, on
each day that occurs during such Interest Period every three months
from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of a Default, the Borrower shall pay interest on (i) the unpaid
principal amount of each Advance owing to each Lender, payable in arrears on the
dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per
annum equal at all times to 2% per annum above the rate per annum required to be
paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid, in the case
of interest, on the Type of Advance on which such interest has accrued pursuant
to clause (a)(i) or (a)(ii) above, and, in all other cases, on Base Rate
Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent shall
give notice to the Borrower and each Appropriate Lender of the applicable
interest rate determined by the Administrative Agent for purposes of clause
(a)(i) or (ii).
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall
pay to the Administrative Agent for the account of the Lenders a commitment fee,
from the date of the acceptance of the Initial Lenders' Commitments by the
Borrower in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the Termination Date, payable in arrears
on the date of the initial Borrowing hereunder, thereafter quarterly on the
first day of each July, October, January and April, commencing January 1, 1998,
and on the Termination Date, at a rate per annum equal to 0.375% on the average
daily Unused Working Capital Commitment of such Lender during such quarter;
provided, however, that no commitment fee shall accrue on any of the Commitments
of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to
the Administrative Agent for the account of each Working Capital Lender a
commission, payable in arrears quarterly on the first day of each July, October,
January and April, commencing July 1, 1996, and on the earliest to occur of the
full drawing, expiration, termination or cancellation of any Letter of Credit
and on the Termination Date, on such Lender's Pro Rata Share of the average
daily aggregate Available Amount during such quarter of all Letters of Credit
outstanding from time to time at a rate per annum equal to the Applicable Margin
for Eurodollar Rate Advances in effect from time to time.
(ii) The Borrower shall pay to each Issuing Bank, for its own
account, such commissions, issuance fees, fronting fees, transfer fees and other
fees and charges in connection with the issuance or administration of each
Letter of Credit as the Borrower and such Issuing Bank shall agree.
(c) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Section
2.10, Convert all or any portion of the Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b), no
Conversion of any Advances shall result in more separate Borrowings than
permitted under Section 2.02(b) and each Conversion of Advances comprising part
of the same Borrowing under any Facility shall be made ratably among the
Appropriate Lenders in accordance with their Commitments under such Facility.
Each such notice of Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $5,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Eurodollar Rate Advance with an Interest Period of one month.
(iii) Upon the occurrence and during the continuance of any
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining or participating in Letters of Credit or of
agreeing to make or of making or maintaining Letter of Credit Advances
(excluding for purposes of this Section 2.10 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender Party is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender Party (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender Party
additional amounts sufficient to compensate such Lender Party for such increased
cost; provided, however, that, before making any such demand, each Lender Party
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party. A certificate
as to the amount of such increased cost, submitted to the Borrower by such
Lender Party, shall be conclusive and binding for all purposes, absent manifest
error.
(b) If any Lender Party determines that either (i) the
enactment of or any change in or in the interpretation of any law or regulation
or (ii) the compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue or participate in Letters of
Credit hereunder and other commitments of such type or the issuance or
maintenance of or participation in the Letters of Credit (or similar contingent
obligations), then, upon demand by such Lender Party or such corporation (with a
copy of such demand to the Administrative Agent), the Borrower shall pay to the
Administrative Agent for the account of such Lender Party, from time to time as
specified by such Lender Party, additional amounts sufficient to compensate such
Lender Party in the light of such circumstances, to the extent that such Lender
Party reasonably determines such increase in capital to be allocable to the
existence of such Lender Party's commitment to lend or to issue or participate
in Letters of Credit hereunder or to the issuance or maintenance of or
participation in any Letters of Credit; provided, however, that, before making
any such demand, each Lender Party agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would
avoid the need for, or reduce the amount of, such additional amounts payable
under this subsection (b) and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party. A certificate
as to such amounts submitted to the Borrower by such Lender Party shall be
conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed at least 25% of the then aggregate unpaid principal
amount thereof notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under any Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Appropriate Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Borrower that such Lenders have determined that the circumstances
causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 2.11. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, irrespective of any right
of counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds, with payments being received by the Administrative Agent after such time
being deemed to have been received on the next succeeding Business Day. The
Administrative Agent will promptly thereafter cause like funds to be distributed
(i) if such payment by the Borrower is in respect of principal, interest,
commitment fees or any other Obligation then payable hereunder and under the
Notes to more than one Lender Party, to such Lender Parties for the account of
their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective Obligations then payable to such Lender Parties and
(ii) if such payment by the Borrower is in respect of any Obligation then
payable hereunder to one Lender Party, to such Lender Party for the account of
its Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances or the Facility to which, or the
manner in which, such funds are to be applied, the Administrative Agent may, but
shall not be obligated to, elect to distribute such funds to each Lender Party
ratably in accordance with such Lender Party's proportionate share of the
principal amount of all outstanding Advances and the Available Amount of all
Letters of Credit then outstanding, in repayment or prepayment of such of the
outstanding Advances or other Obligations owed to such Lender Party, and for
application to such principal installments, as the Administrative Agent shall
direct.
(c) The Borrower hereby authorizes each Lender Party, if and
to the extent payment owed to such Lender Party is not made when due hereunder
or, in the case of a Lender, under the Note held by such Lender, to charge from
time to time against any or all of the Borrower's accounts with such Lender
Party any amount so due.
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to any Lender
Party hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to such Lender Party on
such due date an amount equal to the amount then due such Lender Party. If and
to the extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each such Lender Party shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Lender Party together
with interest thereon, for each day from the date such amount is distributed to
such Lender Party until the date such Lender Party repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the
Borrower hereunder or under the Notes shall be made, in accordance with Section
2.11, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of each Lender Party and each
Agent, taxes that are imposed on its overall net income by the United States and
taxes that are imposed on its overall net income (and franchise taxes imposed in
lieu thereof) by the state or foreign jurisdiction under the laws of which such
Lender Party or such Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender Party, taxes that are
imposed on its overall net income (and franchise taxes imposed in lieu thereof)
by the state or foreign jurisdiction of such Lender Party's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities in respect of
payments hereunder or under the Notes being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender Party or any Agent,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.12) such Lender Party or such Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future
stamp, documentary, excise, property or similar taxes, charges or levies that
arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender Party and each
Agent for and hold it harmless against the full amount of Taxes and Other Taxes,
and the full amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.12, imposed on or paid by such Lender Party or such
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
such Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 8.02, the original or a certified copy of a receipt evidencing such
payment. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or by or
on behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender or
Initial Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it becomes a Lender Party in the case of each other
Lender Party, and from time to time thereafter as requested in writing by the
Borrower (but only so long thereafter as such Lender Party remains lawfully able
to do so), provide each of the Administrative Agent and the Borrower with two
original Internal Revenue Service forms 1001 or 4224 or (in the case of a Lender
Party that is claiming exemption from United States withholding tax under
Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments
of "portfolio interest") form W-8 (and, if such Lender Party delivers a form
W-8, a certificate representing that such Lender Party is not a "bank" for
purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue
Code) of the Borrower and is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue
Code)), as appropriate, or any successor or other form prescribed by the
Internal Revenue Service, certifying that such Lender Party is exempt from or
entitled to a reduced rate of United States withholding tax on payments pursuant
to this Agreement or the Notes or, in the case of a Lender Party providing a
form W-8, certifying that such Lender Party is a foreign corporation,
partnership, estate or trust. If the forms provided by a Lender Party at the
time such Lender Party first becomes a party to this Agreement indicates a
United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from the definition of Taxes hereunder
unless and until such Lender Party provides the appropriate form certifying that
a lesser rate applies, whereupon withholding tax at such lesser rate only shall
be considered excluded from the definition of Taxes hereunder for periods
governed by such form; provided, however, that, if at the date of the Assignment
and Acceptance pursuant to which a Lender Party becomes a party to this
Agreement, the Lender Party assignor was entitled to payments under subsection
(a) in respect of United States withholding tax with respect to interest paid at
such date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise
includible in Taxes) United States withholding tax, if any, applicable with
respect to the Lender Party assignee on such date.
(f) For any period with respect to which a Lender Party has
failed to provide the Borrower with the appropriate form described in subsection
(e) above (other than if such failure is due to a change in law occurring after
the date on which a form originally was required to be provided or if such form
otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) with respect to
Taxes imposed by the United States by reason of such failure; provided, however,
that should a Lender Party become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender Party shall reasonably request to assist such Lender Party to recover
such Taxes.
(g) Any Lender Party claiming any additional amounts payable
pursuant to this Section 2.12 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party
shall obtain at any time any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise, other than as a result of an
assignment pursuant to Section 8.07) (a) on account of Obligations due and
payable to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such interests or participating interests in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such Lender Party's ratable share (according to the proportion of (i)
the purchase price paid to such Lender Party to (ii) the aggregate purchase
price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (i) the
amount of such other Lender Party's required repayment to (ii) the total amount
so recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount so
recovered; provided further that, so long as the Obligations under the Loan
Documents shall not have been accelerated, any excess payment received by any
Appropriate Lender shall be shared on a pro rata basis only with other
Appropriate Lenders. The Borrower agrees that any Lender Party so purchasing an
interest or participating interest from another Lender Party pursuant to this
Section 2.13 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such interest
or participating interest, as the case may be, as fully as if such Lender Party
were the direct creditor of the Borrower in the amount of such interest or
participating interest, as the case may be.
SECTION 2.14. Use of Proceeds. The proceeds of (i) the Term
Loan Advances, the AXELs Series A Advances and the Existing AXELs Series B
Advances shall be available (and the Borrower agrees that it shall use such
proceeds) solely to pay to the Sellers the cash consideration for the
Acquisition, pay transaction fees and expenses and refinance certain Existing
Debt, (ii) the New AXELs Series B Advances shall be available (and the Borrower
agrees that it shall use such proceeds) solely to prepay outstanding Acquisition
Advances pursuant to and as defined in the Second Credit Agreement and to pay
transaction fees and expenses incurred in connection with the First Amendment,
and (iii) the Working Capital Advances and the issuances of Letters of Credit
shall be available (and the Borrower agrees that it shall use such proceeds and
Letters of Credit) solely (a) to provide working capital for the Borrower and
its Subsidiaries, (b) to finance certain acquisitions to the extent permitted
hereunder and to refinance construction costs of new bowling centers after the
completion of the construction thereof, (c) to make any payments required under
the Support Agreement, (d) to pay to the Sellers the "purchase price adjustment"
(if any) required to be paid pursuant to the Purchase Agreement, (e) to finance
payments required under guarantees permitted by Section 5.02(b)(iii)(I) and (f)
for other general corporate purposes.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at
any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such
Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the
Borrower shall be required to make any payment hereunder or under any other Loan
Document to or for the account of such Defaulting Lender, then the Borrower may,
so long as no Default shall occur or be continuing at such time and to the
fullest extent permitted by applicable law, set off and otherwise apply the
Obligation of the Borrower to make such payment to or for the account of such
Defaulting Lender against the obligation of such Defaulting Lender to make such
Defaulted Advance. In the event that, on any date, the Borrower shall so set off
and otherwise apply its obligation to make any such payment against the
obligation of such Defaulting Lender to make any such Defaulted Advance on or
prior to such date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the other Loan Documents
an Advance by such Defaulting Lender made on the date under the Facility
pursuant to which such Defaulted Advance was originally required to have been
made pursuant to Section 2.01. Such Advance shall be a Base Rate Advance and
shall be considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (A)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (B) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted
Amount to any Agent or any of the other Lender Parties and (iii) the Borrower
shall make any payment hereunder or under any other Loan Document to the
Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents payment, to such extent,
of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Agents or Lender Parties,
ratably in accordance with the respective portions of such Defaulted Amounts
payable at such time to the Administrative Agent and such other Agents and
Lender Parties and, if the amount of such payment made by the Borrower shall at
such time be insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Agents and Lender Parties, in the following
order of priority:
(i) first, to the Agents for any Defaulted Amount then owing
to the Agents, ratably in accordance with such respective Defaulted
Amounts then owing to the Agents; and
(ii) second, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in accordance
with such respective Defaulted Amounts then owing to such other Lender
Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a
Defaulted Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any
other Lender Party shall be required to pay or distribute any amount hereunder
or under any other Loan Document to or for the account of such Defaulting
Lender, then the Borrower or such other Lender Party shall pay such amount to
the Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in an account
with Citibank, in the name and under the control of the Administrative Agent,
but subject to the provisions of this subsection (c). The terms applicable to
such account, including the rate of interest payable with respect to the credit
balance of such account from time to time, shall be Citibank's standard terms
applicable to escrow accounts maintained with it. Any interest credited to such
account from time to time shall be held by the Administrative Agent in escrow
under, and applied by the Administrative Agent from time to time in accordance
with the provisions of, this subsection (c). The Administrative Agent shall, to
the fullest extent permitted by applicable law, apply all funds so held in
escrow from time to time to the extent necessary to make any Advances required
to be made by such Defaulting Lender and to pay any amount payable by such
Defaulting Lender hereunder and under the other Loan Documents to the
Administrative Agent or any other Agent or Lender Party, as and when such
Advances or amounts are required to be made or paid and, if the amount so held
in escrow shall at any time be insufficient to make and pay all such Advances
and amounts required to be made or paid at such time, in the following order of
priority:
(i) first, to the Agents for any amount then due and payable
by such Defaulting Lender to the Agents under the Loan Documents,
ratably in accordance with such respective amounts then due and payable
to the Agents;
(ii) second, to any other Lender Parties for any amount then
due and payable by such Defaulting Lender to such other Lender Parties
hereunder, ratably in accordance with such respective amounts then due
and payable to such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under
this Section 2.15 are in addition to other rights and remedies that the Borrower
may have against such Defaulting Lender with respect to any Defaulted Advance
and that any Agent or any Lender Party may have against such Defaulting Lender
with respect to any Defaulted Amount.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of
Credit. The obligation of each Lender to make an Advance or of any Issuing Bank
to issue a Letter of Credit on the occasion of the Initial Extension of Credit
hereunder is subject to the satisfaction of the following conditions precedent
before or concurrently with the Initial Extension of Credit:
(a) The Acquisition shall have been consummated in accordance
with the terms of the Purchase Agreement, without any waiver or
amendment not consented to by the Agents of any material term,
provision or condition set forth therein, and in compliance with all
applicable laws.
(b) The Purchase Agreement shall be in full force and effect.
(c) Parent shall have received at least $375,000,000 in Net
Cash Proceeds of the sale of equity to the Equity Investors, and such
Net Cash Proceeds shall have been contributed, directly or indirectly,
to the Borrower as a capital contribution and the Borrower shall have
received $500,000,000 (less an underwriting spread of 3.5% on the first
$350,000,000 and 4.5% on the remaining $150,000,000) in gross cash
proceeds of the issuance of the Subordinated Notes.
(d) The Lender Parties shall be satisfied with the corporate
and legal structure and capitalization of each Loan Party and each of
its Subsidiaries, including the terms and conditions of the charter,
bylaws and each class of capital stock of each Loan Party and each such
Subsidiary and of each agreement or instrument relating to such
structure or capitalization.
(e) The Agents shall be satisfied that all Existing Debt,
other than the Debt identified on Schedule 3.01(e) (the "Surviving
Debt"), has been prepaid, redeemed or defeased in full or otherwise
satisfied and extinguished and that all Surviving Debt shall be on
terms and conditions satisfactory to the Lender Parties.
(f) Before giving effect to the Acquisition and the other
transactions contemplated by this Agreement, there shall have occurred
no Material Adverse Change since December 31, 1995.
(g) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of the Acquisition, this Agreement, any
Note, any other Loan Document, any Related Document or the consummation
of the transactions contemplated hereby.
(h) Nothing shall have come to the attention of the Lender
Parties during the course of their due diligence investigation to lead
them to believe (i) that the Information Memorandum was or has become
misleading, incorrect or incomplete in any material respect, (ii) that,
following the consummation of the Acquisition, the Borrower and its
Subsidiaries would not have good and marketable title to all material
assets of the Company and its Subsidiaries reflected in the Information
Memorandum (other than those disposed of in the ordinary course of
business) and (iii) that the Acquisition will have a Material Adverse
Effect; without limiting the generality of the foregoing, the Agents
shall have been given such access to the management, records, books of
account, contracts and properties of the Loan Parties and their
Subsidiaries as they shall have requested.
(i) All governmental and third party consents and approvals
necessary in connection with the Acquisition, the Loan Documents and
the Related Documents and the transactions contemplated thereby shall
have been obtained (without the imposition of any conditions that are
not reasonably acceptable to the Agents) and shall remain in effect
other than such governmental or third party consents and approvals the
failure to obtain which shall not (x) be materially adverse to Holdings
or the Borrower, in each case together with its respective
Subsidiaries, taken as a whole, (y) affect the enforceability, validity
or binding effect of any of the Loan Documents required to be executed
and delivered prior to or on the First Closing Date or (z) expose the
Arrangers, the Agents or the Lender Parties to personal liability;
provided, however, that with respect to the receipt of licenses to sell
or serve alcoholic beverages or to engage in gaming, lottery or
gambling activities (or the necessary consents or approvals with
respect thereto), such condition shall be satisfied if the Agents are
reasonably satisfied that licenses have been obtained or that other
appropriate mechanisms which will not result in denial or loss of a
license or penalties (other than immaterial civil penalties) or put the
Borrower or its Subsidiaries at risk of an enforcement action for a
violation are in place and, in each case, are expected to remain in
place for the foreseeable future without material risk or expectation
of losing such ability in the future (other than the risk that any
holder of a liquor license or a gaming, lottery or gambling license
that complies with the terms and requirements of such license and the
relevant law generally bears of nonrenewal) so that after the First
Closing Date, alcoholic beverages can continue to be sold or served and
gaming activities can continue to be conducted in essentially the same
manner and on essentially the same terms (and without any additional
material restrictions) as before the First Closing Date and in
compliance in all material respects with all applicable laws and rules,
regulations, statutes, licenses and orders of any governmental
authority relating to the sale or service of alcoholic beverages or
engaging in gaming, lottery and gambling activities at bowling centers
(or related premises) which would reasonably be expected to enable the
Borrower and its Subsidiaries to derive, during a 10-month period
beginning on the First Closing Date, at least 90% of the total revenues
from the sale and/or service of alcoholic beverages and, other than in
the State of Washington, gaming, lottery and gambling activities (and
from any related management service agreements and leases) during the
10-month period ended October 31, 1995; all applicable waiting periods
shall have expired without any action being taken by any competent
authority; and no law or regulation shall be applicable in the judgment
of the Agents that restrains, prevents or imposes materially adverse
conditions upon the Acquisition, the Loan Documents and the Related
Documents and the transactions contemplated thereby.
(j) The Agents shall be satisfied with all contractual and
other arrangements with the Borrower's management.
(k) All capital stock of the Borrower shall be owned by
Holdings, all capital stock of Holdings shall be owned by Parent and
all capital stock of Parent shall be owned by the Equity Investors, and
all of the stock of the Borrower's Subsidiaries shall be owned by the
Borrower or one or more of the Borrower's Subsidiaries, in each case
free and clear of any lien, charge or encumbrance, other than Liens in
favor of the Secured Parties.
(l) The Agents shall be satisfied that the Borrower and its
Subsidiaries will be able to meet their obligations under all Plans,
that the Borrower's and its Subsidiaries' Plans are, in all material
respects, funded in accordance with the minimum statutory requirements,
that no material "reportable event" (as defined in ERISA, but excluding
events for which reporting has been waived) has occurred as to any such
Plan and that no termination of, or withdrawal from, any such Plan has
occurred or is contemplated that could result in a material liability.
(m) The Agents shall be satisfied (i) with the sources, terms
and conditions of the equity and the other debt financing for the
Acquisition and the other transactions contemplated by the Loan
Documents and the Related Documents, (ii) that the amount of committed
equity and debt financing shall be sufficient to meet the financing
requirements of the Acquisition and the other transactions contemplated
by the Loan Documents and the Related Documents and (iii) that the
amount of transaction fees and expenses payable in connection with the
closing of the Acquisition and the other transactions contemplated by
the Loan Documents and the Related Documents does not exceed the
maximum amount previously disclosed to the Initial Lenders.
(n) The Lender Parties shall have received audited financial
statements of the Borrower and its Subsidiaries for the year ended
December 31, 1995, from which financial statements shall be derived a
Consolidated pro forma EBITDA of the Borrower and its Subsidiaries of
at least $165,000,000 (as reflected in the offering circular for the
Subordinated Notes).
(o) The Borrower shall have paid all accrued fees of the
Lender Parties and all accrued fees and expenses of the Agents and the
Arrangers (including the accrued fees and expenses of counsel to the
Agents and the Arrangers and local, foreign and intellectual property
counsel to, and of other experts and advisors retained by, the Agents
for the Lender Parties).
(p) The Administrative Agent shall have received on or before
the day of the Initial Extension of Credit the following, each dated
such day (unless otherwise specified), in form and substance
satisfactory to the Agents (unless otherwise specified) and (except for
the Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the
Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower, the Company and each other Loan
Party approving the Acquisition, this Agreement, the Notes,
each other Loan Document and each Related Document to which it
is or is to be a party, and of all documents evidencing other
necessary corporate action and governmental and other third
party approvals and consents, if any, with respect to the
Acquisition, this Agreement, the Notes, each other Loan
Document and each Related Document.
(iii) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the date of the Initial Extension of Credit,
listing the charter of the Borrower, the Company and each
other Loan Party and each amendment thereto on file in his
office and certifying that (A) such amendments are the only
amendments to the Borrower's, the Company's or such other Loan
Party's charter on file in his office, (B) the Borrower, the
Company and each other Loan Party have paid all franchise
taxes to the date of such certificate and (C) the Borrower,
the Company and each other Loan Party are duly incorporated
and in good standing under the laws of the jurisdiction of its
incorporation.
(iv) A copy of a certificate of the Secretary of
State of such states as the Administrative Agent may require,
dated reasonably near the date of the Initial Extension of
Credit, stating that the Borrower, the Company and each other
Loan Party are duly qualified and in good standing as foreign
corporations in such State and have filed all annual reports
required to be filed to the date of such certificate.
(v) A certificate of the Borrower, the Company and
each other Loan Party, signed on behalf of the Borrower, the
Company and such other Loan Party by its President or a Vice
President and its Secretary or any Assistant Secretary, dated
the date of the Initial Extension of Credit (the statements
made in which certificate shall be true on and as of the date
of the Initial Extension of Credit), certifying as to (A) the
absence of any amendments to the charter of the Borrower, the
Company or such other Loan Party since the date of the
Secretary of State's certificate referred to in Section
3.01(p)(iii), (B) a true and correct copy of the bylaws of the
Borrower, the Company and such other Loan Party as in effect
on the date of the Initial Extension of Credit, (C) the due
incorporation and good standing of the Borrower, the Company
and such other Loan Party as a corporation organized under the
laws of the state of its incorporation, and the absence of any
proceeding for the dissolution or liquidation of the Borrower,
the Company or such other Loan Party, (D) the truth of the
representations and warranties contained in the Loan Documents
as though made on and as of the date of the Initial Extension
of Credit and (E) the absence of any event occurring and
continuing, or resulting from the Initial Extension of Credit,
that constitutes a Default.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Borrower, the Company and each other Loan
Party certifying the names and true signatures of the officers
of the Borrower, the Company and such other Loan Party
authorized to sign this Agreement, the Notes, each other Loan
Document and each Related Document to which they are or are to
be parties and the other documents to be delivered hereunder
and thereunder.
(vii) A security agreement in substantially the form
of Exhibit D hereto (together with each other security
agreement delivered or to be delivered pursuant to Section
5.01(n), in each case as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Security Agreement"), duly executed by the Borrower and each
other Loan Party, together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated
stock powers executed in blank and instruments
evidencing the Pledged Debt referred to therein
indorsed in blank,
(B) duly executed proper financing
statements, to be filed under the Uniform Commercial
Code of all jurisdictions that the Collateral Agent
may deem necessary or desirable in order to perfect
and protect the first priority liens and security
interests created under the Security Agreement,
covering the Collateral described in the Security
Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing all effective financing statements
filed in the jurisdictions referred to in clause (B)
above that name the Borrower, the Company or any
other Loan Party as debtor, together with copies of
such other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Collateral Agent may deem
necessary or desirable in order to perfect and
protect the Liens created thereby,
(E) evidence of the insurance required
by the terms of the Security Agreement,
(F) copies of the Assigned Agreements
referred to in the Security Agreement, together with
a consent to such assignment (to the extent required
by the terms of the Security Agreement), in
substantially the form of Exhibit B to the Security
Agreement, duly executed by each party to such
Assigned Agreements other than the Loan Parties,
(G) the Blocked Account Letters referred to
in the Security Agreement (to the extent required by
the terms of the Security Agreement), duly executed
by each Blocked Account Bank referred to in the
Security Agreement, and
(H) evidence that all other action that the
Collateral Agent may deem necessary or desirable in
order to perfect and protect the first priority liens
and security interests created under the Security
Agreement has been taken.
(viii) An intellectual property security agreement in
substantially the form of Exhibit E hereto (together with each
other intellectual property security agreement delivered or to
be delivered pursuant to Section 5.01(n), in each case as
amended, supplemented or otherwise modified from time to time
in accordance with its terms, the "Intellectual Property
Security Agreement"), duly executed by the Borrower and each
other Loan Party, together with evidence that all action that
the Collateral Agent may deem necessary or desirable in order
to perfect and protect the first priority liens and security
interests created under the Intellectual Property Security
Agreement has been taken.
(ix) Deeds of trust, trust deeds, mortgages,
leasehold mortgages and leasehold deeds of trust in
substantially the form of Exhibit F hereto and covering
properties listed on Part I of Schedule 4.01(kk) and Part I of
Schedule 4.01(ll) (together with each other mortgage delivered
or to be delivered pursuant to Section 5.01(n), in each case
as amended, supplemented or otherwise modified from time to
time in accordance with their terms, the "Mortgages"), duly
executed by the appropriate Loan Party, together with:
(A) fully paid American Land Title
Association Lender's Extended Coverage title
insurance policies (the "Mortgage Policies") in form
and substance, with endorsements and in amount
acceptable to the Collateral Agent, issued, coinsured
and reinsured by title insurers acceptable to the
Collateral Agent, insuring the Mortgages covering the
manufacturing facilities listed on Schedules 4.01(ll)
and 4.01(kk) to be valid first and subsisting Liens
on the property described therein, free and clear of
all defects (including, but not limited to,
mechanics' and materialmen's Liens) and encumbrances,
excepting only Permitted Encumbrances, and providing
for such other affirmative insurance (including
endorsements for future advances under the Loan
Documents and for mechanics' and materialmen's Liens)
and such coinsurance and direct access reinsurance as
the Collateral Agent may deem necessary or desirable,
(B) title reports, prepared by one or more
nationally recognized title insurance companies, with
respect to each of the properties covered by the
Mortgages, reflecting that such properties are free
and clear of all defects (including, but not limited
to, mechanics' and materialmen's Liens) and
encumbrances, excepting only Permitted Encumbrances,
(C) Surveys in form and substance
satisfactory to the Collateral Agent with respect to
the manufacturing plants located in Lowville, New
York and Richmond, Virginia, each dated no more than
30 days before the day of the Initial Extension of
Credit, certified to the Collateral Agent and the
issuer of the Mortgage Policies in a manner
satisfactory to the Collateral Agent by a land
surveyor duly registered and licensed in the States
in which the respective property described in such
surveys is located and acceptable to the Collateral
Agent, 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 Collateral Agent, and
(D) evidence of the insurance required by
the terms of the Mortgages.
(x) A guaranty in substantially the form of Exhibit G
hereto (as amended, supplemented or otherwise modified in
accordance with its terms, the "Holdings Guaranty"), duly
executed by Holdings.
(xi) A guaranty in substantially the form of Exhibit
H hereto (together with each other guaranty delivered or to be
delivered pursuant to Section 5.01(n), in each case as
amended, supplemented or otherwise modified from time to time
in accordance with its terms, the "Subsidiary Guaranty"), duly
executed by the Subsidiary Guarantors.
(xii) Certified copies of each of the Related
Documents, duly executed by the parties thereto and in form
and substance satisfactory to the Lender Parties, together
with all agreements, instruments and other documents delivered
in connection therewith.
(xiii) Such financial, business and other information
regarding each Loan Party and its Subsidiaries as the Agents
shall have requested, including, without limitation,
information as to possible contingent liabilities, tax
matters, environmental matters, obligations under Plans,
Multiemployer Plans and Welfare Plans, collective bargaining
agreements and other arrangements with employees, audited
annual financial statements dated December 31, 1995, draft
financial statements dated March 31, 1996 (or, in the event
the Agents' due diligence review reveals material changes
since such financial statements, as of a later date within 45
days of the day of the Initial Extension of Credit), annual
financial statements dated December 31, 1995 reflecting
revenues and EBITDA by business segment, a business plan for
the Borrower prepared by management of the Borrower, pro forma
financial statements as to the Borrower and forecasts prepared
by management of the Borrower, in form and substance
satisfactory to the Agents, of balance sheets, income
statements and cash flow statements on an annual basis for
each year following the day of the Initial Extension of Credit
until the Termination Date for the AXELs Series B Facility.
(xiv) Letters and certificates, in substantially the
form of Exhibits I and J hereto, respectively, attesting to
the Solvency of Holdings, the Borrower and each of the
Borrower's first tier and second tier Subsidiaries (other than
any such Subsidiary the primary business of which is to hold
liquor licenses) after giving effect to the Acquisition and
the other transactions contemplated hereby, from a Designated
Financial Officer and Houlihan Lokey Howard & Zukin.
(xv) An environmental assessment report, in form and
substance satisfactory to the Lender Parties, from Dames &
Moore, as to any risks, costs or liabilities under
Environmental Laws to which any Loan Party or any of its
Subsidiaries may be subject, the amount and nature of which
and the Borrower's plans with respect to which shall be
acceptable to the Lender Parties, together with evidence, in
form and substance satisfactory to the Lender Parties, that
all applicable Environmental Laws shall have been materially
complied with.
(xvi) A letter, in form and substance satisfactory to
the Administrative Agent, from the Borrower to Arthur
Andersen, L.L.P., its independent certified public
accountants, advising such accountants that the Administrative
Agent and the Lender Parties have been authorized to exercise
all rights of the Borrower to require such accountants to
disclose any and all financial statements and any other
information of any kind that they may have with respect to the
Borrower and its Subsidiaries and directing such accountants
to comply with any reasonable request of the Administrative
Agent or any Lender Party for such information.
(xvii) Evidence of insurance naming the Collateral
Agent for the benefit of the Secured Parties as insured and
loss payee with such responsible and reputable insurance
companies or associations, and in such amounts and covering
such risks, as is satisfactory to the Collateral Agent.
(xviii) Certified copies of each employment agreement
and other compensation arrangement with each executive officer
of any Loan Party or any of its Subsidiaries.
(xix) A favorable opinion of Wachtell, Lipton, Rosen
& Katz, counsel for the Loan Parties, in substantially the
form of Exhibit K hereto and as to such other matters as any
Lender Party through the Administrative Agent may reasonably
request.
(xx) A favorable opinion of local counsel listed on
Schedule 3.01(p)(xx), in the jurisdictions listed on Schedule
3.01(p)(xx), in form and substance satisfactory to the
Administrative Agent and as to such other matters as any
Lender Party through the Administrative Agent may reasonably
request.
(xxi) A favorable opinion of Pennie & Edmonds,
intellectual property counsel to the Lender Parties, in
substantially the form of Exhibit L hereto and as to such
other matters as any Lender Party through the Administrative
Agent may reasonably request.
(xxii) A favorable opinion of Shearman & Sterling,
counsel for the Arrangers and the Agents, in form and
substance satisfactory to the Arrangers and the Agents.
SECTION 3.02. Conditions Precedent to Each Borrowing and
Issuance. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by an Issuing Bank or a Working Capital
Lender pursuant to Section 2.03(c)) on the occasion of each Borrowing (including
the initial Borrowing), and the obligation of each Issuing Bank to issue a
Letter of Credit (including the initial issuance), shall be subject to the
further conditions precedent that on the date of such Borrowing or issuance (a)
the following statements shall be true (and each of the giving of the applicable
Notice of Borrowing or Notice of Issuance and the acceptance by the Borrower of
the proceeds of such Borrowing or of such Letter of Credit shall constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing or issuance such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing or issuance and to the application of the
proceeds therefrom, as though made on and as of such date;
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default; and
(iii) in the case of any Working Capital Borrowing the
proceeds of which are to be used to make an acquisition or to refinance
the costs of construction of a New Center, (A) after giving effect to
the acquisition to be made, or costs of construction to be refinanced,
with the proceeds of such Borrowing, the Borrower shall be in pro forma
compliance with the covenants contained in Section 5.04, calculated
based on the most recent Financial Statements (and including, for
purposes of determining such pro forma compliance, the Debt and
Modified Consolidated EBITDA attributable to the bowling center being
so acquired or refinanced as though such acquisition or construction
had occurred at the beginning of the 12-month period covered by such
Financial Statements), and (B) the Borrower shall have delivered a
certificate to the Administrative Agent and the Lender Parties in form
satisfactory to the Administrative Agent demonstrating compliance with
clause (A) above;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender through the Administrative Agent
may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
SECTION 3.04. Conditions Precedent to the Making of the New
AXELs Series B Advances. The obligation of each New AXELs Series B Lender to
make a New AXELs Series B Advance hereunder is subject to the satisfaction of
the following conditions precedent before or concurrently with the making of
such New AXELs Series B Advance:
(a) Before and after giving effect to the First Amendment and
the transactions contemplated thereby, there shall have occurred no
Material Adverse Change since December 31, 1995.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement, any Note, any other Loan
Document, any First Amendment Document, any Related Document or the
consummation of the transactions contemplated hereby.
(c) All governmental and third party consents and approvals
necessary in connection with the First Amendment Documents and the
transactions contemplated thereby shall have been obtained (without the
imposition of any conditions that are not reasonably acceptable to the
Agents) and shall remain in effect other than such governmental or
third party consents and approvals the failure to obtain which shall
not (x) be materially adverse to Holdings or the Borrower, in each case
together with its respective Subsidiaries, taken as a whole, (y) affect
the enforceability, validity or binding effect of any of the First
Amendment Documents required to be executed and delivered prior to or
on the Second Closing Date or (z) expose the Arrangers, the Agents or
the Lender Parties to personal liability; and no law or regulation
shall be applicable in the judgment of the Agents that restrains,
prevents or imposes materially adverse conditions upon the First
Amendment Documents and the transactions contemplated thereby.
(d) The Borrower shall have paid all accrued fees of the
Lender Parties and all accrued fees and expenses of the Agents and the
Arrangers (including the accrued fees and expenses of counsel to the
Agents and the Arrangers and local counsel to, and of other experts and
advisors retained by, the Agents for the Lender Parties).
(e) The Administrative Agent shall have received on or before
the day of the making of the New AXELs Series B Advances the following,
each dated such day (unless otherwise specified), in form and substance
satisfactory to the Agents (unless otherwise specified) and (except for
the AXELs Series B Notes) in sufficient copies for each Lender Party:
(i) AXELs Series B Notes payable to the order of the
New AXELs Series B Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower and each other Loan Party
approving this Agreement, the New AXELs Series B Notes, each
other First Amendment Document to which it is or is to be a
party, and of all documents evidencing other necessary
corporate action and governmental and other third party
approvals and consents, if any, with respect to this
Agreement, the AXELs Series B Notes and each other First
Amendment Document.
(iii) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the Second Closing Date, certifying that (A)
the Borrower and each other Loan Party have paid all franchise
taxes to the date of such certificate and (B) the Borrower and
each other Loan Party are duly incorporated and in good
standing under the laws of the jurisdiction of its
incorporation.
(iv) A copy of a certificate of the Secretary of
State or Commonwealth, as the case may be, of the State of New
York and the Commonwealth of Virginia, dated reasonably near
the Second Closing Date, stating that the Borrower and each
other Loan Party that was so qualified as of the First Closing
Date are duly qualified and in good standing as foreign
corporations in such States and have filed all annual reports
required to be filed to the date of such certificate.
(v) A certificate of the Borrower and each other Loan
Party, signed on behalf of the Borrower and such other Loan
Party by its President or a Vice President and its Secretary
or any Assistant Secretary, dated the Second Closing Date (the
statements made in which certificate shall be true on and as
of the Second Closing Date), certifying as to (A) the absence
of any amendments to the charter of the Borrower or such other
Loan Party since the date of the Secretary of State's
certificate referred to in Section 3.01(p)(iii), (B) the
absence of any amendments to the bylaws of the Borrower or
such other Loan Party delivered pursuant to Section
3.01(p)(v), (C) the due incorporation and good standing of the
Borrower and such other Loan Party as a corporation organized
under the laws of the state of its incorporation, and the
absence of any proceeding for the dissolution or liquidation
of the Borrower or such other Loan Party, (D) the truth of the
representations and warranties contained in the Loan Documents
as though made on and as of the Second Closing Date and (E)
the absence of any event occurring and continuing, or
resulting from the making of the New AXELs Series B Advances,
that constitutes a Default.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying
the names and true signatures of the officers of the Borrower
and such other Loan Party authorized to sign First Amendment,
the AXELs Series B Notes and each other First Amendment
Document to which they are or are to be parties and the other
documents to be delivered hereunder and thereunder.
(vii) Amendments to the Mortgages in substantially
the form of Exhibit M hereto and covering the properties
listed on Part I of Schedule 4.01(kk) and Part I of Schedule
4.01(ll), duly executed by the appropriate Loan Party.
(viii) A favorable opinion of Wachtell, Lipton, Rosen
& Katz, special counsel for the Loan Parties, in substantially
the form of Exhibit N hereto and as to such other matters as
any Lender Party through the Administrative Agent may
reasonably request.
(ix) A favorable opinion of Daniel McCormack, General
Counsel of the Borrower, in substantially the form of Exhibit
O hereto and as to such other matters as any Lender Party
through the Administrative Agent may reasonably request.
(x) A favorable opinion of local counsel in the
Commonwealth of Virginia, in form and substance satisfactory
to the Administrative Agent and as to such other matters as
any Lender Party through the Administrative Agent may
reasonably request.
(xi) A favorable opinion of Shearman & Sterling,
counsel for the Arrangers and the Agents, in form and
substance satisfactory to the Arrangers and the Agents.
SECTION 3.05. Conditions Precedent to the Effectiveness of
the Third Amendment. The effectiveness of the Third Amendment is subject to the
satisfaction of the following conditions precedent:
(a) Before and after giving effect to the Third Amendment and
the transactions contemplated thereby, there shall have occurred no
Material Adverse Change since December 31, 1996.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement, any Note, any other Loan
Document, any Third Amendment Document, any Related Document or the
consummation of the transactions contemplated hereby.
(c) All governmental and third party consents and approvals
necessary in connection with the Third Amendment Documents, the IPO and
the other transactions contemplated thereby shall have been obtained
(without the imposition of any conditions that are not reasonably
acceptable to the Agents) and shall remain in effect other than such
governmental or third party consents and approvals the failure to
obtain which shall not (x) be materially adverse to Holdings or the
Borrower, in each case together with its respective Subsidiaries, taken
as a whole, (y) affect the enforceability, validity or binding effect
of any of the Third Amendment Documents required to be executed and
delivered prior to or on the Fourth Closing Date or (z) expose the
Arrangers, the Agents or the Lender Parties to personal liability; and
no law or regulation shall be applicable in the judgment of the Agents
that restrains, prevents or imposes materially adverse conditions upon
the Third Amendment Documents and the transactions contemplated
thereby.
(d) Nothing shall have come to the attention of the Lender
Parties during the course of their due diligence investigation to lead
them to believe that the Information Memorandum was or has become
misleading, incorrect or incomplete in any material respect; the IPO
shall have been consummated and Parent shall have received Gross Cash
Proceeds therefrom of at least $200,000,000; and Parent shall have
contributed the Net Cash Proceeds therefrom to the Borrower as common
equity.
(e) The Borrower shall have paid all accrued fees of the
Existing Lenders and the Lender Parties and all accrued fees and
expenses of the Agents and the Arrangers (including the accrued fees
and expenses of counsel to the Agents and the Arrangers and local
counsel to, and of other experts and advisors retained by, the Agents
for the Lender Parties).
(f) The Administrative Agent shall have received on or before
the Fourth Closing Date, each dated such day (unless otherwise
specified), in form and substance satisfactory to the Agents the
following (unless otherwise specified) and (except for the Working
Capital Notes) in sufficient copies for each Lender Party:
(i) Working Capital Notes payable to the order
of the Working Capital Lenders;
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower and each other Loan Party
approving this Agreement, the Working Capital Notes, each
other Third Amendment Document to which it is or is to be a
party and, in the case of Parent, approving the IPO, and of
all documents evidencing other necessary corporate action and
governmental and other third party approvals and consents, if
any, with respect to the IPO, this Agreement, the Working
Capital Notes and each other Third Amendment Document.
(iii) (A) In the case of Parent, the Borrower and AMF
Bowling Products, a copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the Fourth Closing Date, listing the charter
of each such entity and each amendment thereto on file in his
office and certifying that (1) such amendments are the only
amendments to such entity's charter on file in his office, (2)
each such entity has paid all franchise taxes to the date of
such certificate and (3) each such entity is duly incorporated
and in good standing under the laws of the jurisdiction of its
incorporation and (B) in the case of each Loan Party other
than the Borrower and AMF Bowling Products, a copy of a
certificate of the Secretary of State of the jurisdiction of
its incorporation, dated reasonably near the Fourth Closing
Date, certifying that (1) such Loan Party has paid all
franchise taxes to the date of such certificate and (2) such
Loan Party is duly incorporated and in good standing under the
laws of the jurisdiction of its incorporation.
(iv) A copy of a certificate of the Secretary of
State or Commonwealth, as the case may be, of the State of New
York and the Commonwealth of Virginia, dated reasonably near
the Fourth Closing Date, stating that (A) the Borrower and
each other Loan Party that owns property or conducts business
in such State or Commonwealth are duly qualified and in good
standing as foreign corporations in such State or Commonwealth
and (B) have filed all annual reports required to be filed to
the date of such certificate.
(v) A certificate of the Borrower and each other Loan
Party, signed on behalf of the Borrower and such other Loan
Party by its President or a Vice President and its Secretary
or any Assistant Secretary, dated the Fourth Closing Date (the
statements made in which certificate shall be true on and as
of the Fourth Closing Date), certifying as to (A) the absence
of any amendments to the charter of the Borrower or such other
Loan Party since the date of the Secretary of State's
certificate referred to in Section 3.01(p)(iii) or
3.05(f)(iii), as applicable, (B) the absence of any amendments
to the bylaws of the Borrower or such other Loan Party
delivered pursuant to Section 3.01(p)(v), (C) the due
incorporation and good standing of the Borrower and such other
Loan Party as a corporation organized under the laws of the
state of its incorporation, and the absence of any proceeding
for the dissolution or liquidation of the Borrower or such
other Loan Party, (D) the truth of the representations and
warranties contained in the Loan Documents as though made on
and as of the Fourth Closing Date and (E) the absence of any
event occurring and continuing, or resulting from the
consummation of the IPO or the other transactions contemplated
by the Loan Documents, that constitutes a Default.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying
the names and true signatures of the officers of the Borrower
and such other Loan Party authorized to sign the Third
Amendment, the Working Capital Notes and each other Third
Amendment Document to which they are or are to be parties and
the other documents to be delivered hereunder and thereunder.
(vii) With respect to each state in which Mortgages
have been filed, either:
(A) A letter of local counsel in each state
in which Mortgages have been filed (such local
counsel to be acceptable to the Administrative Agent)
to the effect that, under the law of such state and
assuming that, after giving effect to the Third
Amendment and the transactions contemplated thereby,
so long as (i) the aggregate principal amount of
Obligations secured by the Mortgages has not been
increased, and (ii) the latest Termination Date for
the Facilities has not been extended, no amendment to
any Mortgage filed in such state shall be required to
perfect and maintain the validity, effectiveness and
priority of such Mortgage and the Mortgage liens and
security interests created thereunder, or
(B) amendments to the Mortgages in form and
substance satisfactory to the Collateral Agent and
covering the properties located in such state, duly
executed by the appropriate Loan Party.
(viii) duly executed financing statements and
amendments to the financing statements referred to in Section
3.01(p)(vii)(B), to be filed in all jurisdictions that the
Collateral Agent may deem necessary or desirable in order to
preserve and protect the first priority liens and security
interests created under the Collateral Documents.
(ix) evidence that Parent, the Borrower and AMF
Bowling Products have each filed appropriate forms with the
Patent and Trademark Office registering their respective name
changes.
(x) a revised Schedule 4.01(mm) supplementing the
Schedule 4.01(mm) delivered on the First Closing Date in order
to properly reflect the information contained in such Schedule
as of the Fourth Closing Date.
(xi) A favorable opinion of Wachtell, Lipton, Rosen &
Katz, special counsel for the Loan Parties, in substantially
the form of Exhibit R hereto and as to such other matters as
any Lender Party through the Administrative Agent may
reasonably request.
(xii) A favorable opinion of local counsel in the
Commonwealth of Virginia in form and substance satisfactory to
the Administrative Agent and as to such other matters as any
Lender Party through the Administrative Agent may reasonably
request.
(xiii) A favorable opinion of Shearman & Sterling,
counsel for the Arrangers and the Agents, in form and
substance satisfactory to the Arrangers and the Agents.
SECTION 3.06. Determinations Under Sections 3.04 and 3.05. For
purposes of determining compliance with the conditions specified in Sections
3.04 and 3.05, each Appropriate Lender shall be deemed to have consented to,
approved or accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Appropriate Lenders unless an officer of the Administrative
Agent responsible for the transactions contemplated by the Loan Documents shall
have received notice from such Lender Party prior to the making of the New AXELs
Series B Advances or the Fourth Closing Date, as the case may be, specifying its
objection thereto and, in the case of Section 3.04, such Lender Party shall not
have made available to the Administrative Agent such Lender Party's ratable
portion of such AXELs Series B Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed could not be reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding capital stock of Parent, Holdings and
the Borrower has been validly issued, is fully paid and non-assessable
and, as of the First Closing Date, or from and after the delivery of an
updated Schedule pursuant to Section 5.01(t)(iii), as of the Fourth
Closing Date, is owned by the Equity Investors in the amounts specified
on Schedule 4.01(a) or by Parent or Holdings, as the case may be. All
of the outstanding capital stock of Parent is owned, as of the First
Closing Date, or from and after the delivery of an updated Schedule
pursuant to Section 5.01(t)(iii), as of the Fourth Closing Date, free
and clear of all Liens, except the pledge of such capital stock as is
owned by management of the Borrower to secure obligations of such
management owing to Parent. All of the outstanding capital stock of
Holdings and the Borrower is owned, in each case free and clear of all
Liens, except, in the case of the capital stock of the Borrower, those
created under the Collateral Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
First Closing Date, or from and after the delivery of an updated
Schedule pursuant to Section 5.01(t)(iii), as of the Fourth Closing
Date, (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the First Closing Date, or
from and after the delivery of an updated Schedule pursuant to Section
5.01(t)(iii), on the Fourth Closing Date, and the percentage of the
outstanding shares of each such class owned (directly or indirectly) by
such Loan Party and the number of shares covered by all outstanding
options, warrants, rights of conversion or purchase and similar rights
at the First Closing Date, or from and after the delivery of an updated
Schedule pursuant to Section 5.01(t)(iii), at the Fourth Closing Date.
All of the outstanding capital stock of all of such Subsidiaries has
been validly issued and is fully paid and non-assessable; and such
capital stock (other than directors' qualifying shares), as of the
First Closing Date, or from and after the delivery of an updated
Schedule pursuant to Section 5.01(t)(iii), as of the Fourth Closing
Date, is owned by such Loan Party or one or more of its Subsidiaries,
other than the China Joint Venture, the capital stock of which is owned
by a Loan Party or one or more of its Subsidiaries in the amount and
percentage ownership set forth on Schedule 4.01(b) hereto. All of such
outstanding capital stock to the extent owned by a Loan Party is owned
in each case free and clear of all Liens, except those created under
the Loan Documents. Each such Subsidiary (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed could not be reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted.
(c) The execution, delivery and performance by each Loan Party
of this Agreement, the Notes, each other Loan Document and each Related
Document to which it is or is to be a party (after the execution and
delivery thereof as and when required under this Agreement), and the
consummation of the Acquisition and the other transactions contemplated
hereby, are within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
such Loan Party's charter or bylaws, (ii) violate any law (including,
without limitation, the Securities Exchange Act of 1934 and the
Racketeer Influenced and Corrupt Organizations Chapter of the Organized
Crime Control Act of 1970), rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any loan agreement, indenture, mortgage,
deed of trust or other instrument or material contract or material
lease binding on or affecting any Loan Party, any of its Subsidiaries
or any of their properties or (iv) except for the Liens created under
the Loan Documents, result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of any Loan
Party or any of its Subsidiaries. No Loan Party or any of its
Subsidiaries is in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or in breach
of any such contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument, the violation or breach of which
could be reasonably likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes, any other Loan Document or any Related Document
to which it is or is to be a party, or for the consummation of the
Acquisition or the other transactions contemplated hereby, (ii) the
grant by any Loan Party of the Liens granted by it pursuant to the
Collateral Documents, (iii) the perfection or maintenance of the Liens
created by the Collateral Documents (including the first priority
nature thereof) or (iv) the exercise by any Agent or any Lender Party
of its rights under the Loan Documents or the remedies in respect of
the Collateral pursuant to the Collateral Documents, except for the
authorizations, approvals, actions, notices and filings listed on
Schedule 4.01(d) hereto, all of which have been duly obtained, taken,
given or made and are in full force and effect except as otherwise set
forth on Schedule 4.01(d) hereto and except those authorizations,
approvals, actions, notices and filings the failure to obtain, take,
give or make which, either individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect. All
applicable waiting periods in connection with the Acquisition and the
other transactions contemplated hereby have expired or been terminated
without any action having been taken by any competent authority
restraining, preventing or imposing materially adverse conditions upon
the Acquisition or the rights of the Loan Parties or their Subsidiaries
freely to transfer or otherwise dispose of, or to create any Lien on,
any properties now owned or hereafter acquired by any of them except
where, in the case of any such waiting period other than any waiting
period required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, the failure of such waiting period to have expired
without any such action having been taken could not be reasonably
likely to have a Material Adverse Effect.
(e) This Agreement has been, and each of the Notes, each other
Loan Document and each Related Document when delivered hereunder will
have been, duly executed and delivered by each Loan Party party
thereto. This Agreement is, and each of the Notes, each other Loan
Document and each Related Document when delivered hereunder will be,
the legal, valid and binding obligation of each Loan Party party
thereto, enforceable against such Loan Party in accordance with its
terms.
(f) (i) The Consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statements of income and cash flows of the Company and its Subsidiaries
for the fiscal year then ended, accompanied by an opinion of Arthur
Andersen, L.L.P, independent public accountants, copies of which have
been furnished to each Lender Party, fairly present the Consolidated
financial condition of the Company and its Subsidiaries as at such date
and the Consolidated results of the operations of the Company and its
Subsidiaries for the period ended on such date, all in accordance with
generally accepted accounting principles applied on a consistent basis,
and since December 31, 1996, there has been no Material Adverse Change.
(ii) The Consolidated balance sheets of the Borrower
and its Subsidiaries as at June 30, 1997, and the related
Consolidated statements of income and cash flows of the
Borrower and its Subsidiaries for the six months then ended,
certified by a Designated Financial Officer, copies of which
have been furnished to each Lender Party, fairly present,
subject to year-end audit adjustments, the Consolidated
financial condition of the Borrower and its Subsidiaries as at
such date and the Consolidated results of operations of the
Borrower and its Subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting
principles applied on a consistent basis.
(g) The Consolidated pro forma balance sheet of the Borrower
and its Subsidiaries as at December 31, 1995, and the related
Consolidated pro forma statements of income and cash flows of the
Borrower and its Subsidiaries for the year then ended, certified by a
Designated Financial Officer, copies of which have been furnished to
each Lender Party, fairly present the Consolidated pro forma financial
condition of the Borrower and its Subsidiaries as at such date and the
Consolidated pro forma results of operations of the Borrower and its
Subsidiaries for the period ended on such date, in each case giving
effect to the Acquisition and the other transactions contemplated
hereby, all in accordance with GAAP.
(h) The Consolidated forecasted balance sheets, income
statements and cash flows statements of the Borrower and its
Subsidiaries delivered to the Lender Parties pursuant to Section
3.01(p)(xiii) or 5.03 were prepared in good faith on the basis of the
assumptions stated therein, which assumptions were fair in the light of
conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Borrower's best estimate of
its future financial performance.
(i) Neither the Information Memorandum nor any other
information, exhibit or report furnished by any Loan Party to any Agent
or any Lender Party in connection with the negotiation and syndication
of the Loan Documents or pursuant to the terms of the Loan Documents
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein not
misleading.
(j) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) would be reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of the Acquisition, this
Agreement, any Note, any other Loan Document or any Related Document or
the consummation of the transactions contemplated hereby (other than
any such action, suit, investigation, litigation or proceeding that, in
the judgment of the Agents, is frivolous).
(k) No proceeds of any Advance or drawings under any Letter of
Credit will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of
1934.
(l) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance or drawings under any Letter of Credit will be
used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock.
(m) Set forth on Schedule 4.01(m) hereto is a complete and
accurate list, as of the First Closing Date, or from and after the
delivery of an updated Schedule pursuant to Section 5.01(t)(iii), as of
the Fourth Closing Date, of all Plans, Multiemployer Plans and Welfare
Plans.
(n) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan that could be reasonably expected to
have a Material Adverse Effect.
(o) As of the last annual actuarial valuation date, the funded
current liability percentage, as defined in Section 302(d)(8) of ERISA,
of each Plan exceeds 90% and there has been no material adverse change
in the funding status of such Plan since such date.
(p) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) for each Plan, copies of which have
been filed with the Internal Revenue Service and furnished to the
Lender Parties, is complete and accurate and fairly presents the
funding status of such Plan, and since the date of such Schedule B
there has been no material adverse change in such funding status.
(q) Neither any Loan Party nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability to
any Multiemployer Plan that could be reasonably expected to have a
Material Adverse Effect.
(r) Neither any Loan Party nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiemployer Plan is reasonably
expected to be in reorganization or to be terminated, within the
meaning of Title IV of ERISA, except to the extent that any such
reorganization or termination could not be reasonably expected to have
a Material Adverse Effect.
(s) With respect to each scheme or arrangement mandated by a
government other than the United States (a "Foreign Government Scheme
or Arrangement") and with respect to each employee benefit plan
maintained or contributed to by any Loan Party or any Subsidiary of any
Loan Party that is not subject to United States law (a "Foreign Plan")
to the extent that there could reasonably be expected to be a Material
Adverse Effect:
(i) Any employer and employee contributions required
by law or by the terms of any Foreign Government Scheme or
Arrangement or any Foreign Plan have been made, or, if
applicable, accrued, in accordance with normal accounting
practices.
(ii) The fair market value of the assets of each
funded Foreign Plan, the liability of each insurer for any
Foreign Plan funded through insurance or the book reserve
established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the
accrued benefit obligations, as of the First Closing Date, or
from and after the delivery of an updated Schedule pursuant to
Section 5.01(t)(iii), as of the Fourth Closing Date, with
respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations
most recently used to determine employer contributions to such
Foreign Plan.
(iii) Each Foreign Plan required to be registered has
been registered and has been maintained in good standing with
applicable regulatory authorities.
(t) Except as set forth in the financial statements referred
to in this Section 4.01 and in Section 5.03, the Loan Parties and their
respective Subsidiaries have no material liability with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(u) Neither the business nor the properties of any Loan Party
or any of its Subsidiaries have been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could be reasonably
likely to have a Material Adverse Effect.
(v) Except as set forth on Schedule 4.01(v) hereto or as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, the operations and properties of each Loan
Party and each of its Subsidiaries comply with all applicable
Environmental Laws and Environmental Permits, and (except as aforesaid)
all past non-compliance with such Environmental Laws and Environmental
Permits has been resolved without ongoing obligations or costs, and no
circumstances exist that could be reasonably likely to (i) form the
basis of an Environmental Action against any Loan Party or any of its
Subsidiaries or any of their properties that could have a Material
Adverse Effect or (ii) cause any such property to be subject to any
material restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(w) Except as set forth on Schedule 4.01(w) hereto or as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (i) none of the properties currently owned or
operated by any Loan Party or any of its Subsidiaries or, to the best
knowledge of any Loan Party or any of its Subsidiaries, none of the
properties formerly owned or operated by any of them, is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous
foreign, state or local list or is adjacent to any such property; (ii)
there are no and never have been any underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons
in which Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan Party
or any of its Subsidiaries or, to the best of its knowledge, on any
property formerly owned or operated by any Loan Party or any of its
Subsidiaries; (iii) there is no asbestos or asbestos-containing
material on any property currently owned or operated by any Loan Party
or any of its Subsidiaries; and (iv) Hazardous Materials have not been
released, discharged or disposed of on any property currently or
formerly owned or operated by any Loan Party or any of its
Subsidiaries.
(x) Except as set forth on Schedule 4.01(x) hereto or as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, neither any Loan Party nor any of its
Subsidiaries is undertaking, or has failed to complete, either
individually or together with other potentially responsible parties,
any investigation or assessment or remedial or response action relating
to any actual or threatened release, discharge or disposal of Hazardous
Materials at any site, location or operation, either voluntarily or
pursuant to the order of any governmental or regulatory authority or
the requirements of any Environmental Law; and all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or
from, any property currently or formerly owned or operated by any Loan
Party or any of its Subsidiaries, and that have been disposed of in any
manner, have been disposed of only in a manner not reasonably expected
to result in a Material Adverse Effect.
(y) Neither any Loan Party nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that could be reasonably likely to have a Material Adverse
Effect.
(z) The Collateral Documents create a valid and perfected
first priority security interest in the Collateral subject only to
Permitted Encumbrances, securing the payment of the Secured Obligations
(as defined in the Collateral Documents), and all filings and other
actions necessary or desirable to perfect and protect such security
interest have been duly taken. The Loan Parties are the legal and
beneficial owners of the Collateral free and clear of any Lien, except
for the liens and security interests created or permitted under the
Loan Documents.
(aa) Each Loan Party and each of its Subsidiaries has filed,
has caused to be filed or has been included in all federal income and
other material tax returns (Federal, state, local and foreign) required
to be filed and has paid all income and other material taxes shown
thereon to be due, together with applicable interest and penalties.
(bb) Set forth on Schedule 4.01(bb) hereto is a complete and
accurate list, as of the First Closing Date, or from and after the
delivery of an updated Schedule pursuant to Section 5.01(t)(iii), as of
the Fourth Closing Date, of each taxable year of each Loan Party and
each of its Subsidiaries for which Federal income tax returns have been
filed and for which the expiration of the applicable statute of
limitations for assessment or collection has not occurred by reason of
extension or otherwise (an "Open Year").
(cc) As of the First Closing Date, or from and after the
delivery of an updated Schedule pursuant to Section 5.01(t)(iii), as of
the Fourth Closing Date, there are no adjustments to the Federal income
tax liability of each Loan Party and each of its Subsidiaries proposed
by the Internal Revenue Service with respect to Open Years that,
individually or in the aggregate, could be reasonably likely to have a
Material Adverse Effect. No issues have been raised by the Internal
Revenue Service in respect of Open Years that, in the aggregate, could
be reasonably likely to have a Material Adverse Effect.
(dd) As of the First Closing Date, or from and after the
delivery of an updated Schedule pursuant to Section 5.01(t)(iii), as of
the Fourth Closing Date, there are no adjustments to the state, local
and foreign tax liability of each Loan Party and its Subsidiaries
proposed by all state, local and foreign taxing authorities (other than
amounts arising from adjustments to Federal income tax returns) that,
individually or in the aggregate, could be reasonably likely to have a
Material Adverse Effect. No issues have been raised by such taxing
authorities that, in the aggregate, could be reasonably likely to have
a Material Adverse Effect.
(ee) The Acquisition will not result in the imposition of
federal income taxes on or with respect to the Borrower.
(ff) Except as a direct result of the Acquisition and the
acquisition by AMF Bowling Centers of the companies set forth on
Schedule 4.01(ff) hereto, no "ownership change" as defined in Section
382(g) of the Internal Revenue Code, and no event that would result in
the application of the "separate return limitation year" or
"consolidated return change of ownership" limitations under the Federal
income tax consolidated return regulations, has occurred with respect
to the Borrower or the Company since May 1, 1993.
(gg) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Advances,
nor the issuance of any Letters of Credit, nor the application of the
proceeds or repayment thereof by the Borrower, nor the consummation of
the other transactions contemplated hereby, will violate any provision
of such Act or any rule, regulation or order of the Securities and
Exchange Commission thereunder.
(hh) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ii) Set forth on Schedule 4.01(ii) hereto is a complete and
accurate list of all Existing Debt (other than Surviving Debt), showing
as of the First Closing Date, or from and after the delivery of an
updated Schedule pursuant to Section 5.01(t)(iii), as of the Fourth
Closing Date, the principal amount outstanding thereunder.
(jj) Set forth on Schedule 3.01(e) hereto is a complete and
accurate list of all Surviving Debt, showing as of the First Closing
Date, or from and after the delivery of an updated Schedule pursuant to
Section 5.01(t)(iii), as of the Fourth Closing Date, the principal
amount outstanding thereunder, the maturity date thereof and the
amortization schedule therefor.
(kk) Set forth on Schedule 4.01(kk) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of
its Subsidiaries, showing as of the First Closing Date, or from and
after the delivery of an updated Schedule pursuant to Section
5.01(t)(iii), as of the Fourth Closing Date, the street address, county
or other relevant jurisdiction, state, record owner and book value
thereof. Each Loan Party or such Subsidiary has good, marketable and
insurable fee simple title to such real property, free and clear of all
Liens, other than Liens created or permitted by the Loan Documents.
(ll) Set forth on Schedule 4.01(ll) hereto is a complete and
accurate (in the case of leases of real property outside the United
States, in all material respects) list of all leases of real property
under which any Loan Party or any of its Subsidiaries is the lessee,
showing as of the First Closing Date, or from and after the delivery of
an updated Schedule pursuant to Section 5.01(t)(iii), as of the Fourth
Closing Date, the street address, county or other relevant
jurisdiction, state, lessor, lessee, expiration date and annual rental
cost thereof. Each such lease is the legal, valid and binding
obligation of the lessee thereof, enforceable in accordance with its
terms.
(mm) Set forth on Schedule 4.01(mm) hereto is a complete and
accurate list of all Investments held by any Loan Party or any of its
Subsidiaries, showing as of the Fourth Closing Date, the amount,
obligor or issuer and maturity, if any, thereof.
(nn) Set forth on Schedule 4.01(nn) hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks
and copyrights, and all applications therefor and licenses thereof, of
each Loan Party or any of its Subsidiaries, showing as of the First
Closing Date, or from and after the delivery of an updated Schedule
pursuant to Section 5.01(t)(iii), as of the Fourth Closing Date, the
jurisdiction in which registered, the registration number, the date of
registration and the expiration date, and the Loan Parties and their
Subsidiaries own or have a license to use all patents, trademarks,
trade names, service marks and copyrights reasonably necessary to carry
on their business as now conducted and as proposed to be conducted.
(oo) The Debt of the Loan Parties under the Loan Documents
constitutes "Senior Debt" as such term is defined in the Subordinated
Notes Indentures.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and the Racketeer Influenced
and Corrupt Organizations Chapter of the Organized Crime Control Act of
1970, except, in any case, where the failure so to comply, either
individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect and would not be reasonably likely to
subject any Loan Party or any of its Subsidiaries to any criminal
penalties or any Lender Party to any civil or criminal penalties.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all federal income and other material taxes,
assessments and governmental charges or levies imposed upon it or upon
its property and (ii) all lawful claims that, if unpaid, might by law
become a Lien upon its property; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim (x) that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained or (y) in respect of which
the Lien resulting therefrom, if any, attaches to its property and
becomes enforceable against its other creditors, to the extent that the
aggregate amount of all such taxes, assessments, charges or claims does
not exceed $3,000,000.
(c) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or
occupying its properties to comply, in all material respects, with all
Environmental Laws and Environmental Permits; obtain and renew and
cause each of its Subsidiaries to obtain and renew, when legally
required, all Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries to conduct,
any required investigation, study, sampling and testing, and undertake
any required cleanup, removal, remedial or other action necessary to
remove and clean up all Hazardous Materials from any of its properties,
only in accordance with the requirements of all Environmental Laws;
except, in any case under this subsection (c), where the failure to so
comply with or perform any of the foregoing, either individually or in
the aggregate, could not be reasonably expected to have a Material
Adverse Effect and would not be reasonably likely to subject any Loan
Party or any of its Subsidiaries to any criminal penalties or any
Lender Party to any civil or criminal penalties; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required
to undertake any such cleanup, removal, remedial or other action to the
extent that its obligation to do so is being contested in good faith
and by proper proceedings and appropriate reserves are being maintained
with respect to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises;
provided, however, that the Borrower and its Subsidiaries may
consummate any merger or consolidation permitted under Section 5.02(d);
provided further that neither the Borrower nor any of its Subsidiaries
shall be required to preserve any right, permit, license, approval,
privilege or franchise if the Borrower or such Subsidiary shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or such Subsidiary, as the case
may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lender Parties
or, with respect to permits, licenses, approvals, privileges and
franchises, that the loss thereof could not be reasonably expected to
have a Material Adverse Effect.
(f) Visitation Rights. At any reasonable time and from time to
time, permit any Agent or any of the Lender Parties or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with their independent certified
public accountants.
(g) Preparation of Environmental Reports. At the request of
the Administrative Agent upon the occurrence and during the continuance
of a Default or upon the reasonable belief of the Required Lenders or
the Administrative Agent that Hazardous Materials contamination of a
nature or to an extent not set forth on Schedule 4.01(v), 4.01(w) or
4.01(x) hereto may be present on any property described in the
Mortgages in a manner or condition that could reasonably be expected to
have a Material Adverse Effect, provide to the Lender Parties within 60
days after such request, at the expense of the Borrower, an
environmental site assessment report for any of its or its
Subsidiaries' properties described in the Mortgages, prepared by an
environmental consulting firm acceptable to the Administrative Agent,
indicating the presence or absence of Hazardous Materials and the
estimated cost of any compliance, removal or remedial action in
connection with any Hazardous Materials on such properties; without
limiting the generality of the foregoing, if the Required Lenders
reasonably determine at any time that a material risk exists that any
such report will not be provided within the time referred to above, the
Required Lenders may retain an environmental consulting firm to prepare
such report at the expense of the Borrower, and the Borrower hereby
grants and agrees to cause any Subsidiary that owns any property
described in the Mortgages to grant at the time of such request, to the
Agents, the Lender Parties, such firm and any agents or representatives
thereof an irrevocable non-exclusive license, subject to the rights of
tenants, to enter onto their respective properties to undertake such an
assessment at any reasonable time and upon reasonable prior notice.
(h) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(i) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted,
except where the failure to do so, either individually or in the
aggregate, could not be reasonably expected to have a Material Adverse
Effect.
(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, notify the Administrative Agent of any default
by any party with respect to such leases and cooperate with the
Administrative Agent in all respects to cure any such default, and
cause each of its Subsidiaries to do so, except, in any case, where the
failure to do so, either individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
(k) Performance of Related Documents. Perform and observe all
of the terms and provisions of each Related Document to be performed or
observed by it, maintain each such Related Document in full force and
effect, enforce such Related Document in accordance with its terms
(other than Section 1.5 of the Stockholders' Agreement), take all such
action to such end as may be from time to time requested by the
Administrative Agent and, upon request of the Administrative Agent,
make to each other party to each such Related Document such demands and
requests for information and reports or for action as the Borrower is
entitled to make under such Related Document, and cause each of its
Subsidiaries to do so, except, in any case, where the failure to do so,
either individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect.
(l) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, all transactions otherwise permitted under
the Loan Documents with any of their Affiliates on terms that are fair
and reasonable and no less favorable to the Borrower or such Subsidiary
than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate, other than transactions between or among Loan
Parties and other transactions described on Schedule 5.01(l) hereto.
(m) Cash Concentration Accounts. Maintain main cash
concentration accounts with Citibank and Blocked Accounts into which
substantially all proceeds of Collateral are paid with Citibank or one
or more banks acceptable to the Collateral Agent that have accepted the
assignment of such accounts to the Collateral Agent for the benefit of
the Secured Parties pursuant to the Security Agreement.
(n) Covenant to Guarantee Obligations and Give Security. At
any time (x) upon the request of the Collateral Agent following the
occurrence and during the continuance of a Default, (y) at such time as
any new direct or indirect Subsidiaries of the Borrower are formed or
acquired by any Loan Party or (z) any property is acquired by any Loan
Party, in each case at the expense of the Borrower:
(i) within 10 days after such request, formation or
acquisition, cause each such Subsidiary (other than any
Foreign Subsidiary), and cause each direct and indirect parent
(other than the Borrower and any Foreign Subsidiary) of such
Subsidiary (if it has not already done so), to duly execute
and deliver to the Collateral Agent a guaranty, in form and
substance satisfactory to the Collateral Agent, guaranteeing
the other Loan Parties' Obligations under the Loan Documents,
(ii) within 10 days after such request, formation or
acquisition, furnish to the Collateral Agent a description of
the real and personal properties of the Borrower and its
Subsidiaries in detail satisfactory to the Collateral Agent,
(iii) within 15 days after such request, formation or
acquisition, duly execute and deliver, and cause each such
Subsidiary (other than any Foreign Subsidiary) and each direct
and indirect parent of such Subsidiary (if it has not already
done so) (other than any Foreign Subsidiary except to the
extent permitted in the fourth proviso below) to duly execute
and deliver, to the Collateral Agent mortgages, pledges,
assignments and other security agreements, as specified by and
in form and substance satisfactory to the Collateral Agent,
securing payment of all the Obligations of the Borrower, such
Subsidiary or such parent, as the case may be, under the Loan
Documents and constituting Liens on all such properties;
provided that with respect to any leasehold, the Borrower
shall use, and shall cause its Subsidiaries to use, best
efforts to acquire such leasehold in a way such that consent
of the landlord thereof shall not be required in connection
with the mortgaging thereof; provided further, however, that
such leasehold shall not be required to be mortgaged if, after
the applicable Loan Party has used its best efforts as set
forth in the immediately preceding proviso and to obtain
landlord consents to the extent required by Section 5.01(p),
such Loan Party is unable to obtain such consent; provided
still further that, so long as no Event of Default shall have
occurred and be continuing, such leasehold shall not be
required to be mortgaged if the Collateral Agent shall
determine, in its sole discretion, not to require the
mortgaging of such leasehold because such leasehold has an
immaterial value or constitutes an immaterial portion of the
property of the Person owning such leasehold; provided still
further that, with respect to the pledge of the capital stock
of any Foreign Subsidiary, such pledge shall cover not more
than 66% of the outstanding capital stock of such Foreign
Subsidiary if it is directly owned by a Loan Party and not
cover any of the outstanding capital stock of such Foreign
Subsidiary if it is directly or indirectly owned by another
Foreign Subsidiary,
(iv) within 30 days after such request, formation or
acquisition, take, and cause such Subsidiary (other than any
Foreign Subsidiary) or such parent (other than any Foreign
Subsidiary) to take, whatever action (including, without
limitation, the recording of mortgages, the filing of Uniform
Commercial Code financing statements, the giving of notices
and the endorsement of notices on title documents) may be
necessary or advisable in the opinion of the Collateral Agent
to vest in the Collateral Agent (or in any representative of
the Collateral Agent designated by it) valid and subsisting
Liens on the properties purported to be subject to the
mortgages, pledges, assignments and security agreements
delivered pursuant to this Section 5.01(n), enforceable
against all third parties in accordance with their terms,
(v) within 60 days after such request, formation or
acquisition, deliver to the Collateral Agent, upon the request
of the Collateral Agent in its sole discretion, a signed copy
of a favorable opinion, addressed to the Collateral Agent and
the other Secured Parties, of counsel for the Loan Parties
acceptable to the Collateral Agent as to the matters contained
in clauses (i), (iii) and (iv) above, as to such guaranties,
mortgages, pledges, assignments and security agreements being
legal, valid and binding obligations of each Loan Party party
thereto enforceable in accordance with their terms and as to
such other matters as the Collateral Agent may reasonably
request,
(vi) as promptly as practicable after such request,
formation or acquisition, deliver, upon the request of the
Collateral Agent in its sole discretion, to the Collateral
Agent (x) with respect to each parcel of real property owned
or held by the entity (other than any Foreign Subsidiary) that
is the subject of such request, formation or acquisition and
on which a manufacturing facility is located, surveys and
engineering, soils and other reports meeting the criteria
specified in Section 3.01(p)(ix)(C) or (D), as the case may
be, Mortgage Policies and an environmental assessment report
meeting the criteria specified in Section 3.01(p)(xv) and (y)
with respect to each other parcel of real property owned by
the entity that is the subject of such request, formation or
acquisition, title reports meeting the criteria specified in
Section 3.01(p)(ix)(B), provided, however, that to the extent
that the Borrower or any of its Subsidiaries shall have
otherwise received any of the foregoing items with respect to
such real property, such items shall promptly after the
receipt thereof be delivered to the Collateral Agent,
(vii) upon the occurrence and during the continuance
of a Default, promptly cause to be deposited, and cause each
of its Subsidiaries to cause to be promptly deposited, any and
all cash dividends paid or payable to it or any of its
Subsidiaries from any of its Subsidiaries from time to time
into the Cash Collateral Account, and with respect to all
other dividends paid or payable to it or any of its
Subsidiaries from time to time, promptly execute and deliver,
or cause such Subsidiary to promptly execute and deliver, as
the case may be, any and all further instruments and take or
cause such Subsidiary to take, as the case may be, all such
other action as the Collateral Agent may deem necessary or
desirable in order to obtain and maintain from and after the
time such dividend is paid or payable a perfected, first
priority lien on and security interest in such dividends, and
(viii) at any time and from time to time, promptly
execute and deliver any and all further instruments and
documents and take all such other action as the Collateral
Agent may deem necessary or desirable in obtaining the full
benefits of, or in perfecting and preserving the Liens of,
such guaranties, mortgages, pledges, assignments and security
agreements.
(o) Interest Rate Hedging. Maintain at all times, until such
time as the aggregate outstanding amount under the Term Facilities
shall be less than $400,000,000, interest rate Hedge Agreements with
Persons acceptable to the Administrative Agent, covering a notional
amount of not less than 50% of the Commitments under all of the
Facilities and the other floating rate Debt of the Loan Parties and
providing for such Persons to make payments thereunder for a period of
no less than one year to the extent of increases in interest rates
greater than 3% above the weighted average Eurodollar Rate on the First
Closing Date.
(p) Landlord's Consents, Etc. With respect to leaseholds set
forth on Part II of Schedule 4.01(ll) hereto, for a reasonable period
of time after the First Closing Date, and with respect to any leasehold
acquired after the First Closing Date (other than by a Foreign
Subsidiary) for a reasonable period of time after the acquisition
thereof, use, and cause its Subsidiaries to use, its best efforts to
cure any technical defect as may be required or, in the judgment of the
Collateral Agent, necessary or desirable (as notified to such Loan
Party by the Collateral Agent) to be cured in order to permit the
mortgaging of any leasehold under which any Loan Party is a lessee and,
if a Default shall have occurred and be continuing, use, and cause its
Subsidiaries to use, its best efforts to obtain any consent required
or, in the judgment of the Collateral Agent, necessary or desirable (as
notified to such Loan Party by the Collateral Agent) to permit the
mortgaging of any leasehold under which any Loan Party is a lessee,
and, in either case, use its best efforts to deliver and cause each of
its Subsidiaries to use its best efforts to deliver, such documents and
other items referred to in Section 5.01(n) as may be applicable in
connection with the mortgaging of such leasehold.
(q) Conditions Subsequent to Initial Extension of Credit.
Deliver to the Collateral Agent, in form and substance satisfactory to
the Collateral Agent and in sufficient copies for each Lender Party, as
soon as possible and in any event within 60 days after the Initial
Extension of Credit (or such later date as may be agreed by the
Borrower and the Collateral Agent):
(i) acknowledgment copies of proper financing
statements, duly filed under the Uniform Commercial Code of
all jurisdictions that the Collateral Agent may deem necessary
or desirable in order to perfect and protect the first
priority liens and security interests created under the
Security Agreement, covering the Collateral described in the
Security Agreement,
(ii) completed requests for information, listing the
financing statements referred to in clause (i) above and all
other effective financing statements filed in the
jurisdictions referred to in clause (i) above that name any
Loan Party as debtor, together with copies of such financing
statements,
(iii) evidence that counterparts of the Mortgages
have been duly recorded in all filing or recording offices
that the Collateral Agent may deem necessary or desirable in
order to create a valid first and subsisting Lien on the
property described therein in favor of the Secured Parties
subject only to Permitted Encumbrances and that all filing and
recording taxes and fees have been paid,
(iv) evidence of the completion of all recordings and
filings of or with respect to the Intellectual Property
Security Agreement that the Collateral Agent may deem
necessary or desirable in order to perfect and protect the
Liens created thereunder,
(v) evidence that such action as the Collateral Agent
may deem necessary or desirable in order to perfect and
protect the Liens on the capital stock held by any Loan Party
in any of its Foreign Subsidiaries has been taken (including,
without limitation, the execution and delivery by the
applicable Loan Party of such agreements or instruments of
pledge as may be necessary to perfect and protect Liens in
favor of the Collateral Agent for the benefit of the Secured
Parties on capital stock of each of the Borrower's
Subsidiaries organized under the laws of Australia), provided
that in any event such Liens shall cover not more than 66% of
the outstanding capital stock of Foreign Subsidiaries directly
owned by such Loan Party and shall not cover any capital stock
of any Foreign Subsidiary directly or indirectly owned by a
Foreign Subsidiary,
(vi) a signed copy of a favorable opinion addressed
to the Collateral Agent and the other Secured Parties, of
counsel for the Loan Parties acceptable to the Collateral
Agent, as to the agreements and instruments of pledge referred
to in clause (v) above being the legal, valid and binding
obligation of the Loan Party thereto, enforceable in
accordance with their terms and as to such other matters as
the Collateral Agent may reasonably request,
(vii) evidence that all other action as the
Collateral Agent may deem necessary or desirable in order to
perfect and protect the first priority liens and security
interests created under the Collateral Documents has been
taken,
(viii) evidence of business interruption insurance
naming the Collateral Agent for the benefit of the Secured
Parties as insured, as is satisfactory to the Collateral
Agent, and
(ix) evidence that the Borrower shall have applied to
Standard & Poor's Ratings Group's CUSIP Service Bureau for the
assignment of private placement numbers to the Notes.
(r) Conditions Subsequent to the Making of the New AXELS
Series B Advances. Deliver to the Collateral Agent, in form and
substance satisfactory to the Collateral Agent and in sufficient copies
for each Lender Party, as soon as possible, and in any event within 60
days after the making of the New AXELs Series B Advances (or such later
date as may be agreed by the Borrower and the Collateral Agent):
(i) evidence that the First Mortgage Amendments have
been duly recorded in all filing and recording offices that
the Collateral Agent may deem necessary or desirable in order
to maintain a valid first and subsisting lien on the property
described therein in favor of the Secured Parties subject only
to Permitted Encumbrances and that all filing and recording
taxes and fees have been paid;
(ii) evidence that either (x) endorsements to the
Mortgage Policies have been provided which update the Mortgage
Policies to the Second Closing Date and which indicate no
additional exceptions to coverage under such Mortgage Policies
from those specified on the First Closing Date, or (y) such
other satisfactory assurances have been given to the
Collateral Agent that the lien priority of the Mortgages will
not be affected by the recording of the First Mortgage
Amendments and that Mortgage Policies continue to insure the
Mortgages as amended by the First Mortgage Amendments; and
(iii) signed copies of favorable opinions of such
local counsel as the Administrative Agent may require, in form
and substance satisfactory to the Arrangers and the Agents.
(s) Conditions Subsequent to the Third Closing Date. Deliver
to the Collateral Agent, in form and substance satisfactory to the
Collateral Agent and in sufficient copies for each Lender Party, as
soon as possible, and in any event within 120 days after the Third
Closing Date (or such later date as may be agreed by the Borrower and
the Collateral Agent), with respect to each jurisdiction in which the
Second Mortgage Amendments were required to be delivered.
(i) evidence that the Second Mortgage Amendments have
been duly recorded in all filing and recording offices that
the Collateral Agent may deem necessary or desirable in order
to maintain a valid first and subsisting lien on the property
described therein in favor of the Secured Parties subject only
to Permitted Encumbrances and that all filing and recording
taxes and fees have been paid; and
(ii) evidence that either (x) endorsements to the
Mortgage Policies have been provided which update the Mortgage
Policies to the Third Closing Date and which indicate no
additional exceptions to coverage under such Mortgage Policies
from those specified on the First Closing Date, or (y) such
other satisfactory assurances have been given to the
Collateral Agent that the lien priority of the Mortgages will
not be affected by the recording of the Second Mortgage
Amendments and that Mortgage Policies continue to insure the
Mortgages as amended by the Second Mortgage Amendments.
(t) Conditions Subsequent to the Fourth Closing Date. Deliver
to the Collateral Agent, in form and substance satisfactory to the
Collateral Agent and in sufficient copies for each Lender Party, as
soon as possible, and in any event within 120 days after the Fourth
Closing Date (or such later date as may be agreed by the Borrower and
the Collateral Agent), with respect to each jurisdiction in which the
Third Mortgage Amendments were required to be delivered.
(i) evidence that the Third Mortgage Amendments have
been duly recorded in all filing and recording offices that
the Collateral Agent may deem necessary or desirable in order
to maintain a valid first and subsisting lien on the property
described therein in favor of the Secured Parties subject only
to Permitted Encumbrances and that all filing and recording
taxes and fees have been paid;
(ii) evidence that either (x) endorsements to the
Mortgage Policies have been provided which update the Mortgage
Policies to the Fourth Closing Date and which indicate no
additional exceptions to coverage under such Mortgage Policies
from those specified on the First Closing Date, or (y) such
other satisfactory assurances have been given to the
Collateral Agent that the lien priority of the Mortgages will
not be affected by the recording of the Third Mortgage
Amendments and that Mortgage Policies continue to insure the
Mortgages as amended by the Third Mortgage Amendments; and
(iii) revised Schedules 4.01(a), 4.01(b), 4.01(d),
4.01(m), 4.01(bb), 4.01(ff), 4.01(ii), 4.01(kk), 4.01(ll) and
4.01(nn) supplementing such Schedules delivered on the First
Closing Date in order to properly reflect the information
contained in such Schedules as of the Fourth Closing Date.
(u) Further Assurances. (i) Promptly upon request by the
Administrative Agent, or any Lender Party through the Administrative
Agent, correct, and cause each of its Subsidiaries promptly to correct,
any material defect or error that may be discovered in any Loan
Document or in the execution, acknowledgment, filing or recordation
thereof, and
(ii) Promptly upon request by the Collateral Agent, or any
Lender Party through the Collateral Agent, do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register,
and cause each of its Subsidiaries promptly to do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, pledge
agreements, mortgages, deeds of trust, trust deeds, assignments,
financing statements and continuations thereof, termination statements,
notices of assignment, transfers, certificates, assurances and other
instruments as the Collateral Agent, or any Lender Party through the
Collateral Agent, may reasonably require from time to time in order to
(A) carry out more effectively the purposes of this Agreement, the
Notes or any other Loan Document, (B) to the fullest extent permitted
by applicable law, subject any of the Borrower's or any of its
Subsidiaries' properties, assets, rights or interests to the Liens now
or hereafter intended to be covered by any of the Collateral Documents,
(C) perfect and maintain the validity, effectiveness and priority of
any of the Collateral Documents and any of the Liens intended to be
created thereunder and (D) assure, convey, grant, assign, transfer,
preserve, protect and confirm more effectively unto the Agents and the
Lender Parties the rights granted or now or hereafter intended to be
granted to the Agents and the Lender Parties under any Loan Document or
under any other instrument executed in connection with any Loan
Document to which any Loan Party or any of its Subsidiaries is or is to
be a party; provided, however, that in any event this Section 5.01(u)
shall not require Liens on, and the execution and delivery of
Collateral Documents covering, any property to the extent not otherwise
required by the terms of the Loan Documents.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned
or hereafter acquired, or sign or file or suffer to exist, or permit
any of its Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement that
names the Borrower or any of its Subsidiaries as debtor, or sign or
suffer to exist, or permit any of its Subsidiaries to sign or suffer to
exist, any security agreement authorizing any secured party thereunder
to file such financing statement, or assign, or permit any of its
Subsidiaries to assign, any accounts or other right to receive income,
excluding, however, from the operation of the foregoing restrictions
the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the First Closing Date and
described on Schedule 5.02(a) hereto;
(iv) purchase money Liens upon or in real property or
equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property or equipment
to be subject to such Liens, or Liens existing on any such
property or equipment at the time of acquisition (other than
any such Liens created in contemplation of such acquisition
that do not secure the purchase price), or extensions,
renewals or replacements of any of the foregoing for the same
or a lesser amount; provided, however, that no such Lien shall
extend to or cover any property other than the property or
equipment being acquired, constructed or improved, and no such
extension, renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being extended,
renewed or replaced; and provided further that the aggregate
principal amount of the Debt secured by Liens permitted by
this clause (iv) shall not exceed the amount permitted under
Section 5.02(b)(iii)(B) at any time outstanding and that any
such Debt shall not otherwise be prohibited by the terms of
the Loan Documents;
(v) Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(iii)(C); provided that
no such Lien shall extend to or cover any Collateral or assets
other than the assets subject to such Capitalized Leases;
(vi) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the
Borrower or any Subsidiary of the Borrower or becomes a
Subsidiary of the Borrower; provided that such Liens were not
created in contemplation of such merger, consolidation or
investment and do not extend to any assets other than those of
the Person merged into or consolidated with the Borrower or
such Subsidiary or acquired by the Borrower or such
Subsidiary;
(vii) Liens securing Obligations of the Borrower or
any of its Subsidiaries in an aggregate amount not to exceed
$5,000,000 at any time outstanding;
(viii) Liens arising in connection with any lease
permitted under Section 5.02(c), provided that no such Lien
shall extend to or cover any assets other than the assets
subject to such lease;
(ix) Liens on the capital stock of the Play Center
Joint Venture securing Obligations of the Play Center Joint
Venture; and
(x) the replacement, extension or renewal of any Lien
permitted by clauses (iii) and (vi) above upon or in the same
property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or change
in any direct or contingent obligor) of the Debt secured
thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist,
any Debt other than:
(i) in the case of the Borrower,
(A) Debt owed to its Subsidiaries; so long
as at the time of incurrence of such Debt,
foreclosure proceedings shall not have been commenced
with respect to any stock or assets of such
Subsidiaries,
(B) Debt in respect of Hedge Agreements not
entered into for speculative purposes and designed to
hedge against fluctuations in interest rates or
foreign exchange rates incurred in the ordinary
course of business and consistent with prudent
business practice, and
(C) Debt in respect of guarantees by the
Borrower of the Obligations of Foreign Subsidiaries
under bank overdraft facilities permitted under
Section 5.02(b)(iii)(I),
(ii) in the case of any of its Subsidiaries, Debt
owed to the Borrower or to a wholly owned Subsidiary of the
Borrower to the extent permitted under Section 5.02(f); and
(iii) in the case of the Borrower and any of its
Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt secured by Liens permitted by
Section 5.02(a)(iv) not to exceed in the aggregate
$10,000,000 at any time outstanding,
(C) Capitalized Leases in an aggregate
amount, calculated in accordance with GAAP, not to
exceed in the aggregate $10,000,000 at any time
outstanding,
(D) the Surviving Debt, and any Debt
extending the maturity of, or refunding or
refinancing, in whole or in part, any Surviving Debt,
provided that the terms of any such extending,
refunding or refinancing Debt, and of any agreement
entered into and of any instrument issued in
connection therewith, are otherwise permitted by the
Loan Documents and provided further that the
principal amount of such Surviving Debt shall not be
increased above the principal amount thereof
outstanding immediately prior to such extension,
refunding or refinancing, and the direct and
contingent obligors therefor shall not be changed, as
a result of or in connection with such extension,
refunding or refinancing,
(E) Subordinated Debt under the
Subordinated Notes Indentures,
(F) Debt of any Person that becomes a
Subsidiary of the Borrower after the First Closing
Date in accordance with the terms of Section 5.02(f)
that is existing at the time such Person becomes a
Subsidiary of the Borrower,
(G) Debt in an aggregate principal amount
not to exceed $5,000,000 outstanding at any time and
consisting of letters of credit (other than Letters
of Credit issued hereunder) and reimbursement
obligations in respect thereof,
(H) other Debt in an aggregate amount
not to exceed $5,000,000 at any time outstanding,
(I) in the case of Foreign Subsidiaries,
Debt under bank overdraft facilities in an aggregate
amount not to exceed $10,000,000 at any time
outstanding,
(J) indorsement of negotiable instruments
for deposit or collection or similar transactions in
the ordinary course of business, and
(K) Debt consisting of repurchase
arrangements in connection with the financing of
bowling equipment sales by the Borrower and its
Subsidiaries.
(c) Lease Obligations. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee for the rental or hire of
real or personal property of any kind under leases or agreements to
lease (including Capitalized Leases) having an original term of one
year or more that would cause the direct and contingent liabilities of
the Borrower and its Subsidiaries, on a Consolidated basis, in respect
of all such obligations to exceed an amount payable in any period of 12
consecutive months equal to the sum of (i) $25,000,000, (ii) an amount
equal to the product of (x) $200,000 and (y) the number of leased
bowling centers acquired by the Borrower or any of its Subsidiaries
after the First Closing Date and (iii) in each calendar year occurring
after 1996, an amount equal to 4% of the amount permitted under this
Section 5.02(c) in the immediately preceding calendar year, calculated
as at the end of such preceding calendar year.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
to do so, except that (i) any Subsidiary of the Borrower may merge into
or consolidate with the Borrower (in the case of any merger or
consolidation to which the Borrower is a party), or any other
Subsidiary of the Borrower; provided that, in the case of any such
merger or consolidation, the Person surviving such merger or
consolidation shall be the Borrower (in the case of any merger or
consolidation to which the Borrower is a party), or a wholly owned
Subsidiary of the Borrower, (ii) in connection with any acquisition
permitted under Section 5.02(f), any Subsidiary of the Borrower may
merge into or consolidate with any other Person or permit any other
Person to merge into or consolidate with it; provided that the Person
surviving such merger shall be a wholly owned Subsidiary of the
Borrower and (iii) in connection with any sale or other disposition
permitted under Section 5.02(e) (other than clause (ii) thereof), any
Subsidiary of the Borrower may merge into or consolidate with any other
Person or permit any other Person to merge into or consolidate with it;
provided, however, that in each case, immediately after giving effect
thereto, no event shall occur and be continuing that constitutes a
Default.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets other than inventory
to be sold in the ordinary course of its business, except:
(i) sales of Inventory in the ordinary course of
its business,
(ii) in a transaction authorized by subsection
(d)(i) or (ii) of this Section 5.02,
(iii) the sale or other disposition of damaged, worn
out or obsolete property that is no longer necessary for the
proper conduct of the business of the Borrower and its
Subsidiaries in the ordinary course of business, provided that
the fair value of the assets so sold or otherwise disposed of
shall not exceed $1,000,000 in the aggregate in any Fiscal
Year,
(iv) the sale or other disposition of assets by any
Loan Party to any other Loan Party,
(v) the sale of assets or properties for fair value
in an aggregate amount for any one such transaction or series
of related transactions not to exceed $10,000,
(vi) sales or exchanges of assets by the Borrower or
any of its Subsidiaries for fair value and for cash or senior
promissory notes or equity of the seller thereof or like-kind
assets (including, without limitation, the stock of the Person
owning such assets) to be used in the business of the Borrower
and its Subsidiaries or any other assets, provided that the
fair value of the assets so sold or exchanged shall not exceed
$25,000,000 in the aggregate in any Fiscal Year, provided
further that any notes or equity or other non-cash assets
received in connection with any sale or exchange of assets
pursuant to this clause (vi) shall be pledged as Collateral
securing the Obligations of the Borrower or such Subsidiary,
as the case may be, under the Loan Documents and the Secured
Parties' lien and security interest therein shall be perfected
(and the Borrower shall, and shall cause any such Subsidiary
to, take such action as the Collateral Agent may deem
necessary or desirable to effect such perfection) in
accordance with the terms of the Loan Documents,
(vii) sale of the Borrower's billiards equipment
manufacturing business for fair value, and
(viii) the lease by the Borrower and its
Subsidiaries, as lessors, in the ordinary course of their
respective business and on an arm's-length basis, of real
property consisting of space located in their respective
bowling centers, and other leasing arrangements entered into
by the Borrower and its Subsidiaries in the ordinary course of
business and without significant economic cost to the Borrower
and its Subsidiaries in order to permit the service of
alcoholic beverages and gaming operations pursuant to
applicable law,
provided that in the case of sales or exchanges of assets pursuant to
clauses (vi) and (vii) above, the Borrower shall, on the date of
receipt by any Loan Party or any of its Subsidiaries of any Net Cash
Proceeds from such sale, prepay the Advances pursuant to, and in the
amount and order of priority set forth in, Section 2.06(b)(ii), as
specified therein.
(f) Investments in Other Persons. Make or hold, or permit any
of its Subsidiaries to make or hold, any Investment in any Person other
than:
(i) (A) Investments by the Borrower and its
Subsidiaries in their Subsidiaries outstanding on the First
Closing Date, (B) additional Investments in their wholly owned
Subsidiaries that are Loan Parties and (C) additional
Investments in their wholly owned Subsidiaries that are not
Loan Parties and the China Joint Venture, in the case of this
clause (C), in an aggregate amount invested not to exceed an
amount in any Fiscal Year equal to the sum of (x) $10,000,000,
(y) the aggregate amount of capital contributions made after
the Fourth Closing Date by the Equity Investors and new third
party equity investors in Parent in any Fiscal Year to the
extent such amount was contributed to such Subsidiary as a
capital contribution in such Fiscal Year (without duplication
of amounts contributed pursuant to clause (ii) below) and (z)
any amount available for Investments pursuant to Section
5.02(f)(ii)(x) but not so invested, provided that, to the
extent that any amount permitted to be invested in any Fiscal
Year pursuant to this clause (C) shall not have been so
invested, such amount may be invested pursuant to this
subsection (i) in the next succeeding Fiscal Year and any
amounts invested in the next succeeding Fiscal Year shall be
deemed to be applied first against the amount so carried over
from the preceding Fiscal Year;
(ii) Investments by the Borrower and its Subsidiaries
in their non-wholly owned Subsidiaries and in other Persons
that are not their Subsidiaries in an aggregate amount
invested from the Fourth Closing Date not to exceed the sum of
(x) $65,000,000 and (y) the aggregate amount of capital
contributions made after the Fourth Closing Date by the Equity
Investors and new third party equity investors in Parent in
any Fiscal Year to the extent such amount was contributed to
such Subsidiary as a capital contribution in such Fiscal Year
(without duplication of amounts contributed or invested
pursuant to clause (i) above);
(iii) Loans and advances to employees in the ordinary
course of business of the Borrower and its Subsidiaries as
presently conducted in an aggregate principal amount not to
exceed $7,500,000 for the purpose of purchasing common stock
of Parent and an additional $2,000,000 at any time
outstanding;
(iv) Investments by the Borrower and its
Subsidiaries in Cash Equivalents;
(v) Investments by the Borrower in Hedge
Agreements permitted under Section 5.02(b)(i)(B);
(vi) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(i)(A);
(vii) Investments existing on the Fourth Closing Date
and described on Schedule 4.01(mm) hereto;
(viii) Investments consisting of notes and equity
received pursuant to Section 5.02(e)(vi) or (vii); and
(ix) other Investments made in connection with the
acquisition of all or any part of the assets or stock or other
equity interest of any Person or the acquisition or
construction of New Centers; provided that with respect to
Investments made under this clause (ix): (1) any newly
acquired or created Subsidiary of the Borrower or any of its
Subsidiaries shall be a wholly owned Subsidiary thereof and
such Subsidiary (unless such Subsidiary is a Foreign
Subsidiary) shall become a Subsidiary Guarantor and execute
and deliver the documents referred to in Section 5.01(n); (2)
immediately before and after giving effect thereto, no Default
shall have occurred and be continuing or would result
therefrom; (3) substantially all of any business acquired or
invested in pursuant to this clause (ix) shall be in the same
or a substantially related line of business as the business of
the Borrower or any of its Subsidiaries (after giving effect
to permitted expansion by the Borrower and its Subsidiaries
into golf-related business pursuant to Section 5.02(h)); and
(4) immediately after giving effect to the acquisition of a
company or business pursuant to this clause (ix), the Borrower
shall be in pro forma compliance with the covenants contained
in Section 5.04, calculated based on the relevant Financial
Statements, as though such acquisition had occurred at the
beginning of the 12-month period covered thereby, as evidenced
by a certificate of a Designated Financial Officer furnished
to the Lender Parties, demonstrating such compliance and
reflecting the Adjusted EBITDA of any bowling center so
acquired for the immediately preceding 12-month period.
(g) Dividends, Etc. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its
capital stock or any warrants, rights or options to acquire such
capital stock, now or hereafter outstanding, return any capital to its
stockholders as such, make any distribution of assets, capital stock,
warrants, rights, options, obligations or securities to its
stockholders as such or issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, or permit
any of its Subsidiaries to do any of the foregoing or permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire
for value any capital stock of the Borrower or any warrants, rights or
options to acquire such capital stock or to issue or sell any capital
stock or any warrants, rights or options to acquire such capital stock,
except that:
(i) so long as no Default shall have occurred and be
continuing or would result therefrom, the Borrower may (A)
declare and pay dividends and distributions payable only in
common stock of the Borrower and (B) declare and pay cash
dividends to Holdings solely to the extent necessary to (x)
make payments required under the non-competition agreements
listed on Schedule 5.02(g) hereto and (y) declare and pay cash
dividends to Parent to the extent permitted under, and in
accordance with the terms of, the Holdings Guaranty, and
(ii) so long as foreclosure proceedings shall not
have been commenced with respect to any stock or assets of any
Subsidiary of the Borrower, any such Subsidiary may (A)
declare and pay cash dividends to the Borrower and (B) declare
and pay cash dividends to any other wholly owned Subsidiary of
the Borrower of which it is a Subsidiary.
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business
as carried on at the First Closing Date, except that the Borrower and
its Subsidiaries may own and operate golf driving ranges and engage in
other golf-related businesses to the extent that the aggregate amount
invested by the Borrower and its Subsidiaries in golf driving ranges
and other golf-related businesses does not exceed $50,000,000 at any
time outstanding.
(i) Charter Amendments. Amend, or permit any of its
Subsidiaries to amend, its certificate of incorporation or bylaws in
any material respect.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies
or reporting practices, except as required by generally accepted
accounting principles or (ii) its Fiscal Year.
(k) Prepayments, Etc. of Debt. (i) Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Debt, other than (A) the prepayment of the Advances in
accordance with the terms of this Agreement, (B) regularly scheduled or
required repayments or redemptions of Surviving Debt, (C) in connection
with any acquisition of a company or business pursuant to Section
5.02(f)(ix), the prepayment, redemption, purchase, defeasance or other
satisfaction of existing Debt of such company or business to the extent
required by the terms of such Debt and (D) the prepayment of any
portion of the Subordinated Notes (including, without limitation, any
premium thereon and expenses incurred in connection therewith) with a
portion of the Net Cash Proceeds received by the Borrower from the IPO
to the extent such Net Cash Proceeds are not required to be used to
prepay Working Capital Advances in accordance with Section
2.06(b)(ii)(B) or (ii) amend, modify or change any term or condition of
any Surviving Debt or Subordinated Debt in any manner that would impair
in any material respect the value of the interests or rights of the
Borrower or any of its Subsidiaries thereunder or that would impair in
any material respect the rights or interests of any Agent or any Lender
Party, or permit any of its Subsidiaries to do any of the foregoing
other than to prepay any Debt payable to the Borrower or any other Loan
Party.
(l) Amendment, Etc. of Related Documents. Cancel or terminate
any Related Document or consent to or accept any cancellation or
termination thereof, amend, modify or change in any manner any term or
condition of any Related Document or give any consent, waiver or
approval thereunder, waive any default under or any breach of any term
or condition of any Related Document, agree in any manner to any other
amendment, modification or change of any term or condition of any
Related Document or take any other action in connection with any
Related Document, in each case that would impair in any material
respect the value of the interests or rights of the Borrower thereunder
or that would impair in any material respect the rights or interests of
any Agent or any Lender Party, or permit any of its Subsidiaries to do
any of the foregoing.
(m) Ownership Change. Take, or permit any of its Subsidiaries
to take, any action that would result in an "ownership change" (as
defined in Section 382 of the Internal Revenue Code) with respect to
the Borrower or any of its Subsidiaries or the application of the
"separate return limitation year" or "consolidated return change of
ownership" limitations under the Federal income tax consolidated return
regulations with respect to the Borrower or any of its Subsidiaries
(other than as a direct result of the Acquisition and the acquisition
by AMF Bowling Centers of the companies set forth on Schedule 4.01(ff)
hereto) that could be reasonably likely to have a Material Adverse
Effect.
(n) Negative Pledge. Enter into or suffer to exist, or permit
any of its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties, (ii) in connection with any Surviving Debt and any Debt
outstanding on the date such Subsidiary first becomes a Subsidiary (so
long as such agreement was not entered into solely in contemplation of
such Subsidiary becoming a Subsidiary) or (iii) in connection with any
lease permitted under Section 5.02(c) solely to the extent that such
lease prohibits a Lien on the lease or the property subject to such
lease.
(o) Partnerships, Etc. Become a general partner in any general
or limited partnership or joint venture, or permit any of its
Subsidiaries to do so, other than any such Subsidiary the sole assets
of which consist of its interest in such partnership or joint venture.
(p) Speculative Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options
or futures contracts or any similar speculative transactions except for
Hedge Agreements permitted under Section 5.02(b)(i)(B).
(q) Capital Expenditures. Make, or permit any of its
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by the Borrower and its
Subsidiaries to exceed $60,000,000 during the Fiscal Year ending
December 31, 1997, $80,000,000 during the Fiscal Year ending December
31, 1998 and $100,000,000 during each Fiscal Year thereafter, provided,
that to the extent that any Capital Expenditures permitted to be made
in any Fiscal Year shall not have been so made, such Capital
Expenditures may be made in the immediately succeeding Fiscal Year; and
provided further, that for purposes of calculating the aggregate amount
of Capital Expenditures permitted in any Fiscal Year, any amounts so
carried over from the immediately preceding Fiscal Year shall be deemed
to be spent after amounts otherwise permitted to be spent in such
Fiscal Year.
(r) Payment Restrictions Affecting Subsidiaries. Directly or
indirectly, create or otherwise cause or suffer to exist or become
effective, or permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become
effective, any encumbrance or restriction on the ability of any of its
Subsidiaries to pay dividends or make any other distributions to the
Borrower or any of its Subsidiaries on its capital stock or with
respect to any other interest or participation, or measured by its
profits, or pay any Debt owed to the Borrower or any of its
Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of the Loan Documents, Surviving Debt as in effect
on the First Closing Date and applicable law.
SECTION 5.03. Reporting Requirements. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will furnish to the
Administrative Agent and the Lender Parties:
(a) Default Notice. As soon as possible and in any event
within two days after any officer of the Borrower or Holdings obtains
knowledge of any Default or any event, development or occurrence
reasonably likely to have a Material Adverse Effect continuing on the
date of such statement, a statement of a Designated Financial Officer
setting forth details of such Default, event, development or occurrence
and the action that the Borrower has taken and proposes to take with
respect thereto.
(b) Quarterly Financials. As soon as available and in any
event within 45 days after the end of each of the first three quarters
of each Fiscal Year, Consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as of the end of such quarter and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal quarter and ending
with the end of such fiscal quarter and Consolidated and consolidating
statements of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of
the previous Fiscal Year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding
figures for the corresponding date or period of the preceding Fiscal
Year, all in reasonable detail and duly certified (subject to normal
year-end audit adjustments) by a Designated Financial Officer as having
been prepared in accordance with GAAP, together with (i) a certificate
of said officer (A) stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement
as to the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto and (B) setting forth, for the
Rolling Period ending at the end of such fiscal quarter, the Adjusted
EBITDA (and the calculation thereof) of each New Center constructed
within the preceding 15 months, EBITDA of each bowling center acquired
or constructed by the Borrower or any of its Subsidiaries after the
First Closing Date and acquired or constructed at least 15 months prior
to the end of such Rolling Period and all Other Additions, if any, for
such Rolling Period and (ii) a schedule in form satisfactory to the
Administrative Agent of the computations used by the Borrower in
determining compliance with the covenants contained in Section 5.04,
provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Borrower shall also
provide, if necessary for the determination of compliance with Section
5.04, a statement of reconciliation conforming such financial
statements to GAAP.
(c) Annual Financials. As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for such
Fiscal Year, in each case accompanied by an opinion not qualified as to
scope or going concern of Arthur Andersen, L.L.P. or other independent
public accountants of nationally recognized standing acceptable to the
Administrative Agent, together with (i) a certificate of such
accounting firm to the Lender Parties stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries,
which audit was conducted by such accounting firm in accordance with
generally accepted auditing standards, such accounting firm has
obtained no knowledge that a Default has occurred and is continuing, or
if, in the opinion of such accounting firm, a Default has occurred and
is continuing, a statement as to the nature thereof, (ii) a schedule in
form satisfactory to the Administrative Agent of the computations used
by such accountants in determining, as of the end of such Fiscal Year,
compliance with the covenants contained in Section 5.04, provided that
in the event of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP and (iii) a
certificate of a Designated Financial Officer (A) stating that no
Default has occurred and is continuing or, if a default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto
and (B) setting forth, for the Rolling Period ending at the end of such
Fiscal Year, the Adjusted EBITDA (and the calculation thereof) of each
New Center constructed within the preceding 15 months, EBITDA of each
bowling center acquired or constructed by the Borrower or any of its
Subsidiaries after the First Closing Date and acquired or constructed
at least 15 months prior to the end of such Rolling Period and all
Other Additions, if any, for such Rolling Period.
(d) Annual Forecasts. As soon as available and in any event no
later than 15 days after the end of each Fiscal Year, forecasts
prepared by management of the Borrower, in form satisfactory to the
Administrative Agent, of balance sheets, income statements and cash
flow statements on a monthly basis for the Fiscal Year following such
Fiscal Year and on an annual basis for each Fiscal Year thereafter
until the Termination Date for the AXELs Series B Facility.
(e) ERISA Events and ERISA Reports. (i) Promptly and in any
event within 20 days after any Loan Party or any ERISA Affiliate knows
or has reason to know that any ERISA Event has occurred, a statement of
a Designated Financial Officer describing such ERISA Event and the
action, if any, that such Loan Party or such ERISA Affiliate has taken
and proposes to take with respect thereto and (ii) on the date any
records, documents or other information must be furnished to the PBGC
with respect to any Plan pursuant to Section 4010 of ERISA, a copy of
such records, documents and information.
(f) Plan Terminations. Promptly and in any event within 10
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any
Plan.
(g) Actuarial Reports. Within 20 Business Days after receipt
thereof by any Loan Party or any ERISA Affiliate, a copy of the annual
actuarial valuation report for each Plan the funded current liability
percentage (as defined in Section 302(d)(8) of ERISA) of which is less
than 90% or the unfunded current liability of which exceeds $2,000,000.
(h) Plan Annual Reports. Within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Plan.
(i) Multiemployer Plan Notices. Promptly and in any event
within 10 Business Days after receipt thereof by any Loan Party or any
ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of
each notice concerning (i) the imposition of Withdrawal Liability by
any such Multiemployer Plan, (ii) the reorganization or termination,
within the meaning of Title IV of ERISA, of any such Multiemployer Plan
or (iii) the amount of liability incurred, or that may be incurred, by
such Loan Party or any ERISA Affiliate in connection with any event
described in clause (i) or (ii).
(j) Litigation. Promptly after the commencement thereof,
notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type
required to be disclosed in Section 4.01(j).
(k) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and
reports that Parent or any Loan Party or any of its Subsidiaries sends
to all of its stockholders, and copies of all regular, periodic and
special reports, and all registration statements, that Parent or any
Loan Party or any of its Subsidiaries files with the Securities and
Exchange Commission or any governmental authority that may be
substituted therefor, or with any national securities exchange.
(l) Creditor Reports. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other holder of the
securities of any Loan Party or of any of its Subsidiaries pursuant to
the terms of any indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lender Parties pursuant to
any other clause of this Section 5.03.
(m) Agreement Notices. Promptly upon receipt thereof, copies
of all notices of any default or breach and all other material requests
and other documents received by any Loan Party or any of its
Subsidiaries under or pursuant to any Related Document or indenture,
loan or credit or similar agreement and, from time to time upon request
by the Administrative Agent, such information and reports regarding the
Related Documents as the Administrative Agent may reasonably request.
(n) Revenue Agent Reports. Within 10 days after receipt,
copies of all Revenue Agent Reports (Internal Revenue Service Form
886), or other written proposals of the Internal Revenue Service, that
propose, determine or otherwise set forth positive adjustments to the
Federal income tax liability of the affiliated group (within the
meaning of Section 1504(a)(1) of the Internal Revenue Code) of which
the Borrower is a member aggregating $2,000,000 or more.
(o) Tax Certificates. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a
certificate (a "Tax Certificate"), signed by the President of the
Borrower or a Designated Financial Officer, stating that the common
parent of the affiliated group (within the meaning of Section
1504(a)(1) of the Internal Revenue Code) of which the Borrower is a
member has paid to the Internal Revenue Service or other taxing
authority, or to the Borrower, the full amount that such affiliated
group is required to pay in respect of Federal income tax for such year
and that the Borrower and its Subsidiaries have received any amounts
payable to them, and have not paid amounts in respect of taxes
(Federal, state, local or foreign) in excess of the amount they are
required to pay, under the Tax Agreements in respect of such taxable
year.
(p) Notification of Tax Adjustments. Promptly, and in any
event within five Business Days after receipt of notice thereof, notice
of any adjustment that has been proposed formally or informally by any
tax authority relating to any tax return (Federal, state, local and
foreign) filed by any Loan Party or any of its Subsidiaries and
Affiliates in excess of $1,000,000.
(q) Environmental Conditions. Notice of any Environmental
Action against, or of any noncompliance with any Environmental Law or
Environmental Permit by, any Loan Party or any of its Subsidiaries that
could (i) reasonably be expected to have a Material Adverse Effect or
(ii) reasonably be expected to cause any property described in the
Mortgages to be subject to any restrictions on ownership, occupancy,
use or transferability under any Environmental Law that could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, such notice to be furnished promptly after
such Environmental Action or noncompliance meets the criteria set forth
in either subsection (i) or subsection (ii) of this Section 5.03(q).
(r) Real Property. As soon as available and in any event
within 60 days after the end of each Fiscal Year, a report
supplementing Schedules 4.01(kk) and 4.01(ll) hereto, including an
identification of all real and leased property disposed of by the
Borrower or any of its Subsidiaries during such Fiscal Year, a list and
description (including the street address, county or other relevant
jurisdiction, state, record owner, book value thereof, and in the case
of leases of property, lessor, lessee, expiration date and annual
rental cost thereof) of all real property acquired or leased during
such Fiscal Year and a description of such other changes in the
information included in such Schedules as may be necessary for such
Schedules to be accurate and complete, provided that so long as no
Default shall have occurred and be continuing, updated asset appraisals
shall not be required pursuant to this subsection (r).
(s) Insurance. As soon as available and in any event within 60
days after the end of each Fiscal Year, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for
each Loan Party and its Subsidiaries and containing such additional
information as any Lender Party (through the Administrative Agent) may
reasonably specify.
(t) Guarantees of Overdraft Facilities of Foreign
Subsidiaries. On the first Business Day of each week, during such times
as the aggregate Unused Working Capital Commitments shall be less than
$15,000,000, a report specifying the amount of Debt of the Borrower
outstanding under Section 5.02(b)(i)(C) as of the last Business Day of
the prior week.
(u) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Lender Party (through the Administrative Agent) may from time to
time reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment hereunder, the Borrower will:
(a) Minimum EBITDA. Maintain at all times (calculated at the
end of each fiscal quarter of the Borrower) Modified Consolidated
EBITDA of not less than the sum of (i) the amount set forth below for
each Rolling Period set forth below and (ii) the EBITDA Adjustment
Amount for such Rolling Period:
Rolling Period Ending Amount
- --------------------- ------
September 30, 1996 $140,000,000
December 31, 1996 $145,000,000
March 31, 1997 $150,000,000
June 30, 1997 $150,000,000
September 30, 1997 $150,000,000
December 31, 1997 $150,000,000
March 31, 1998 $150,000,000
June 30, 1998 $150,000,000
September 30, 1998 $155,000,000
December 31, 1998 $155,000,000
March 31, 1999 $155,000,000
June 30, 1999 $155,000,000
September 30, 1999 $165,000,000
December 31, 1999 $165,000,000
March 31, 2000 $165,000,000
June 30, 2000 $165,000,000
September 30, 2000 $175,000,000
December 31, 2000 $175,000,000
March 31, 2001 $175,000,000
June 30, 2001 $175,000,000
September 30, 2001 $185,000,000
December 31, 2001 $185,000,000
March 31, 2002 $185,000,000
June 30, 2002 $185,000,000
September 30, 2002 $195,000,000
December 31, 2002 $195,000,000
March 31, 2003 $195,000,000
June 30, 2003 $195,000,000
September 30, 2003 and thereafter $200,000,000
(b) Cash Interest Coverage Ratio. Maintain at all times
(calculated at the end of each fiscal quarter of the Borrower) a ratio
of Modified Consolidated EBITDA to cash interest payable on all Debt of
the Borrower and its Subsidiaries on a Consolidated basis, in each case
for such Rolling Period of not less than the amount set forth below for
each Rolling Period set forth below:
Rolling Period Ending Ratio
- --------------------- -----
September 30, 1996 2.00:1
December 31, 1996 2.00:1
March 31, 1997 2.00:1
June 30, 1997 2.00:1
September 30, 1997 2.25:1
December 31, 1997 2.25:1
March 31, 1998 2.25:1
June 30, 1998 2.25:1
September 30, 1998 2.25:1
December 31, 1998 2.25:1
March 31, 1999 2.35:1
June 30, 1999 2.35:1
September 30, 1999 2.35:1
December 31, 1999 2.35:1
March 31, 2000 2.75:1
June 30, 2000 2.75:1
September 30, 2000 2.75:1
December 31, 2000 2.75:1
March 31, 2001 2.75:1
June 30, 2001 2.75:1
September 30, 2001 2.50:1
December 31, 2001 2.50:1
March 31, 2002 2.50:1
June 30, 2002 2.50:1
September 30, 2002 and thereafter 2.75:1
(c) Fixed Charge Coverage Ratio. Maintain at all times
(calculated at the end of each fiscal quarter of the Borrower) a ratio
of (A) Modified Consolidated EBITDA during such Rolling Period less the
sum of (I) cash taxes paid plus (II) Capital Expenditures made, in each
case, by the Borrower and its Subsidiaries during such Rolling Period
to (B) the sum of (i) cash interest payable on all Debt plus (ii)
principal amounts of all Debt under the Term Facilities payable by the
Borrower during such Rolling Period of not less than the amount set
forth below for each Rolling Period set forth below:
Rolling Period Ending Ratio
- --------------------- -----
September 30, 1996 1.05:1
December 31, 1996 1.05:1
March 31, 1997 1.05:1
June 30, 1997 1.05:1
September 30, 1997 1.10:1
December 31, 1997 1.10:1
March 31, 1998 1.10:1
June 30, 1998 1.10:1
September 30, 1998 1.10:1
December 31, 1998 1.10:1
March 31, 1999 1.15:1
June 30, 1999 1.15:1
September 30, 1999 1.15:1
December 31, 1999 1.15:1
March 31, 2000 1.20:1
June 30, 2000 1.20:1
September 30, 2000 1.20:1
December 31, 2000 1.20:1
March 31, 2001 1.20:1
June 30, 2001 1.20:1
September 30, 2001 1.10:1
December 31, 2001 1.10:1
March 31, 2002 and thereafter 1.00:1
(d) Senior Debt to EBITDA Ratio. Maintain at all times
(calculated at the end of each fiscal quarter of the Borrower) a ratio
of Consolidated Debt (other than Subordinated Debt and Hedge
Agreements) of the Borrower and its Subsidiaries to Modified
Consolidated EBITDA of not more than the amount set forth below for
each Rolling Period set forth below:
Rolling Period Ending Ratio
- --------------------- -----
September 30, 1996 3.50:1
December 31, 1996 3.50:1
March 31, 1997 3.50:1
June 30, 1997 3.75:1
September 30, 1997 3.75:1
December 31, 1997 3.60:1
March 31, 1998 3.60:1
June 30, 1998 3.60:1
September 30, 1998 3.60:1
December 31, 1998 3.60:1
March 31, 1999 3.60:1
June 30, 1999 3.60:1
September 30, 1999 3.60:1
December 31, 1999 3.60:1
March 31, 2000 3.25:1
June 30, 2000 3.25:1
September 30, 2000 3.25:1
December 31, 2000 3.25:1
March 31, 2001 3.00:1
June 30, 2001 3.00:1
September 30, 2001 3.00:1
December 31, 2001 3.00:1
March 31, 2002 and thereafter 2.50:1
(e) Total Debt/EBITDA Ratio. Maintain at all times (calculated
at the end of each fiscal quarter of the Borrower) a ratio of
Consolidated total Debt (other than Hedge Agreements) of the Borrower
and its Subsidiaries to Modified Consolidated EBITDA of not more than
the amount set forth below for each Rolling Period set forth below:
Rolling Period Ending Ratio
- --------------------- -----
September 30, 1996 6.95:1
December 31, 1996 6.95:1
March 31, 1997 6.75:1
June 30, 1997 6.50:1
September 30, 1997 6.50:1
December 31, 1997 6.00:1
March 31, 1998 6.00:1
June 30, 1998 6.00:1
September 30, 1998 6.00:1
December 31, 1998 6.00:1
March 31, 1999 6.00:1
June 30, 1999 6.00:1
September 30, 1999 6.00:1
December 31, 1999 6.00:1
March 31, 2000 5.50:1
June 30, 2000 5.50:1
September 30, 2000 5.50:1
December 31, 2000 5.50:1
March 31, 2001 5.00:1
June 30, 2001 5.00:1
September 30, 2001 5.00:1
December 31, 2001 5.00:1
March 31, 2002 and thereafter 4.50:1
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any
Advance when the same shall become due and payable or (ii) the Borrower
shall fail to pay any interest on any Advance, or any Loan Party shall
fail to make any other payment under any Loan Document, in each case
under this clause (ii) within three days after the same becomes due and
payable; or
(b) any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 2.14, 5.01(e), (f), (m),
(n)(i) or (n)(ii), (p), (q), (r), (s) (t) or (u), 5.02, 5.03(a) or
5.04; or
(d) any Loan Party shall fail to perform any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 15
days after the earlier of the date on which (A) a Responsible Officer
becomes aware of such failure or (B) written notice thereof shall have
been given to the Borrower by the Administrative Agent or any Lender
Party; or
(e) any Loan Party or any of its Material Subsidiaries shall
fail to pay any principal of, premium or interest on or any other
amount payable in respect of any Debt that is outstanding in a
principal amount of at least $25,000,000 either individually or in the
aggregate (but excluding Debt outstanding hereunder) of such Loan Party
or such Material Subsidiary (as the case may be), when the same becomes
due and payable (whether by scheduled maturity, 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 Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt 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 accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be
declared to be due and payable or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof; or
(f) any Loan Party or any of its Material Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against any Loan Party or any of its Material
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 30 days or any of
the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property) shall occur; or any Loan Party or any
of its Material Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess
of $25,000,000 shall be rendered against any Loan Party or any of its
Material Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 15 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided, however, that any such
judgment or order shall not be an Event of Default under this Section
6.01(g) if and to the extent that the amount of such judgment or order
is covered by a valid and binding policy of insurance between the
defendant and the insurer covering payment thereof so long as such
insurer, which shall be rated at least "A" by A.M. Best Company, has
been notified of, and has not disputed the claim made for payment of,
the amount of such judgment or order; or
(h) any non-monetary judgment or order shall be rendered
against any Loan Party or any of its Material Subsidiaries that could
be reasonably likely to have a Material Adverse Effect, and there shall
be any period of 15 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01, 3.04, 3.05 or 5.01(n) shall for any reason
cease to be valid and binding on or enforceable against any Loan Party
party to it, or any such Loan Party shall so state in writing; or
(j) any provision relating to the subordination of any
Subordinated Debt to the Obligations of the Loan Parties under the Loan
Documents contained in any Subordinated Debt Document shall for any
reason cease to be valid and binding on or enforceable against any Loan
Party party to it or any holder of Subordinated Debt issued pursuant to
such Subordinated Debt Document, or any such Loan Party or holder shall
so state in writing; or
(k) any Collateral Document (excluding Mortgages covering
Collateral which, in the aggregate, is immaterial) after delivery
thereof pursuant to Section 3.01, 3.04, 3.05 or 5.01(n) shall for any
reason (other than pursuant to the terms thereof or as a result of
action taken or failure to take action by any Agent or Lender Party)
cease to create a valid and perfected first priority lien on and
security interest in the Collateral purported to be covered thereby; or
(l) Parent ceases to own and control legally and beneficially
all of the outstanding shares of the capital stock of Holdings; or
(m) Holdings ceases to own and control legally and
beneficially all of the outstanding shares of the capital stock of the
Borrower; or
(n) a Change of Control shall occur; or
(o) any ERISA Event shall have occurred with respect to a Plan
and the sum (determined as of the date of occurrence of such ERISA
Event) of the Insufficiency of such Plan and the Insufficiency of any
and all other Plans with respect to which an ERISA Event shall have
occurred and then exist (or the liability of the Loan Parties and the
ERISA Affiliates related to such ERISA Event) exceeds $25,000,000; or
(p) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Loan Parties and the ERISA Affiliates as Withdrawal
Liability (determined as of the date of such notification), exceeds
$25,000,000 or requires payments exceeding $7,500,000 per annum; or
(q) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, and as a result of such reorganization or
termination the aggregate annual contributions of the Loan Parties and
the ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the plan years
of such Multiemployer Plans immediately preceding the plan year in
which such reorganization or termination occurs by an amount exceeding
$7,500,000;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Commitments of the Lender Parties and the obligation of each
Appropriate Lender to make Advances (other than Letter of Credit Advances by an
Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c)) and of
each Issuing Bank to issue Letters of Credit to be terminated, whereupon the
same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
any Loan Party or any of its Subsidiaries under the Federal Bankruptcy Code, (x)
the obligation of each Lender to make Advances (other than Letter of Credit
Advances by an Issuing Bank or a Working Capital Lender pursuant to Section
2.03(c)) and of each Issuing Bank to issue Letters of Credit shall automatically
be terminated and (y) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit then outstanding. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Administrative Agent and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim.
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender Party (in
its capacities as a Lender, an Issuing Bank (if applicable) and a potential
Hedge Bank) hereby appoints and authorizes each Agent to take such action as
agent on its behalf and to exercise such powers and discretion under this
Agreement and the other Loan Documents as are delegated to such Agent by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters expressly provided for in the
Loan Documents as being subject to the discretion of any Agent, such matters
shall be subject to the sole discretion of such Agent, its directors, officers,
agents and employees. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Notes), no Agent shall be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lender
Parties and all holders of Notes; provided, however, that no Agent shall be
required to take any action that exposes such Agent to personal liability or
that is contrary to this Agreement or applicable law. Each Agent agrees to give
to each Lender Party and each other Agent prompt notice of each notice given to
it by the Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. Neither the Agents nor
any of their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, each Agent:
(a) may treat the payee of any Note as the holder thereof until, in the case of
the Administrative Agent, the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any
other Agent, such Agent has received notice from the Administrative Agent that
it has received and accepted such Assignment and Acceptance, in each case as
provided in Section 8.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank, Citicorp, Goldman and Affiliates. With
respect to its Commitments, the Advances made by it and the Notes issued to it,
each of Citibank, Citicorp and Goldman shall have the same rights and powers
under the Loan Documents as any other Lender Party and may exercise the same as
though it were not an Agent; and the term "Lender Party" or "Lender Parties"
shall, unless otherwise expressly indicated, include each of Citibank, Citicorp
and Goldman in its individual capacity. Each of Citibank, Citicorp and Goldman
and its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, accept investment banking engagements from and generally engage
in any kind of business with, any Loan Party, any of its Subsidiaries and any
Person who may do business with or own securities of any Loan Party or any such
Subsidiary, all as if Citibank, Citicorp or Goldman, as the case may be, were
not an Agent and without any duty to account therefor to the Lender Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon the Agents or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without reliance upon the Agents or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally
agrees to indemnify each Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by such Agent under the Loan Documents; provided,
however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender Party
agrees to reimburse such Agent promptly upon demand for its ratable share of any
costs and expenses (including, without limitation, reasonable fees and expenses
of counsel) payable by the Borrower under Section 8.04, to the extent that such
Agent is not promptly reimbursed for such costs and expenses by the Borrower.
For purposes of this Section 7.05(a), the Lender Parties' respective ratable
shares of any amount shall be determined, at any time, according to the sum of
(a) the aggregate principal amount of the Advances outstanding at such time and
owing to the respective Lender Parties, (b) their respective Pro Rata Shares of
the aggregate Available Amount of all Letters of Credit outstanding at such
time, (c) the aggregate unused portions of their respective Term Loan
Commitments, AXELs Series A Commitments and AXELs Series B Commitments at such
time and (d) their respective Unused Working Capital Commitments at such time;
provided that the aggregate principal amount of Letter of Credit Advances owing
to any Issuing Bank shall be considered to be owed to the Working Capital
Lenders ratably in accordance with their respective Working Capital Commitments.
In the event that any Defaulted Advance shall be owing by any Defaulting Lender
at any time, such Lender Party's Commitment with respect to the Facility under
which such Defaulted Advance was required to have been made shall be considered
to be unused for purposes of this Section 7.05(a) to the extent of the amount of
such Defaulted Advance. The failure of any Lender Party to reimburse an Agent
promptly upon demand for its ratable share of any amount required to be paid by
the Lender Party to such Agent as provided herein shall not relieve any other
Lender Party of its obligation hereunder to reimburse such Agent for its ratable
share of such amount, but no Lender Party shall be responsible for the failure
of any other Lender Party to reimburse such Agent for such other Lender Party's
ratable share of such amount. Without prejudice to the survival of any other
agreement of any Lender Party hereunder, the agreement and obligations of each
Lender Party contained in this Section 7.05(a) shall survive the payment in full
of principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
(b) Each Working Capital Lender severally agrees to indemnify
each Issuing Bank (to the extent not promptly reimbursed by the Borrower) from
and against such Working Capital Lender's ratable share (determined as provided
below) of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against such
Issuing Bank in any way relating to or arising out of the Loan Documents or any
action taken or omitted by such Issuing Bank under the Loan Documents; provided,
however, that no Working Capital Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Issuing Bank's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Working Capital Lender agrees to reimburse such Issuing Bank promptly upon
demand for its ratable share of any costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) payable by the Borrower
under Section 8.04, to the extent that such Issuing Bank is not promptly
reimbursed for such costs and expenses by the Borrower. For purposes of this
Section 7.05(b), the Working Capital Lenders' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Working Capital Lenders, (b) their respective Pro Rata Shares of
the aggregate Available Amount of all Letters of Credit outstanding at such
time, and (c) their respective Unused Working Capital Commitments at such time;
provided that the aggregate principal amount of Letter of Credit Advances owing
to any Issuing Bank shall be considered to be owed to the Working Capital
Lenders ratably in accordance with their respective Working Capital Commitments.
In the event that any Defaulted Advance shall be owing by any Defaulting Lender
at any time, such Lender Party's Commitment with respect to the Facility under
which such Defaulted Advance was required to have been made shall be considered
to be unused for purposes of this Section 7.05(b) to the extent of the amount of
such Defaulted Advance. The failure of any Working Capital Lender to reimburse
such Issuing Bank promptly upon demand for its ratable share of any amount
required to be paid by the Working Capital Lenders to such Issuing Bank as
provided herein shall not relieve any other Working Capital Lender of its
obligation hereunder to reimburse such Issuing Bank for its ratable share of
such amount, but no Working Capital Lender shall be responsible for the failure
of any other Working Capital Lender to reimburse such Issuing Bank for such
other Working Capital Lender's ratable share of such amount. Without prejudice
to the survival of any other agreement of any Working Capital Lender hereunder,
the agreement and obligations of each Working Capital Lender contained in this
Section 7.05(b) shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under the other Loan Documents.
SECTION 7.06. Successor Agents. Any Agent may resign as to any
or all of the Facilities at any time by giving written notice thereof to the
Lender Parties and the Borrower and may be removed as to all of the Facilities
at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent as to such of the Facilities as to which such Agent has resigned
or been removed subject, so long as no Default shall have occurred and be
continuing, to the consent of the Borrower, such consent not to be unreasonably
withheld or delayed. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
such retiring Agent's giving of notice of resignation or the Required Lenders'
removal of such retiring Agent, then such retiring Agent may, on behalf of the
Lender Parties, appoint a successor Agent subject, so long as no Default shall
have occurred and be continuing, to the consent of the Borrower, such consent
not to be unreasonably withheld or delayed, which shall be a commercial bank
organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $250,000,000. Upon
the acceptance of any appointment as an Agent hereunder by a successor Agent as
to all of the Facilities and upon the execution and filing or recording of such
financing statements, or amendments thereto, and such amendments or supplements
to the Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Agent shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent as to less than all of the Facilities and upon the execution and
filing or recording of such financing statements, or amendments thereto, and
such amendments or supplements to the Mortgages, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Collateral Documents, such successor Agent shall succeed to
and become vested with all the rights, powers, discretion, privileges and duties
of the retiring Agent as to such Facilities, other than with respect to funds
transfers and other similar aspects of the administration of Borrowings under
such Facilities, issuances of Letters of Credit (notwithstanding any resignation
as Agent with respect to the Letter of Credit Facility) and payments by the
Borrower in respect of such Facilities, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement as to such
Facilities, other than as aforesaid. After any retiring Agent's resignation or
removal hereunder as Agent as to all of the Facilities, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent as to any Facilities under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (a) no amendment,
waiver or consent shall, unless in writing and signed by all of the Lender
Parties (other than any Lender Party that is, at such time, a Defaulting
Lender), do any of the following at any time: (i) waive any of the conditions
specified in Section 3.01 or, in the case of the Initial Extension of Credit,
Section 3.02, (ii) change the number of Lenders or the percentage of (x) the
Commitments, (y) the aggregate unpaid principal amount of the Advances or (z)
the aggregate Available Amount of outstanding Letters of Credit that, in each
case, shall be required for the Lenders or any of them to take any action
hereunder, (iii) reduce or limit the obligations of any Guarantor under Section
1 of any Guaranty or release such Guarantor or otherwise limit such Guarantor's
liability with respect to the Obligations owing to the Administrative Agent and
the Lender Parties other than, in the case of any Subsidiary Guarantor, to the
extent permitted under the Subsidiary Guaranty, (iv) release any material
portion of the Collateral in any transaction or series of related transactions
(except to the extent permitted by Section 5.02(e)) or permit the creation,
incurrence, assumption or existence of any Lien (other than Liens permitted
under Section 5.02(a)) on any material portion of the Collateral in any
transaction or series of related transactions to secure any Obligations other
than Obligations owing to the Secured Parties under the Loan Documents and other
than Debt owing to any other Person, provided that, in the case of any Lien on
any material portion of the Collateral to secure Debt owing to any other Person
(other than Liens permitted under Section 5.02(a)), (A) the Borrower shall, on
the date such Debt shall be incurred or issued, prepay the Advances pursuant to,
and in the order of priority set forth in, Section 2.06(b)(ii) in an aggregate
principal amount equal to the amount of the Net Cash Proceeds thereof to the
extent required to do so under Section 2.06(b)(ii), (B) such Lien shall be
subordinated to the Liens created under the Loan Documents on terms acceptable
to the Required Lenders and (C) the Required Lenders shall otherwise permit the
creation, incurrence, assumption or existence of such Lien and, to the extent
not otherwise permitted under Section 5.02(b), of such Debt, (v) amend this
Section 8.01, or (vi) limit the liability of any Loan Party under any of the
Loan Documents, (b) no amendment, waiver or consent shall, unless in writing and
signed by the Required Lenders and each Lender that has a Commitment under the
Term Loan Facility, AXELs Series A Facility, AXELs Series B Facility or Working
Capital Facility if affected by such amendment, waiver or consent, (i) increase
the Commitments of such Lender or subject such Lender to any additional
obligations, (ii) reduce the principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender or (iv) change the allocation or the order of application of any
prepayment set forth in Section 2.06 in any manner that materially affects such
Lender and (c) no amendment, waiver or consent shall, unless in writing and
signed by (i) the Required Lenders and each New AXELs Series B Lender, waive any
of the conditions specified in Section 3.04 or, in the case of the making of New
AXELs Series B Advances, Section 3.02 or (ii) the Required Lenders waive any of
the conditions specified in Section 3.05; provided further that no amendment,
waiver or consent shall, unless in writing and signed by each Issuing Bank in
addition to the Lenders required above to take such action, affect the rights or
obligations of the Issuing Banks under this Agreement; and provided further that
no amendment, waiver or consent shall, unless in writing and signed by an Agent
in addition to the Lenders required above to take such action, affect the rights
or duties of such Agent under this Agreement.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered, if to the Borrower, at its address at AMF
Bowling Worldwide, Inc., 8100 AMF Drive, Mechanicsville, Virginia 23111,
Attention: Stephen E. Hare, with a copy to Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004, Attention: David Greenwald, Esq.; if to any
Initial Lender or any Initial Issuing Bank, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any other Lender Party,
at its Domestic Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender Party; if to the Collateral Agent, at its
address at 399 Park Avenue, New York, New York 10043, Attention: Charles Foster;
and if to the Administrative Agent, at its address at 399 Park Avenue, 6th
Floor, New York, New York 10043, Attention: Charles Foster; or, as to the
Borrower or the Administrative Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Administrative Agent. All such notices
and communications shall (a) when mailed, be effective three Business Days after
the same is deposited in the mails, (b) when mailed for next day delivery by a
reputable freight company or reputable overnight courier service, be effective
one Business Day thereafter, and (c) when sent by telegraph, telecopier or
telex, be effective when the same is confirmed by telephone, telecopier
confirmation or return telecopy or telex answerback, respectively, except that
notices and communications to the Administrative Agent pursuant to Article II,
III or VII shall not be effective until received by the Administrative Agent.
Delivery by telecopier of an executed counterpart of any amendment or waiver of
any provision of this Agreement or the Notes or of any Exhibit hereto to be
executed and delivered hereunder shall be effective as delivery of a manually
executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender Party or any Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a)
The Borrower agrees to pay on demand (i) all costs and expenses of the Arrangers
and the Agents in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including,
without limitation, (A) all due diligence, collateral review, syndication,
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and expenses and (B) the reasonable fees and
expenses of counsel (including, without limitation, local or foreign counsel)
for the Arrangers and the Agents with respect thereto, with respect to advising
each of the Administrative Agent and the Collateral Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of the Agents and the Lender Parties in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation,
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally (including, without limitation, the reasonable fees and
expenses of counsel (including, without limitation, local or foreign counsel)
for each Agent and each Lender Party with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless each
Agent, each Arranger, each Lender Party and each of their Affiliates and their
officers, trustees, directors, employees, agents and advisors (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Facilities, the actual or proposed use of the proceeds
of the Advances or the Letters of Credit, the Loan Documents or any of the
transactions contemplated thereby, including, without limitation, any
acquisition or proposed acquisition (including, without limitation, the
Acquisition and any of the other transactions contemplated hereby) by the Equity
Investors or any of their Subsidiaries or Affiliates of all or any portion of
the stock or substantially all the assets of the Company or any of its
Subsidiaries or (ii) the actual or alleged presence of Hazardous Materials on
any property of any Loan Party or any of its Subsidiaries or any Environmental
Action relating in any way to any Loan Party or any of its Subsidiaries, in each
case whether or not such investigation, litigation or proceeding is brought by
any Loan Party, its directors, shareholders or creditors or an Indemnified Party
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated (but excluding any such claims,
damages, losses, liabilities and expenses (A) of any Indemnified Party to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct or (B)
arising from disputes among two or more Lender Parties (but not including any
such dispute that involves a Lender Party to the extent that such Lender Party
is acting in any different capacity (such as an Agent or Arranger) or to the
extent it involves syndication activities). The Borrower also agrees not to
assert any claim against any Agent, any Lender Party or any of their Affiliates,
or any of their respective officers, directors, trustees, employees, attorneys
and agents, on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the Facilities, the
actual or proposed use of the proceeds of the Advances or the Letters of Credit,
the Loan Documents or any of the transactions contemplated thereby.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender Party other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.01(c), 2.06,
2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender
Party other than on the last day of the Interest Period for such Advance upon an
assignment of rights and obligations under this Agreement pursuant to Section
8.07 as a result of a demand by the Borrower pursuant to Section 8.07(a), the
Borrower shall, upon demand by such Lender Party (with a copy of such demand to
the Administrative Agent), pay to the Administrative Agent for the account of
such Lender Party any amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender Party to fund or
maintain such Advance.
(d) If any Loan Party fails to pay when due any costs,
expenses or other amounts payable by it under any Loan Document, including,
without limitation, fees and expenses of counsel and indemnities, such amount
may be paid on behalf of such Loan Party by the Administrative Agent or any
Lender Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement
of any Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the request
or the granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing under this
Agreement and the Note or Notes (if any) held by such Lender Party, irrespective
of whether such Lender Party shall have made any demand under this Agreement or
such Note or Notes and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
Party and its respective Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender Party and its respective Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective when the Third Amendment shall have been executed by the Borrower and
the Agents and when the Administrative Agent shall have been notified by the
Required Lenders that such Lender Parties have executed the Third Amendment and
the conditions precedent set forth in the Third Amendment and in Section 3.05
have been satisfied in full, and thereafter shall be binding upon and inure to
the benefit of the Borrower, each Agent and each Lender Party and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender
may (and, so long as no Default shall have occurred and be continuing, if
demanded by the Borrower (following a demand by such Lender pursuant to Section
2.10 or 2.12 or if such Lender shall be a Defaulting Lender) upon at least 5
Business Days' notice to such Lender and the Administrative Agent, will) assign
to one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement and the other Loan Documents (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of one or more Facilities, (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment or Commitments of
the assigning Lender being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000, (iii) each such assignment shall be
to an Eligible Assignee, (iv) each such assignment made as a result of a demand
by the Borrower pursuant to this Section 8.07(a) shall be arranged by the
Borrower after consultation with the Administrative Agent and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement and the other Loan Documents or an assignment of a portion of
such rights and obligations made concurrently with another such assignment or
other such assignments that together cover all of the rights and obligations of
the assigning Lender under this Agreement and the other Loan Documents, (v) no
Lender shall be obligated to make any such assignment as a result of a demand by
the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall
have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, and (vi) the parties
to each such assignment shall execute and deliver to the Administrative Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $1,500 for each Assignment and Acceptance between a Lender
and one of its Affiliates or another Lender or $3,000 for each other Assignment
and Acceptance, provided, however, that for each such assignment made as a
result of a demand by the Borrower pursuant to this Section 8.07(a), the
Borrower shall pay to the Administrative Agent the applicable processing and
recordation fee.
(b) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in such Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender or
Issuing Bank, as the case may be, hereunder and (y) the Lender or Issuing Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than its rights under Sections 2.10, 2.12 and 8.04 to the
extent any claim thereunder relates to an event arising prior to such
assignment) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon any Agent, such assigning Lender Party or any other Lender
Party and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes each Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Loan Documents as are delegated to such Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender or Issuing Bank, as the case may be.
(d) The Administrative Agent, acting for this purpose (but
only for this purpose) as the agent of the Borrower, shall maintain at its
address referred to in Section 8.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lender Parties and the Commitment under each Facility of,
and principal amount of the Advances owing under each Facility to, each Lender
Party from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agents and the Lender Parties shall treat each Person whose name
is recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender Party and an assignee, together with any Note or Notes
subject to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower and the other Agents. In the case of any assignment by a Lender, within
five Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent in exchange for
the surrendered Note or Notes a new Note to the order of such Eligible Assignee
in an amount equal to the Commitment assumed by it under a Facility pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder under such Facility, a new Note to the order of the
assigning Lender in an amount equal to the Commitment retained by it hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1, A-2, A-3 or A-4 hereto, as the case may
be.
(f) Each Issuing Bank may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under the undrawn
portion of its Letter of Credit Commitment at any time; provided, however, that
(i) except in the case of an assignment to a Person that immediately prior to
such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's
rights and obligations under this Agreement, the amount of the Letter of Credit
Commitment of the assigning Issuing Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000 and shall
be in an integral multiple of $1,000,000 in excess thereof, (ii) each such
assignment shall be to an Eligible Assignee and (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with a processing and recordation fee of $3,000.
(g) Each Lender Party may sell participations to one or more
Persons (other than any Loan Party or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, release any Guarantor or Guarantors to the extent that such
release would have the effect of releasing all or substantially all of the
Collateral, or release all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this
Agreement, any Lender Party may at any time create a security interest in all or
any portion of its rights under this Agreement (including, without limitation,
the Advances owing to it and the Note or Notes held by it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.09. No Liability of the Issuing Banks. The Borrower
assumes all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit. Neither
any Issuing Bank nor any other Lender Party nor any of their respective officers
or directors shall be liable or responsible for: (a) the use that may be made of
any Letter of Credit or any acts or omissions of any beneficiary or transferee
in connection therewith; (b) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by such Issuing Bank against presentation of documents that do not
comply with the terms of a Letter of Credit, including failure of any documents
to bear any reference or adequate reference to the Letter of Credit; or (d) any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit, except that the Borrower shall have a claim against such
Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the
extent of any direct, but not consequential, damages suffered by the Borrower
that the Borrower proves were caused by (i) such Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of such Letter of Credit or (ii) such
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 8.10. Confidentiality. Neither any Agent nor any
Lender Party shall disclose any Confidential Information to any Person without
the consent of the Borrower, other than (a) to such Agent's or such Lender
Party's Affiliates and their officers, directors, partners, employees, agents
and advisors and to actual or prospective Eligible Assignees and participants,
and then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process, provided that, other than with respect to
Confidential Information otherwise permitted to be disclosed pursuant to clause
(d) below, such Agent or Lender Party shall, unless prohibited by applicable law
or regulation or court order, give notice to the Borrower of any such
requirement to disclose such Confidential Information, and, if practicable, such
notice shall be given prior to such disclosure, provided, however, that the
failure to give such notice shall not prohibit such disclosure, (c) to any
rating agency when required by it, provided that, prior to any such disclosure,
such rating agency shall undertake to preserve the confidentiality of any
Confidential Information relating to the Borrower received by it from such
Lender Party and (d) as requested or required by any state, federal or foreign
authority or examiner or the National Association of Insurance Commissioners or
any state or federal authority regulating such Lender Party.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any of the other Loan Documents to which it is a
party, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any of the other Loan
Documents in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any of the
other Loan Documents to which it is a party in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
SECTION 8.12. Release of Collateral. Upon the sale, lease,
transfer or other disposition of any item of Collateral of any Loan Party
(including, without limitation, as a result of the sale, in accordance with the
terms of the Loan Documents, of the Loan Party that owns such Collateral) in
accordance with the terms of the Loan Documents, the Collateral Agent will, at
the Borrower's expense, execute and deliver to such Loan Party such documents as
such Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the
Collateral Documents in accordance with the terms of the Loan Documents.
SECTION 8.13. Governing Law; Waiver of Jury Trial. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the laws of the State of New York. Each of the Borrower, the Agents and the
Lender Parties irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents, the Advances or the
actions of any Agent or any Lender Party in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
AMF BOWLING WORLDWIDE, INC.
(f/k/a AMF Group Inc.)
By /s/ Michael P. Bardaro
-------------------------------
Title: Vice President, Secretary
GOLDMAN SACHS CREDIT
as Syndication Agent
By /s/ ILLEGIBLE
--------------------------
Title:
CITIBANK, N.A.,
as Administrative Agent
By /s/ Judith [ ] Minter
--------------------------
Title: Attorney-in-fact
CITICORP USA, INC.,
as Collateral Agent
By
---------------------------
Title:
Lenders
GOLDMAN SACHS CREDIT
PARTNERS, L.P.
By /s/ ILLEGIBLE
------------------------------
Title:
CITICORP USA, INC.
By /s/ Judith [ ] Minter
------------------------------
Title: Attorney-in-fact
ABN AMRO BANK N.V.
By /s/ David J. Kraut
-------------------------------
Title: Assistant Vice President
By /s/ Lisa Megeaski
-----------------------------------
Title: Vice President
AERIES FINANCE LTD.
By /s/ ILLEGIBLE
-------------------------------
Title: Director
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Charles D. Mires
--------------------------------
Title: Authorized Signatory
By /s/ Jerry D. Zinkula
-----------------------------------
Title: Authorized Signatory
AMARA - 2 FINANCE LTD.
By /s/ Andrew Ian Wignall
------------------------------------
Title: Director
AMSOUTH BANK
By /s/ ILLEGIBLE
------------------------------------
Title: Commerical Banking Officer
BANK OF AMERICA NT&SA
By /s/ Jonathan M. Kitei
---------------------------
Title: Attorney-in-Fact
BANKBOSTON, N.A.
By /s/ ILLEGIBLE
-------------------------------------
Title: Commercial Banking Officer
BANK OF HAWAII
By /s/ Donna R. Parker
------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ J.R. Trimble
-------------------------------
Title: Senior Relationship Manager
BANK OF SCOTLAND
By /s/ Annie Chin Tat
----------------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ ILLEGIBLE
--------------------------------
Title: Managing Director
CAPTIVA II FINANCE LTD.
By /s/ David Egglishaw
----------------------------
Title:
CIBC INC.
By /s/ Timothy E. Doyle
-----------------------------
Title: Managing Director, CIBC Wood Gundy
Securities Corp., as Agent
COMERICA BANK
By /s/ ILLEGIBLE
---------------------------
Title: First Vice President
COMMERCIAL LOAN FUNDING TRUST I
By Lehman Commercial Paper Inc., not in its
individual capacity but solely as
Administrative Agent
By s/ Michele Swanson
-----------------------------
Title: Authorized Signatory
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By /s/ Brian O'Leary
-----------------------------------
Title: Vice President
By /s/ Anthony Rock
------------------------------------
Title: Vice President
CORESTATES BANK N.A.
By /s/ ILLEGIBLE
---------------------------
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By /s/ David Bouhl, F.V.P.
------------------------------------
Title: Head of Corporate Banking
Chicago
CREDITANSTALT BANKVEREIN
By /s/ Geoffrey Headington
-------------------------------------
Title: Associate
By /s/ Clifford L. Wells
-------------------------------------
Title: Vice President
CRESTAR BANK
By /s/ ILLEGIBLE
--------------------------
Title: VP
DEBT STRATEGIES FUND, INC.
By /s/ Lynn Callicott Baranski
----------------------------------
Title: Authorized Signatory
DRESDNER BANK AG, NEW YORK
AND GRAND CAYMAN
BRANCHES
By /s/ Richard W. Conroy
----------------------------------
Title: Vice President
By /s/ Ben Marzouk
----------------------------------
Title: Vice President
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
its agent/manager
By /s/ ILLEGIBLE
------------------------
Title: VP
GENERAL ELECTRIC CAPITAL
CORPORATION
By /s/ ILLEGIBLE
------------------------
Title: Manager Operations
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/ Takuya Honjo
--------------------------------
Title: Senior Vice President
KEYPORT LIFE INSURANCE COMPANY
By Chancellor LGT Senior Secured Management,
Inc., as Portfolio Advisor
By /s/ ILLEGIBLE
--------------------------
Title: AVP
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michelle Swanson
-----------------------------
Title: Authorized Signatory
MARINE MIDLAND BANK
By /s/ ILLEGIBLE
--------------------------
Title: Authorized Signatory (8891)
MELLON BANK, N.A.
By /s/ ILLEGIBLE
--------------------------
Title: First Vice President
MERITA BANK LTD, NEW YORK
BRANCH
By /s/ Frank Maffei
----------------------------------
Title: Vice President
By --------------------------
Title:
MERRILL LYNCH PRIME RATE
PORTFOLIO
By Merrill Lynch Asset Management, L.P., as
Investment Advisor
By /s/ Lynn Callicott Baranski
---------------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Lynn Callicott Baranski
-----------------------------
Title: Authorized Signatory
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ ILLEGIBLE
----------------------------
Title: Assistant Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By /s/ ILLEGIBLE
---------------------------
Title: Senior Vice President
ML CBO IV (CAYMAN) LTD.
By Protective Asset Management L.L.C., as
Collateral Agent
By /s/ James Dondero CFA, CPA
-------------------------------------
Title: President and Protective Asset
Management Company
MORGAN STANLEY SENIOR FUNDING, INC.
By /s/ Christopher A. Pucillo
----------------------------------
Title: Vice President
NATEXIS BANQUE BFCE
By /s/ G. K. Doover
---------------------------------
Title: Vice President
By /s/ William C. Maier
------------------------------------
Title: Vice President-Group Manager
OCTAGON CREDIT INVESTORS
LOAN PORTFOLIO
(a unit of Chase Manhattan Bank)
By /s/ Andrew D. Gordon
-----------------------------------
Title: Managing Director
PAMCO CAYMAN LTD.
By Protective Asset Management Company, as
Collateral Manager
By /s/ James Dondero CFA, CPA
-------------------------------------
Title: President Protective Asset
Management Company
PILGRIM AMERICA PRIME RATE
TRUST
By /s/ Michael J. Bacevich
-----------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Gary W. Tyrrell
-----------------------------
Title: Vice President
PPM AMERICA, INC., as attorney-in
fact, on behalf of Jackson National Life
Insurance Company
By /s/ ILLEGIBLE
---------------------------
Title: Managing Director
ROYALTON COMPANY
By Pacific Investment Management Company, as
its Investment Advisor
By /s/ ILLEGIBLE
---------------------------
Title: Vice President
THE SAKURA BANK, LIMITED
By /s/ Yasuhiro Terada
---------------------------
Title: Senior Vice President
SENIOR DEBT PORTFOLIO
By Boston Management and Research,
as Investment Advisor
By /s/ Scott H. Page
-----------------------------
Title: Vice President
SENIOR HIGH INCOME PORTFOLIO
By /s/ Lynn Callicott Baranski
----------------------------------
Title: Authorized Signatory
SIGNET BANK
By /s/ J. Charles Link
----------------------------
Title: SVP
SOCIETE GENERALE
By /s/ ILLEGIBLE
----------------------------
Title: Vice President
THE TRAVELERS INSURANCE
COMPANY
By /s/ Teresa M. Torrey
----------------------------------
Title: Second Vice President
UNITED STATES NATIONAL BANK
OF OREGON
By /s/ ILLEGIBLE
---------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ ILLEGIBLE
---------------------------
Title:
Exhibit A to
Amendment No. 1
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 7, 1997
Among
AMF BOWLING WORLDWIDE, INC.
as Borrower
-- --------
and
THE INITIAL LENDERS AND INITIAL ISSUING BANKS
and
GOLDMAN SACHS CREDIT PARTNERS L.P.
and
CITICORP SECURITIES, INC.
as Arrangers
-- ---------
and
GOLDMAN SACHS CREDIT PARTNERS L.P.
as Syndication Agent
-- ----------- -----
and
CITIBANK, N.A.
as Administrative Agent
-- -------------- -----
and
CITICORP USA, INC.
as Collateral Agent
-- ---------- -----
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms........................................................................... 3
1.02. Computation of Time Periods..................................................................... 39
1.03. Accounting Terms................................................................................ 39
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances.................................................................................... 40
2.02. Making the Advances............................................................................. 43
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit.............................. 44
2.04. Repayment of Advances........................................................................... 46
2.05. Termination or Reduction of the Commitments..................................................... 51
2.06. Prepayments..................................................................................... 52
2.07. Interest........................................................................................ 57
2.08. Fees............................................................................................ 58
2.09. Conversion of Advances.......................................................................... 59
2.10. Increased Costs, Etc............................................................................ 60
2.11. Payments and Computations....................................................................... 61
2.12. Taxes........................................................................................... 63
2.13. Sharing of Payments, Etc........................................................................ 65
2.14. Use of Proceeds................................................................................. 66
2.15. Defaulting Lenders.............................................................................. 67
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit............................................. 70
3.02. Conditions Precedent to Each Borrowing and Issuance............................................. 80
3.03. Determinations Under Section 3.01............................................................... 81
3.04. Conditions Precedent to the Making of the New AXELs Series B Advances........................... 81
3.05. Conditions Precedent to the Effectiveness of the Third Amendment................................ 84
3.06. Determinations Under Sections 3.04 and 3.05..................................................... 88
</TABLE>
ii
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower.................................................. 88
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants........................................................................... 98
5.02. Negative Covenants..............................................................................109
5.03. Reporting Requirements..........................................................................119
5.04. Financial Covenants.............................................................................124
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default...............................................................................129
6.02. Actions in Respect of the Letters of Credit upon Default........................................133
ARTICLE VII
THE AGENTS
7.01. Authorization and Action........................................................................133
7.02. Agents' Reliance, Etc...........................................................................134
7.03. Citibank, Citicorp, Goldman and Affiliates......................................................134
7.04. Lender Party Credit Decision....................................................................135
7.05. Indemnification.................................................................................135
7.06. Successor Agents................................................................................137
</TABLE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc.................................................................................138
8.02. Notices, Etc....................................................................................139
8.03. No Waiver; Remedies.............................................................................140
8.04. Costs and Expenses..............................................................................140
8.05. Right of Set-off................................................................................142
8.06. Binding Effect..................................................................................143
8.07. Assignments and Participations..................................................................143
8.08. Execution in Counterparts.......................................................................147
8.09. No Liability of the Issuing Banks...............................................................147
8.10. Confidentiality.................................................................................148
8.11. Jurisdiction, Etc...............................................................................148
8.12. Release of Collateral...........................................................................149
8.13. Governing Law; Waiver of Jury Trial.............................................................149
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Subsidiary Guarantors
Schedule III - Stockholders' Agreement
Schedule 3.01(e) - Surviving Debt
Schedule 3.01(p)(xx) - Local Counsel
Schedule 4.01(a) - Equity Investors' Ownership of Parent
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings
Schedule 4.01(m) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(v) - Environmental Laws Disclosure
Schedule 4.01(w) - Environmental Disclosure
Schedule 4.01(x) - Hazardous Materials Disclosure
Schedule 4.01(bb) - Open Years
Schedule 4.01(ff) - Acquisitions by AMF Bowling Centers
Schedule 4.01(ii) - Existing Debt
Schedule 4.01(kk) - Owned Real Property
Schedule 4.01(ll) - Leased Real Property
Schedule 4.01(mm) - Investments
Schedule 4.01(nn) - Intellectual Property
Schedule 5.01(l) - Transactions with Affiliates
Schedule 5.02(a) - Existing Liens
Schedule 5.02(g) - Non-competition Agreements
iv
EXHIBITS
Exhibit A-1 - Form of Term Loan Note
Exhibit A-2 - Form of AXELs Series A Note
Exhibit A-3 - Form of AXELs Series B Note
Exhibit A-4 - Form of Working Capital Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement
Exhibit F - Form of Mortgage
Exhibit G - Form of Holdings Guaranty
Exhibit H - Form of Subsidiary Guaranty
Exhibit I - Form of Solvency Opinion
Exhibit J - Form of Solvency Certificate
Exhibit K - Form of Opinion of Counsel to the Loan Parties
Exhibit L - Form of Opinion of Intellectual Property Counsel
Exhibit M - Form of Mortgage Amendment
Exhibit N - Form of Opinion of Counsel to the Loan Parties regarding Amendment No. 3 to the
Original Credit Agreement
Exhibit O - Form of Opinion of Daniel McCormack, General Counsel for the Borrower regarding
Amendment No. 3 to the Original Credit Agreement
Exhibit P - Form of Second Mortgage Amendment
Exhibit Q - Form of Opinion of Counsel to the Loan Parties regarding Amendment No. 2 to the
Second Credit Agreement
Exhibit R - Form of Opinion of Counsel to the Loan Parties regarding Amendment No. 1 to the
Existing Credit Agreement
</TABLE>
AMENDMENT NO. 6 TO STOCKHOLDERS AGREEMENT
AMENDMENT NO. 6, dated as of December 31, 1997 to the Stockholders
Agreement, dated as of April 30, 1996, as amended (the "Stockholders
Agreement"), by and among AMF BOWLING, INC., a Delaware corporation formerly
named AMF Holdings Inc. ("Bowling"), GS CAPITAL PARTNERS II, L.P., a Delaware
limited partnership, GS CAPITAL PARTNERS II OFFSHORE, L.P., a Cayman Islands
exempt limited partnership, GOLDMAN SACHS & CO. VERWALTUNGS GMBH, a corporation
recorded in the Commercial Register Frankfurt, as nominee for GS Capital
Partners II German C.L.P., THE GOLDMAN SACHS GROUP, L.P., a Delaware limited
partnership, STONE STREET FUND 1995, L.P., a Delaware limited partnership, STONE
STREET 1996, L.P., a Delaware limited partnership, BRIDGE STREET FUND 1995,
L.P., a Delaware limited partnership, BRIDGE STREET FUND 1996, L.P., a Delaware
limited partnership, BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
a Delaware limited partnership, BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P., a
Delaware limited partnership, BLACKSTONE FAMILY INVESTMENT PARTNERSHIP, L.P., a
Delaware limited partnership, BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II, L.P.,
a Delaware limited partnership, KELSO INVESTMENT ASSOCIATES V, L.P., a Delaware
limited partnership, KELSO EQUITY PARTNERS V, L.P., a Delaware limited
partnership, BAIN CAPITAL FUND V, L.P., a Delaware limited partnership, BAIN
CAPITAL FUND V-B, L.P., a Delaware limited partnership, BCIP ASSOCIATES, a
Delaware general partnership, BCIP TRUST ASSOCIATES, L.P., a Delaware limited
partnership, CITICORP NORTH AMERICA, INC., a Delaware corporation, CHARLES M.
DIKER, the management investors listed in Schedule I to the Stockholders
Agreement, as such Schedule I may be amended from time to time (collectively,
the "Management Investors") and all other parties thereto.
WHEREAS, Bowling's Certificate of Incorporation was amended on October
29, 1997, among other things, to change the name from AMF Holdings Inc. to AMF
Bowling, Inc.;
WHEREAS, Charles M. Diker desires to make certain dispositions of the
Common Stock of Bowling to members of his family and certain affiliated entities
(the "Diker Transferees") in the respective amounts set forth on the signature
pages hereto underneath the signature of each Diker Transferee; and
WHEREAS, pursuant to and in accordance with Section 3.9 of the
Stockholders Agreement, Holdings wishes to amend the Stockholders Agreement on
the terms contained herein;
NOW, THEREFORE, the Stockholders Agreement is amended as follows:
1. New Holders. The Stockholders Agreement is hereby amended to include
the Diker Transferees listed on the signature pages hereto as parties to the
Stockholders Agreement and the Diker Transferees agree to be bound by all of the
applicable terms and conditions of the Stockholders Agreement.
2. Governing Law. This Amendment shall be governed and construed and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflicts of laws thereof.
3. Reaffirmation. In all respects not inconsistent with the terms and
provisions of this Amendment No. 6, the Stockholders Agreement shall continue to
be in full force and effect in accordance with the terms and conditions thereof,
and is hereby ratified, adopted, approved and confirmed. From and after the date
hereof, each reference to the Stockholders Agreement in any other instrument or
document shall be deemed a reference to the Stockholders Agreement as amended
hereby, unless the context otherwise requires.
4. No Waiver. The execution, delivery and performance of this Amendment
No. 6 shall not operate as a waiver of any condition, power, remedy or right
exercisable in accordance with the Stockholders Agreement, and shall not
constitute a waiver of any provision of the Stockholders Agreement, except as
expressly provided herein.
IN WITNESS WHEREOF, AMF Bowling, Inc. has caused this Amendment No. 6
to be duly executed, as of the date first written above.
AMF BOWLING, INC.
By: /s/ Douglas J. Stanard
---------------------------------------
Name: Douglas J. Stanard
Title: President & CEO
The undersigned, by signing his, her or its name hereto, hereby agrees
to be bound by all of the terms and conditions of the Stockholders Agreement as
amended; this signature page also being deemed to be a counterpart to the
Stockholders Agreement.
Dated as of the date first written above.
VALERIE CHARLES DIKER FUND INC.
By: /s/ Charles Diker
-----------------------------------------
Name: Charles Diker
Title: President
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
Number of Shares: 11,054.71
----------------------------------------
Valerie Diker
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
Number of Shares: 33,164.14
CHARLES DIKER & VALERIE DIKER
TRUSTEES FOR PATRICIA HELEN DIKER
AUG. 31, 1987 TRUST
By: /s/ Charles Diker
-----------------------------------------
Charles Diker, Trustee
By:
-----------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
Number of Shares: 11,054.71
CHARLES DIKER & VALERIE DIKE
TRUSTEES FOR MARK NORMAN DIKER
AUG. 4, 1987 TRUST
By:
-----------------------------------------
Charles Diker, Trustee
By: /s/ Valerie Diker
-----------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
Number of Shares: 11,054.71
CHARLES DIKER & VALERIE DIKER
TRUSTEES FOR BRUCE DANIEL DIKER
OCT. 1, 1987 TRUST
By:
-----------------------------------------
Charles Diker, Trustee
By: /s/ Valerie Diker, Trustee
-----------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
Number of Shares: 11,054.71
AMENDMENT NO. 7 TO STOCKHOLDERS AGREEMENT
AMENDMENT NO. 7, dated as of January 1, 1998 to the Stockholders
Agreement, dated as of April 30, 1996, as amended (the "Stockholders
Agreement"), by and among AMF BOWLING, INC., a Delaware corporation formerly
named AMF Holdings Inc. ("Bowling"), GS CAPITAL PARTNERS II, L.P., a Delaware
limited partnership, GS CAPITAL PARTNERS II OFFSHORE, L.P., a Cayman Islands
exempt limited partnership, GOLDMAN SACHS & CO. VERWALTUNGS GMBH, a corporation
recorded in the Commercial Register Frankfurt, as nominee for GS Capital
Partners II German C.L.P., THE GOLDMAN SACHS GROUP, L.P., a Delaware limited
partnership, STONE STREET FUND 1995, L.P., a Delaware limited partnership, STONE
STREET 1996, L.P., a Delaware limited partnership, BRIDGE STREET FUND 1995,
L.P., a Delaware limited partnership, BRIDGE STREET FUND 1996, L.P., a Delaware
limited partnership, BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
a Delaware limited partnership, BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P., a
Delaware limited partnership, BLACKSTONE FAMILY INVESTMENT PARTNERSHIP L.P., a
Delaware limited partnership, BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II, L.P.,
a Delaware limited partnership, KELSO INVESTMENT ASSOCIATES V, L.P., a Delaware
limited partnership, KELSO EQUITY PARTNERS V, L.P., a Delaware limited
partnership, BAIN CAPITAL FUND V, L.P., a Delaware limited partnership, BAIN
CAPITAL FUND V-B, L.P., a Delaware limited partnership, BCIP ASSOCIATES, a
Delaware general partnership, BCIP TRUST ASSOCIATES, L.P., a Delaware limited
partnership, CITICORP NORTH AMERICA, INC., a Delaware corporation, CHARLES M.
DIKER, the management investors listed in Schedule I to the Stockholders
Agreement, as such Schedule I may be amended from time to time (collectively,
the "Management Investors") and all other parties thereto.
WHEREAS, the Board of Directors of Bowling has recommended that the
Stockholders Agreement be amended in certain respects; and
WHEREAS, pursuant to and in accordance with Section 3.9 of the
Stockholders Agreement, Bowling and Stockholders holding a majority of the
outstanding shares of Common Stock of Bowling wish to amend the Stockholders
Agreement on the terms contained herein, it being understood that such
amendments do not affect the rights and obligations of any Stockholder
differently from any other Stockholder or adversely affect the Management
Investors (or a group thereof as a class);
NOW, THEREFORE, the Stockholders Agreement is amended as follows:
1. Defined Terms. Capitalized terms used and not defined herein shall
have the meanings assigned to them in the Stockholders Agreement.
2. Name of Company. Unless the context otherwise requires, when used in
the Stockholders Agreement, references to "AMF Holdings Inc." and "Holdings"
shall be deemed to be references to "AMF Bowling, Inc." and "Bowling," as the
case may be.
3. Amendment to Section 1.1.6. The last sentence of Section 1.1.6 of
the Stockholders Agreement shall be deleted and the following shall be
substituted therefor:
"No member of the Board who is an employee of Bowling or an
employee, partner or stockholder of GSCP shall receive any
compensation or benefit (other than reimbursement of
reasonable out-of-pocket expenses contemplated by the
preceding sentence) from Bowling or any subsidiary of Bowling
for serving as a member of the Board or for performing his or
her duties as a director of Bowling; each other member of the
Board shall be entitled to receive a fee of $2,000 for each
Board meeting attended in person and a fee of $1,000 for each
meeting of the Audit Committee, Compensation Committee
(including any Subcommittee thereof), Executive Committee or
other standing committee of the Board attended in person."
4. Amendment to Section 1.1.7. The first sentence of Section 1.1.7 of
the Stockholders Agreement shall be deleted and the following shall be
substituted therefor:
"At all times during the term of this Agreement there shall be
an executive committee of the Board (the "Executive
Committee") which shall consist of three members, two of whom
shall be a GSCP Director and the other of whom shall be the
President and Chief Executive Officer of Bowling."
5. Amendments to Section 1.1.8. The reference to "2,877,151 shares" in
clause (y)(ii) of Section 1.1.8(b) of the Stockholders Agreement shall be
deleted and "4,877,151 shares" shall be substituted therefor.
6. Governing Law. This Amendment shall be governed and construed and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflicts of laws thereof.
7. Reaffirmation. In all respects not inconsistent with the terms and
provisions of this Amendment No. 7, the Stockholders Agreement shall continue to
be in full force and effect in accordance with the terms and conditions thereof,
and is hereby ratified, adopted, approved and confirmed. From and after the date
hereof, each reference to the Stockholders Agreement in any other instrument or
document shall be deemed a reference to the Stockholders Agreement as amended
hereby, unless the context otherwise requires.
8. No Waiver. The execution, delivery and performance of this Amendment
No. 7 shall not operate as a waiver of any condition, power, remedy or right
exercisable in accordance with the Stockholders Agreement, and shall not
constitute a waiver of any provision of the Stockholders Agreement, except as
expressly provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7
to be duly executed as of the date first written above.
AMF BOWLING, INC.
By: /s/ Douglas J. Stanard
---------------------------------------
Name: Douglas J. Stanard
Title: President & CEO
Address: AMF Bowling, Inc.
8100 AMF Drive
Richmond, Virginia 23111
Telecopier No.: (804) 730-4327
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P.
General Partner
By: GS Advisors Inc., its General
Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
<PAGE>
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: GS Advisors II (Cayman), L.P.
General Partner
By: GS Advisors II, Inc., its
General Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
GOLDMAN, SACHS & CO. VERWALTUNGS GMBH
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Managing Director
By: /s/ David J. Greenwald
---------------------------------------
Name: David J. Greenwald
Title: Registered Agent
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
<PAGE>
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Partner
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
STONE STREET FUND 1995, L.P.
By: Stone Street Value Corp., its
General Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Vice President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
STONE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its
General Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Vice President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
BRIDGE STREET FUND 1995, L.P.
By: Stone Street Value Corp., its
Managing General Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Vice President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
BRIDGE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its
Managing General Partner
By: /s/ Richard A. Friedman
---------------------------------------
Name: Richard A. Friedman
Title: Vice President
Address: c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: David J. Greenwald
Telecopier No.: (212) 357-5505
<PAGE>
BLACKSTONE CAPITAL PARTNERS II MERCHANT
BANKING FUND L.P.
By: Blackstone Management Associates II
L.L.C., its General Partner
By: /s/ Howard A. Lipson
---------------------------------------
Name: Howard A. Lipson
Title: Member
Address: 345 Park Avenue
19th Floor
New York, NY 10154
Attn: Howard A. Lipson
Telecopier No.: (212) 754-8725
BLACKSTONE OFFSHORE CAPITAL PARTNERS
II L.P.
By: Blackstone management Associates
II L.L.C., its General Partner
By: /s/ Howard A. Lipson
---------------------------------------
Name: Howard A. Lipson
Title: Member
Address: 345 Park Avenue
19th Floor
New York, NY 10154
Attn: Howard A. Lipson
Telecopier No.: (212) 754-8725
<PAGE>
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP L.P.
By: Blackstone Management Associates
II L.L.C., its General Partner
By: /s/ Howard A. Lipson
---------------------------------------
Name: Howard A. Lipson
Title: Member
Address: 345 Park Avenue
19th Floor
New York, NY 10154
Attn: Howard A. Lipson
Telecopier No.: (212) 754-8725
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II, L.P.
By: Blackstone Management Associates
II L.L.C., its General Partner
By: /s/ Howard A. Lipson
---------------------------------------
Name: Howard A. Lipson
Title: Member
Address: 345 Park Avenue
19th Floor
New York, NY 10154
Attn: Howard A. Lipson
Telecopier No.: (212) 754-8725
<PAGE>
KELSO INVESTMENT ASSOCIATES V, L.P.
By: Kelso Partners V, L.P., its
General Partner
By: /s/ Thomas R. Wall, IV
---------------------------------------
Name: Thomas R. Wall, IV
Title: General Partner
Address: 320 Park Avenue, 24th Floor
New York, NY 10022
Attn: James J. Connors, II
Telecopier No.: (212) 223-2379
KELSO EQUITY PARTNERS V, L.P.
By: /s/ Thomas R. Wall, IV
---------------------------------------
Name: Thomas R. Wall, IV
Title:General Partner
Address: 320 Park Avenue, 24th Floor
New York, NY 10022
Attn: James J. Connors, II
Telecopier No.: (212) 223-2379
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P., its
General Partner
By: Bain Capital Investors V, Inc., its
General Partner
By: /s/ Paul B. Edgerley
---------------------------------------
Name: Paul B. Edgerley
Title: Managing Director
<PAGE>
Address: 2 Copley Plaza
Boston, MA 02116
Attn: Paul Edgerley
Telecopier No.: (617) 572-3000
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P., its
General Partner
By: Bain Capital Investors V, Inc., its
General Partner
By: /s/ Paul B. Edgerley
---------------------------------------
Name: Paul B. Edgerley
Title: Managing Director
Address: 2 Copley Plaza
Boston, MA 02116
Attn: Paul Edgerley
Telecopier No.: (617) 572-3000
BCIP ASSOCIATES
By: /s/ Paul B. Edgerley
---------------------------------------
Name: Paul B. Edgerley
Title: A General partner
Address: 2 Copley Plaza
Boston, MA 02116
Attn: Paul Edgerley
Telecopier No.: (617) 572-3000
BCIP TRUST ASSOCIATES, L.P.
By: /s/ Paul B. Edgerley
---------------------------------------
Name: Paul B. Edgerley
Title: General Partner
Address: 2 Copley Plaza
Boston, MA 02116
Attn: Paul Edgerley
Telecopier No.: (617) 572-3000
CITICORP NORTH AMERICA, INC.
By: /s/ Jeroen Fikke
---------------------------------------
Name: Jeroen Fikke
Title: Vice President
Address: 399 Park Avenue, 6th Floor
New York, NY 10043
Attn: Jeroen Fikke
Telecopier No.: (212) 559-0292
VALERIE CHARLES DIKER FUND INC.
By: /s/ Charles Diker
---------------------------------------
Name: Charles Diker
Title: President
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
<PAGE>
/s/ Valerie Diker
---------------------------------------
Valerie Diker
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
CHARLES DIKER & VALERIE DIKER
TRUSTEES FOR PATRICIA HELEN DIKER
AUG. 31, 1987 TRUST
By: /s/ Charles Diker
---------------------------------------
Charles Diker, Trustee
By: /s/ Valerie Diker
---------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
CHARLES DIKER & VALERIE DIKE
TRUSTEES FOR MARK NORMAN DIKER
AUG. 4, 1987 TRUST
By: /s/ Charles Diker
---------------------------------------
Charles Diker, Trustee
By: /s/ Valerie Diker
---------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
CHARLES DIKER & VALERIE DIKER
TRUSTEES FOR BRUCE DANIEL DIKER
OCT. 1, 1987 TRUST
By: /s/ Charles Diker
---------------------------------------
Charles Diker, Trustee
By: /s/ Valerie Diker
---------------------------------------
Valerie Diker, Trustee
Address: c/o Charles Diker
Charles Diker Associates
One New York Plaza, 31st Floor
New York, New York 10004
Telecopier No.: (212) 559-0292
/s/ Charles M. Diker
----------------------------------------
Charles M. Diker
Charles M. Diker Associates
One New York Plaza, 31st Floor
New York, NY 10004
Telecopier No.: (212) 908-0176
/s/ Douglas J. Stanard
----------------------------------------
Douglas J. Stanard
2206 Monument Avenue
Richmond, VA 23220
Telecopier No.: (804) 359-0175
/s/ Stephen E. Hare
----------------------------------------
Stephen E. Hare
101 Lockgreen Place
Richmond, VA 23226
EXHIBIT 10.17
AMF Holdings Inc.
Registration Rights Agreement
Amendment No. 5
AGREEMENT NOT TO EXERCISE REGISTRATION RIGHTS
The undersigned party to the Registration Rights Agreement (the "Agreement"),
dated as of April 30, 1996, by and among AMF Holdings Inc. (subsequently
renamed AMF Bowling, Inc., "AMF Bowling") and the Stockholders (as defined
therein), as amended, hereby agrees not to exercise any and all of its
rights under Section 1.3 of the Agreement with respect to the currently
contemplated initial public offering of common stock, par value $.01 per
share, of AMF Bowling.
This waiver shall terminate automatically and be of no further force and
effect if such currently contemplated initial public offering is not
consummated on or prior to December 31, 1997.
Dated: September 30, 1997
CITICORP NORTH AMERICA, INC.
By:
----------------------------------
Jeroen Fikke, Vice President
-------------------------------------
Charles M. Diker
/s/ Douglas J. Stanard
-------------------------------------
Douglas J. Stanard
/s/ Stephen E. Hare
-------------------------------------
Stephen E. Hare
CITICORP NORTH AMERICA, INC.
By:
---------------------------------
Jeroen Fikke, Vice President
/s/ Charles M. Diker
-------------------------------------
Charles M. Diker
/s/ Douglas J. Stanard
-------------------------------------
Douglas J. Stanard
/s/ Stephen E. Hare
-------------------------------------
Stephen E. Hare
GS: CAPITAL PARTNERS, II, L.P.
By: GS Advisors, L.P., General Partner
By: GS Advisors, Inc., its General Partner
By: /s/ Richard A. Friedman
----------------------------------
Richard A. Friedman, President
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: GS Advisors II (Cayman), General Partner
By: GS Advisors II, Inc., its General
Partner
By: /s/ Richard A. Friedman
-----------------------------------
Richard A. Friedman, President
GOLDMAN, SACHS & CO VERWALTUNGS GmbH
By: /s/ Richard A. Friedman
-----------------------------------
Richard A. Friedman, Managing Director
By: /s/ David J. Greenwald
-----------------------------------
David J. Greenwald, Registered Agent
STONE STREET FUND 1995, L.P.
By: Stone Street Value Corp., its General Partner
By: /s/ Richard A. Friedman
---------------------------------------------
Richard A. Friedman, Vice President
STONE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its General Partner
By: /s/ Richard A. Friedman
---------------------------------------------
Richard A. Friedman, Vice President
BRIDGE STREET FUND 1995, L.P.
By: Stone Street Value Corp., its Managing
General Partner
By: /s/ Richard A. Friedman
--------------------------------------------
Richard A. Friedman, Vice President
BRIDGE STREET FUND 1996, L.P.
By: Stone Street Value Corp., its Managing
General Partner
By: /s/ Richard A. Friedman
-------------------------------------------
Richard A. Friedman, Vice President
BLACKSTONE CAPITAL PARTNERS II MERCHANT
BANKING FUND L.P.
By: Blackstone Management Associates II L.L.C.,
its General Partner
By:
------------------------------------------
Howard A. Lipson, Member
BLACKSTONE OFFSHORE CAPITAL PARTNERS II, L.P.
By: Blackstone Management Associates II, L.L.C.,
its General Partner
By:
------------------------------------------
Howard A. Lipson, Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II, L.P.
By: Blackstone Management Associates II, L.L.C.,
its General Partner
By:
-----------------------------------------
Howard A. Lipson, Member
BRIDGE STEET FUND 1995, L.P.
By: Stone Street Value Corp., its Managing
General Partner
By:
----------------------------------------
Richard A. Friedman, Vice President
BRIDGE STREET FUND 1996, L.P.
By: Stone Street Value Corp., its Managing
General Partner
By:
---------------------------------------
Richard A. Friedman, Vice President
BLACKSTONE CAPITAL PARTNERS II MERCHANT
BANKING FUND L.P.
By: Blackstone Management Associates II
L.L.C., its General Partner
By: /s/ Howard A. Lipson
--------------------------------------
Howard A. Lipson, Member
BLACKSTONE OFFSHORE CAPITAL PARTNERS
II, L.P.
By: Blackstone Management Associates II,
L.L.C., its General Partner
By: /s/ Howard A. Lipson
-------------------------------------
Howard A. Lipson, Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II, L.P.
By: Blackstone Management Associatees
II, L.L.C., its General Partner
By: /s/ Howard A. Lipson
-------------------------------------
Howard A. Lipson, Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP L.P.
By: Blackstone Management Associates II,
L.L.C., its General Partner
By: /s/ Howard A. Lipson
-------------------------------------
Howard A. Lipson, Member
KELSO INVESTMENT ASSOCIATES V., L.P.
By: Kelso Partners V, L.P., its General
Partner
By: /s/ Thomas R. Wall IV
------------------------------------
Thomas R. Wall IV, General Partner
KELSO EQUITY PARTNERS V, L.P.
By: /s/ Thomas R. Wall IV
------------------------------------
Thomas R. Wall IV, General Partner
BAIN CAPITAL FUND V., L.P.
By: Bain Capital Partners, V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By:
---------------------------------
Paul B. Edgerly
Managing Director
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.
its General Partner
By:
--------------------------------
Paul B. Edgerly
Managing Director
BCIP ASSOCIATES
By:
-----------------------------------
Paul B. Edgerly, a General Partner
BCIP TRUST ASSOCIATES, L.P.
By:
---------------------------------
Paul B. Edgerly, a General Partner
KELSO INVESTMENT ASSOCIATES V., L.P.
By: Kelso Partners V, L.P.,
its General Partner
By: /s/ Thomas R. Wall IV
-----------------------------------
Thomas R. Wall IV, General Partner
KELSO EQUITY PARTNERS V, L.P.
By: /s/ Thomas R. Wall IV
---------------------------------
Thomas R. Wall IV, General Partner
BAIN CAPITAL FUND V., L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.,
its General Partner
By: /s/ Paul B. Edgerly
---------------------------------
Paul B. Edgerly
Managing Director
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.,
its General Partner
By: Bain Capital Investors V, Inc.
its General Partner
By: /s/ Paul B. Edgerly
---------------------------------
Paul B. Edgerly
Managing Director
BCIP ASSOCIATES
By: /s/ Paul B. Edgerly
---------------------------------
Paul B. Edgerly, a General Partner
BCIP TRUST ASSOCIATES, L.P.
By: /s/ Paul B. Edgerly
---------------------------------
Paul B. Edgerly, a General Partner
CITICORP NORTH AMERICA, INC.
By: /s/ Charles Foster
----------------------------------
Charles Foster
Vice President & Attorney-In-Fact
/s/
-------------------------------------
Charles M. Diker
/s/ Douglas J. Stanard
-------------------------------------
Douglas J. Stanard
/s/ Stephen E. Hare
-------------------------------------
Stephen E. Hare
AMF BOWLING, INC.
1998 STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions
The purpose of the Plan is to give the Company and its Affiliates (as
defined below) a competitive advantage in attracting, retaining and motivating
employees, and to provide the Company and its subsidiaries with a stock plan
providing incentives linked to the financial results of the Company and
increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Affiliate" of a Person means a Person controlled by,
controlling or under common control with such Person.
(b) "Award" means a Stock Appreciation Right, Stock Option or
Restricted Stock.
(c) "Award Agreement" means a Restricted Stock Agreement or Option
Agreement. An Award Agreement may consist of provisions of an
employment agreement.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" shall mean (1) the acquisition by a Person
or a group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) of a majority of the outstanding voting
stock of the Company (but not including any acquisition by
GSCP or its Affiliates), or (2) the sale of or other
disposition (other than by way of merger or consolidation) of
all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, to any Person or group (as
defined above). For all purposes of the Plan, the sale of one
of the Company's two main businesses (i.e., (x) bowling
products and related activities and (y) operation of bowling
centers) is not a Change of Control.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(g) "Commission" means the Securities and Exchange Commission or
any successor agency.
(h) "Committee" means the Compensation Committee of the Board,
provided that, if any member of the Compensation Committee
does not or would not qualify as both an outside director for
purposes of Section 162(m) of the Code and a non-employee
director for purposes of Rule 16b-3, the Board shall designate
the remaining members of the Compensation Committee (but not
less than two members) as a subcommittee of the Compensation
Committee to act as the Committee for purposes of the Plan.
(i) "Common Stock" means common stock, par value $0.01 per share,
of the Company.
(j) "Company" means AMF Bowling, Inc., a Delaware corporation.
(k) "Disability" means, as to an Incentive Stock Option, a
disability within the meaning of Section 22(e)(3) of the Code.
As to all other Awards, "Disability" shall mean permanent and
total disability as determined under procedures established by
the Committee for purposes of the Plan, unless otherwise
defined in an applicable Restricted Stock Agreement or Option
Agreement.
(l) "Employment" means, unless otherwise defined in an applicable
Restricted Stock Agreement or Option Agreement, employment
with the Company or any of its Affiliates.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(n) "Fair Market Value" of the Common Stock means, as of any given
date, the mean between the highest and lowest reported sales
prices of the Common Stock on the New York Stock Exchange or,
if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or, if
not so listed, on NASDAQ. If such sales prices are not so
available, the Fair Market Value of the Common Stock shall be
determined by the Committee in good faith.
(o) "GSCP" means, collectively, GS Capital Partners II, L.P., The
Goldman Sachs Group and certain other partnerships and
entities, as defined in the Stockholders Agreement.
(p) "Incentive Stock Option" means any Stock Option designated as,
and qualified as, an "incentive stock option" within the
meaning of Section 422 of the Code.
<PAGE>
(q) "Mature Shares" means shares of Common Stock for which the
holder thereof has good title, free and clear of all liens and
encumbrances and which such holder either (1) has held for at
least six months, or (2) has purchased on the open market.
(r) "Nonqualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
(s) "Option Agreement" means an agreement setting forth the terms
and conditions of an Award of Stock Options and, if
applicable, Stock Appreciation Rights.
(t) "Participant" means any employee of the Company or an
Affiliate who receives an Award under the Plan.
(u) "Person" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, government (or
any department or agency thereof) or other entity.
(v) "Plan" means the AMF Bowling, Inc. 1998 Stock Incentive Plan,
as set forth herein and as hereinafter amended from time to
time.
(w) "Restricted Stock" means an award granted under Section 7.
(x) "Restricted Stock Agreement" means an agreement setting forth
the terms and conditions of an Award of Restricted Stock.
(y) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16 of the Exchange Act, as amended
from time to time.
(z) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor thereto.
(aa) "Stock Appreciation Right" means a right granted under Section
6.
(bb) "Stock Option" means an option granted under Section 5.
(cc) "Stockholders Agreement" means the Stockholders Agreement,
dated as of April 30, 1996, among the Company and certain of
its stockholders, as amended from time to time.
(dd) "Taxable Year" means the fiscal year period used by the
Company for reporting taxes or income under the Code.
Certain other terms are defined elsewhere in this Plan.
SECTION 2. Administration
(a) The Plan shall be administered by the Committee. Among other
things, the Committee shall have the authority, subject to the terms of the
Plan, to:
(i) select, pursuant to Section 4, the employees to whom
Awards may from time to time be granted;
(ii) determine whether and to what extent Incentive Stock
Options, Nonqualified Stock Options, Stock
Appreciation Rights and Restricted Stock or any
combination thereof are to be granted hereunder;
(iii)determine the time or times when an Award shall be
granted, and the number of shares of Common Stock to
be covered by each Award granted hereunder;
(iv) determine the terms and conditions of any Award
granted hereunder (including, but not limited to, the
option price, any vesting conditions, restrictions or
limitations (which may be related to the performance
of the Participant, the Company or any of its
Affiliates)) and any acceleration of vesting or
waiver of forfeiture regarding any Award and the
shares of Common Stock relating thereto, based on
such factors as the Committee shall determine;
(v) modify, amend or adjust the terms and conditions of
any Award, at any time or from time to time;
(vi) determine to what extent and under what circumstances
Common Stock and other amounts payable with respect
to an Award shall be deferred;
(vii)determine under what circumstances an Award may be
settled in cash or Common Stock under Section 5(k);
(viii) adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it
shall from time to time deem advisable;
<PAGE>
(ix) interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any agreement
relating thereto);
(x) determine any additional requirements, conditions,
restrictions or limitations relating to Awards that
the Committee deems appropriate; and
(xi) otherwise supervise the administration of the Plan.
(b) The Committee may, in its discretion, delegate to the Chief
Executive Officer of the Company the authorities described in subparagraphs (i)
through (iv) of paragraph (a) above, except to the extent that such a delegation
would prevent compliance with Rule 16b-3, Section 162(m) or any other section of
the Code, or other applicable law or regulation. Actions taken by the Chief
Executive Officer pursuant to such a delegation of authority shall be subject to
ratification by the Committee.
(c) The Committee may act only by a majority of its members then in
office, except that the members thereof may authorize any one or more of their
number or any officer of the Company to execute and deliver documents on behalf
of the Committee. Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation, construction or
application of the Plan or an Award (or related Award Agreement) granted
hereunder shall be determined by the Committee. Any determination made by the
Committee pursuant to the provisions of the Plan with respect to the Plan, any
Award or Award Agreement shall be made in the sole discretion of the Committee
and, with respect to an Award, at the time of the grant of the Award or, unless
in contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee shall be final and binding on all persons,
including the Company and the Participants.
SECTION 3. Common Stock Subject to Plan
(a) The total number of shares of Common Stock reserved and available
for grant under the Plan shall be two million (2,000,000). Shares subject to an
Award under the Plan may be authorized and unissued shares or may be treasury
shares. Shares of Common Stock that have not been issued under the AMF Bowling,
Inc. 1996 Stock Incentive Plan (the "1996 Plan"), and shares which are subject
to awards under the 1996 Plan that expire or otherwise terminate, may be
allocated to Awards under this Plan. No more than two hundred thousand (200,000)
shares may be allocated to the Awards that are granted to any Participant during
any single Taxable Year.
(b) If any shares of Restricted Stock are forfeited, or if any Stock
Option (and related Stock Appreciation Right, if any) expires or otherwise
terminates without being exercised, or if any Stock Appreciation Right is
exercised for cash, the shares subject to such Awards shall again be available
for distribution in connection with Awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, spinoff, stock dividend, stock split, reverse stock split,
extraordinary distribution with respect to the Common Stock or other change in
corporate structure affecting the Common Stock, the Committee or Board may make
such substitution or adjustment in the aggregate number and kind of shares
reserved for issuance under the Plan, in the number, kind and Exercise Price (as
defined in Section 5) of shares subject to outstanding Stock Options and Stock
Appreciation Rights, in the number and kind of shares subject to Restricted
Stock Awards, and/or such other equitable substitution or adjustments as it may
determine to be fair and appropriate in its sole discretion; provided, however,
that the number of shares subject to any Award shall always be a whole number.
Any such adjusted Exercise Price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right
associated with any Stock Option. Notwithstanding anything in the Plan to the
contrary, the Committee may take the foregoing actions without the consent of
any Participant, and the Committee's determination shall be conclusive and
binding on all persons for all purposes.
SECTION 4. Eligibility
Employees of the Company and its Affiliates who the Committee
determines to have directly affected, or who are expected to directly affect,
the management, growth and profitability of the Company and its Affiliates shall
be eligible to be granted Awards under the Plan. The Committee shall have the
power and complete discretion to select eligible employees to receive Awards and
to determine for each eligible employee the nature of the Award and the terms
and conditions of the Award, unless delegated to the Chief Executive Officer of
the Company pursuant to Section 2(b).
<PAGE>
SECTION 5. Stock Options
(a) The Committee shall have the authority to grant any eligible
employee Incentive Stock Options, Nonqualified Stock Options or both types of
Stock Options (in each case with or without Stock Appreciation Rights). To the
extent that any Stock Option is not designated as an Incentive Stock Option, or
even if so designated it does not qualify as an Incentive Stock Option, it shall
constitute a Nonqualified Stock Option.
(b) Stock Options shall be evidenced by Option Agreements, which shall
include such terms and provisions as the Committee may determine from time to
time. An Option Agreement shall expressly indicate whether it is intended to be
an agreement for an Incentive Stock Option or a Nonqualified Stock Option. The
grant of a Stock Option shall occur on the date the Committee by resolution
selects an employee to receive the grant of a Stock Option, determines the
number of shares of Common Stock to be subject to such Stock Option to be
granted to such employee and specifies the terms and provisions of the Stock
Option, or on such other date as the Committee may determine. The Company shall
notify a Participant of any grant of a Stock Option, and a written Option
Agreement shall be duly executed and delivered by the Company to the
Participant. Such agreement shall become effective upon execution by the Company
and the Participant.
(c) Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any Incentive
Stock Option under such Section 422 of the Code.
(d) Stock Options shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(i) Exercise Price. The price per share of Common Stock
purchasable under a Stock Option shall be determined
by the Committee and set forth in the Option
Agreement (the "Exercise Price"). The Exercise Price
for Common Stock covered under a Nonqualified Stock
Option shall in no event be less than 90% of the Fair
Market Value of such Common Stock on the date of
grant. The Exercise Price for Common Stock covered
under an Incentive Stock Option shall in no event be
less than 100% of the Fair Market Value of such
Common Stock on the date of grant (or 110% of Fair
Market Value in the case of a grant to a 10%
shareholder (as defined in Section 422 of the Code)).
(ii) Option Term. The term of each Stock Option shall be
fixed by the Committee. Absent any such term being
fixed by the Committee, pursuant to an Option
Agreement or otherwise, such term shall be ten years.
Notwithstanding the foregoing, the term for an
Incentive Stock Option shall be no longer than ten
years (or five years in the case of a grant to a 10%
shareholder (as defined in Section 422 of the Code)).
(iii)Exercisability. Except as otherwise provided herein,
Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as
shall be determined by the Committee. If the
Committee provides that any Stock Option is
exercisable only in installments, the Committee may
at any time waive such installment exercise
provisions, in whole or in part, based on such
factors as the Committee may determine. In addition,
the Committee may at any time accelerate the
exercisability of any Stock Option.
(iv) Method of Exercise. Subject to the provisions of this
Section 5, vested Stock Options may be exercised, in
whole or in part, at any time during the option term
by giving written notice of exercise to the Company
specifying the number of shares of Common Stock
subject to the Stock Option to be purchased.
(e) Notice of exercise of a vested Stock Option shall be accompanied by
payment in full of the Exercise Price by certified or bank check or such other
instrument as the Company may accept. If authorized under the Participant's
Option Agreement or if otherwise approved by the Committee, payment in full or
in part may also be made in the form of Mature Shares already owned by the
Participant of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock Option
is exercised). In the case of an Incentive Stock Option the right to make a
payment in the form of already owned Mature Shares of the same class as the
Common Stock subject to the Stock Option may be authorized only at the time the
Stock Option is granted.
(f) If authorized under the Participant's Award Agreement or if
otherwise approved by the Committee, payment for any shares subject to a Stock
Option may also be made by (i) delivering a properly executed exercise notice to
the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
Exercise Price, and the amount of any federal, state, local or foreign
withholding taxes, or (ii) instructing the Committee to withhold a number of
such shares having a Fair Market Value on the date of exercise equal to
<PAGE>
the aggregate Exercise Price of such Stock Option. The Company may enter
into agreements for coordinated procedures with one or more brokerage
firms to facilitate the method of exercise described in clause (i) above.
(g) No shares of Common Stock shall be issued until full payment
therefor has been made. Except as otherwise provided in the Stockholders
Agreement or the applicable Option Agreement, subject to a Participant's
compliance with Section 12(a) hereof, a Participant shall have all of the rights
of a stockholder of the Company holding the class or series of Common Stock that
is subject to such Stock Option (including, if applicable, the right to vote the
shares and the right to receive dividends and distributions), when the
Participant has given written notice of exercise, has paid in full for such
shares and, if requested, has given the representations referred to in Section
12(c).
(h) Stock Options shall not be transferable by Participants other than
(i) by will or by the laws of descent and distribution, or (ii) in the case of a
Nonqualified Stock Option, pursuant to a qualified domestic relations order (as
defined in the Employee Retirement Income Security Act of 1974, as amended). All
Stock Options shall be exercisable, subject to the terms of the Plan, during the
Participant's lifetime only by the Participant or by the legal representative of
the Participant or, in the case of a Nonqualified Stock Option, the
Participant's alternate payee pursuant to a qualified domestic relations order.
The term "Participant" includes the estate of the Participant or the legal
representative of the Participant named in the Option Agreement and any person
to whom a Stock Option is transferred by will or the laws of descent and
distribution or, in the case of a Nonqualified Stock Option, the alternate payee
under a qualified domestic relations order; provided, however, that references
herein to Employment of a Participant or termination of Employment of a
Participant shall continue to refer to the Employment or termination of
Employment of the applicable grantee of an Award hereunder. Notwithstanding the
foregoing, the Committee may in its discretion grant Nonqualified Stock Options
that are transferable by a Participant under circumstances in addition to those
specified above.
(i) Unless otherwise specified in the Participant's Option Agreement,
the Participant shall, upon the Participant's death or when the Participant's
Employment is terminated for any reason:
(i) forfeit all Stock Options that have not previously
vested;
(ii) have three months to exercise the Participant's
vested Stock Options that are vested on the date of
the Participant's termination of Employment if such
termination is for any reason other than the
Participant's death; and
(iii) have one year to exercise the Participant's vested
Stock Options that are vested on the date of death if
the Participant's termination of Employment is due to
the Participant's death.
Any vested Stock Options not exercised within the permissible period of time
shall be forfeited by the Participant.
(j) Notwithstanding any provisions of Section 5(i) to the contrary, the
exercise provisions for Incentive Stock Options shall in all events not be more
liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the
first to occur of (x) ten years from the date of
grant, (y) three months following the date of the
Participant's retirement or termination of Employment
for reasons other than Disability or death, or (z)
one year following the date of the Participant's
termination of Employment on account of Disability or
death.
(ii) An Incentive Stock Option, by its terms, shall be
exercisable in any calendar year only to the extent
that the aggregate Fair Market Value (determined at
the date of grant) of the Common Stock with respect
to which Incentive Stock Options are exercisable for
the first time during the calendar year does not
exceed $100,000 (the "Limitation Amount"). Incentive
Stock Options granted under the Plan and all other
plans of the Company and its Affiliates shall be
aggregated for purposes of determining whether the
Limitation Amount has been exceeded. The Committee
may impose, at the time the Incentive Stock Option is
granted, such conditions on the Incentive Stock
Option as it deems appropriate to ensure that the
foregoing requirement is met. If Incentive Stock
Options that first become exercisable in a calendar
year exceed the Limitation Amount, the excess Stock
Options will be treated as Nonstatutory Stock Options
to the extent permitted by law.
(k) On receipt of written notice of exercise, the Committee may in its
discretion elect to cash out all or any portion of the shares of Common Stock
for which a Stock Option is being exercised by paying the Participant an amount,
in cash or Common Stock, equal to the excess of the Fair Market Value of one
share of Common Stock over the Exercise Price per share times the number of
shares of Common Stock for which the Stock Option is being exercised on the
effective date of such cashout.
<PAGE>
SECTION 6. Stock Appreciation Rights
(a) Stock Appreciation Rights may be granted in conjunction with all or
part of any Stock Option granted under the Plan. In the case of a Nonqualified
Stock Option, such rights may be granted either at or after the time of grant of
such Stock Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of grant of such Stock Option. A Stock Appreciation
Right shall terminate and no longer be exercisable upon the termination or
exercise of the related Stock Option. In either case, the terms and conditions
of a Stock Appreciation Right shall be set forth in the Option Agreement for the
related Stock Option or an amendment thereto.
(b) A Stock Appreciation Right may be exercised by a Participant in
accordance with Section 6(c) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the Participant shall be entitled to receive
an amount determined in the manner prescribed in Section 6(c). Stock Options
which have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(c) Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the
Stock Options to which they relate are exercisable in
accordance with the provisions of Section 5 and this
Section 6; provided, however, that a Stock
Appreciation Right shall not be exercisable during
the first six months of its term by a Participant who
is actually or potentially subject to Section 16(b)
of the Exchange Act, except that this limitation
shall not apply in the event of death or Disability
of the Participant prior to the expiration of the
six-month period;
(ii) upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive an amount
equal to the product of (x) the excess of the Fair
Market Value of one share of Common Stock over the
Exercise Price per share specified in the related
Stock Option times (y) the number of shares in
respect of which the Stock Appreciation Right shall
have been exercised, in cash, shares of Common Stock
or both, with the Committee having the right to
determine the form of payment;
(iii)Stock Appreciation Rights shall be transferable only
with the related Stock Option in accordance with
Section 5(h); and
(iv) upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set
forth in Section 3 on the number of shares of Common
Stock to be issued under the Plan, but only to the
extent of the number of shares covered by the Stock
Appreciation Right at the time of exercise.
SECTION 7. Restricted Stock
The Committee shall determine the employees to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
to be awarded to any employee, the conditions for vesting, the time or times
within which such Awards may be subject to forfeiture and restrictions on
transfer and any other terms and conditions of the Awards (including provisions
(i) relating to placing legends on certificates representing shares of
Restricted Stock, (ii) permitting the Company to require that shares of
Restricted Stock be held in custody by the Company with a stock power from the
owner thereof until restrictions lapse and (iii) relating to any rights to
purchase the Restricted Stock on the part of the Company and its Affiliates), in
addition to those contained in the Stockholders Agreement. The terms and
conditions of Restricted Stock Awards shall be set forth in a Restricted Stock
Agreement, which shall include such terms and provisions as the Committee may
determine from time to time. Except as provided in this Section 7, the
Restricted Stock Agreement, the Stockholders Agreement and any other relevant
agreements, the Participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a stockholder of the Company holding the class or
series of Common Stock that is the subject of the Restricted Stock Award,
including, if applicable, the right to vote the shares and the right to receive
any cash dividends or distributions (but, subject to the third paragraph of
Section 3, not the right to receive non-cash dividends or distributions). If so
determined by the Committee in the applicable Restricted Stock Agreement, cash
dividends and distributions on the class or series of Common Stock that is the
subject of the Restricted Stock Award shall be automatically deferred and
reinvested in additional Restricted Stock, held subject to the vesting of the
underlying Restricted Stock, or held subject to meeting conditions applicable
only to dividends and distributions. Each Participant shall agree at the time
his or her Restricted Stock is granted, and as a condition thereof, to pay to
the Company, or make arrangements
<PAGE>
satisfactory to the Company regarding the payment to the Company of,
applicable withholding taxes. Until such amount has been paid or arrangements
satisfactory to the Company have been made, no stock certificate free of a
legend reflecting the restrictions set forth above shall be issued to such
Participant. As an alternative to making a cash payment to the Company to
satisfy applicable withholding taxes, if the grant so provides, the
Participant may elect to (i) deliver Mature Shares or (ii) have the Company
retain that number of shares of Common Stock that would satisfy all or a
specified portion of the applicable withholding taxes.
<PAGE>
SECTION 8. Tax Offset Bonuses
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the Participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
Participant, for the purpose of assisting the Participant to pay applicable
payroll taxes, all as determined by the Committee, and on such other terms and
conditions as the Committee shall determine.
SECTION 9. Change in Control Provisions
Notwithstanding any other provision of the Plan to the contrary, unless
otherwise provided in the applicable Award Agreement or the Stockholders
Agreement, in the event of a Change in Control:
(a) immediately prior to the occurrence of a Change in Control,
all Stock Options and Stock Appreciation Rights outstanding as
of such date, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent
of the original grant; and
(b) the restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions, fully vested and transferable
to the full extent of the not theretofore forfeited portion of
the original grant.
SECTION 10. Term, Amendment and Termination
(a) The Plan will terminate ten (10) years after the effective date of
the Plan. Awards outstanding as of such date shall not be affected or impaired
by the termination of the Plan.
(b) The Board may amend, alter, or discontinue the Plan, prospectively
or retroactively as it shall deem advisable; provided that, if and to the extent
required by the Code, no change shall be made that increases the total number of
shares of Common Stock reserved for issuance pursuant to Awards granted under
the Plan (except pursuant to Section 3(c)), materially modifies the requirements
as to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan, unless such change is
authorized by the shareholders of the Company. No amendment, alteration or
discontinuation of the Plan shall be made which would impair the rights of any
Participant under an Award theretofore granted without the Participant's
consent. The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall be made which would
impair the rights of any Participant thereunder without the Participant's
consent. Notwithstanding the foregoing the Board may unilaterally amend the Plan
and any Award with respect to a Participant as it deems appropriate to ensure
compliance with Rule 16b-3 and to cause Incentive Stock Options to meet the
requirements of the Code and the regulations thereunder.
SECTION 11. Unfunded Status of Plan
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
SECTION 12. General Provisions
(a) Stockholders Agreement. Unless the Committee determines otherwise,
it shall be a condition to receiving any Award under the Plan that a Participant
become a party to the Stockholders Agreement, and such Participant shall become
a "Management Investor" thereunder.
(b) Awards and Certificates. Shares of Restricted Stock and shares of
Common Stock issuable upon the exercise of a Stock Option or Stock Appreciation
Right (together, "Plan Shares") shall be evidenced in such manner as the
Committee may deem appropriate, including book-entry registration or issuance of
one or more stock certificates. Any certificate issued
<PAGE>
in respect of Plan Shares shall be registered in the name of such Participant
and shall bear appropriate legends referring to the terms, conditions, and
restrictions applicable to such Award, substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms, conditions
and restrictions (including forfeiture) of the AMF Bowling,
Inc. 1998 Stock Incentive Plan and [a Restricted Stock
Agreement] [an Option Agreement] between the issuer and the
registered holder hereof. Copies of such Plan and Agreement
are on file at the offices of AMF Bowling, Inc. [address]."
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and may not be sold or
otherwise disposed of except pursuant to an effective
registration statement under said Act and applicable state
securities laws or an applicable exemption to the registration
requirements of such Act and laws."
Such shares may bear other legends to the extent the Committee or the Board
determines it to be necessary or appropriate, including any required by the
Stockholders Agreement or pursuant to any applicable Restricted Stock Agreement
or Option Agreement. If and when all restrictions expire without a prior
forfeiture of the Plan Shares theretofore subject to such restrictions, new
certificates for such shares shall be delivered to the Participant without the
first legend listed above. The Committee may require that any certificates
evidencing Plan Shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that the Participant deliver a stock power,
endorsed in blank, relating to the Plan Shares.
(c) Representations and Warranties. The Committee may require each
person purchasing or receiving Plan Shares to (i) represent to and agree with
the Company in writing that such person is acquiring the shares without a view
to the distribution thereof and (ii) make any other representations and
warranties that the Committee deems appropriate.
(d) Additional Compensation. Nothing contained in the Plan shall
prevent the Company or any of its Affiliate thereof from adopting other or
additional compensation arrangements for its employees.
(e) No Right of Employment. Adoption of the Plan or grant of any Award
shall not confer upon any employee any right to continued Employment, nor shall
it interfere in any way with the right of the Company or any of its Affiliates
thereof to terminate the Employment of any employee at any time.
(f) Withholding Taxes. No later than the date as of which an amount
first becomes includible in the gross income of a Participant for federal income
tax purposes with respect to any Award under the Plan, such Participant shall
pay to the Company or, if appropriate, any of its Affiliates, or make
arrangements satisfactory to the Committee regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. If approved by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. The Committee may establish such procedures as
it deems appropriate, including making irrevocable elections, for the settlement
of withholding obligations with Common Stock.
(g) Beneficiaries. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid or by
whom any rights of the Participant, after the Participant's death, may be
exercised.
(h) Pooling of Interests. Notwithstanding any other provision of this
Plan, if any right granted pursuant to this Plan would make a Change in Control
transaction ineligible for pooling-of-interests accounting under APB No. 16 that
but for the nature of such grant or grants would otherwise be eligible for such
accounting treatment, the Committee shall have the ability to substitute for the
cash payable pursuant to such grant or grants Common Stock with a Fair Market
Value equal to the cash that would otherwise be payable hereunder.
(i) Governing Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed and enforced in accordance with
the laws of the State of New York without regard to the principles of conflicts
of law thereof.
(j) Compliance with Laws. If any law or any regulation of any
commission or agency having jurisdiction shall require the Company or a
Participant seeking to exercise Stock Options or Stock Appreciation Rights to
take any action with respect to the Plan Shares to be issued upon the exercise
of Stock Options or Stock Appreciation Rights then the date upon which the
Company shall issue or cause to be issued the certificate or certificates for
the Plan Shares shall be postponed until full
<PAGE>
compliance has been made with all such requirements of law or regulation;
provided, that the Company shall use its reasonable efforts to take all
necessary action to comply with such requirements of law or regulation.
Moreover, in the event that the Company shall determine that, in compliance
with the Securities Act or other applicable statutes or regulations, it is
necessary to register any of the Plan Shares with respect to which an exercise
of a Stock Option or Stock Appreciation Right has been made, or to qualify any
such Plan Shares for exemption from any of the requirements of the Securities
Act or any other applicable statute or regulation, no Stock Options or Stock
Appreciation Rights may be exercised and no Plan Shares shall be issued to the
exercising Participant until the required action has been completed;
provided, that the Company shall use its reasonable efforts to take all
necessary action to comply with such requirements of law or regulation.
Notwithstanding anything to the contrary contained herein, neither the Board nor
the members of the Committee owes a fiduciary duty to any Participant in his or
her capacity as such.
SECTION 13. Effective Date of Plan
The Plan shall be effective as of the date it is approved by the Board.
The Plan shall be submitted to the shareholders of the Company for approval.
Until (i) the Plan has been approved by the Company's shareholders, and (ii) the
requirements of any applicable federal or state securities laws have been met,
no Award may be granted unless such Award is contingent on the occurrence of
those events.
EXHIBIT 11.1
AMF BOWLING, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Period Ended Year Ended
December 31, December 31,
1996 (a) 1997
------------ ------------
<S> <C>
Shares
Weighted average number of common shares outstanding 39,713 45,249
============ ============
Net loss before extraordinary items $ (19,484) $ (32,198)
============ ============
Net loss $ (19,484) $ (55,564)
============ ============
Net loss per share before extraordinary items (b) $ (0.49) $ (0.71)
Per share effect of extraordinary items (b) -- (0.52)
------------ ------------
Basic and diluted loss per common share (b) $ (0.49) $ (1.23)
============ ============
</TABLE>
(a) For the period from the inception date of January 12, 1996 which includes
results of operations of the acquired business from May 1, 1996 through
the period ended December 31, 1996.
(b) Outstanding stock options and warrants are not considered as their effect
is antidilutive.
EXHIBIT 21.1
AMF BOWLING,INC.
List of Subsidiary Corporations
Jurisdiction of
Entity Origin
- ------ ------
AMF Group Holdings Inc. Delaware
AMF Bowling Worldwide, Inc. Delaware
AMF Bowling Holdings Inc. Delaware
AMF Bowling Centers Holdings Delaware
AMF Bowling Products, Inc. Virginia
AMF Worldwide Bowling Centers Holdings Inc. Delaware
AMF Bowling Centers, Inc. Virginia
AMF Beverage Company of Oregon, Inc. Oregon
AMF Beverage Company of W. VA., Inc. West Virginia
Bush River Corporation South Carolina
Fair Lanes Texas Concession Co., Inc. Texas
King Louie Lenexa, Inc. Kansas
300, Inc. Texas
AMF Bowling Products International, B.V. Netherlands
American Recreation Centers, Inc. California
Michael Jordan Golf Company, Inc. Delaware
Michael Jordan Golf-Water Tower, Inc. Illinois
Lake Grove Centers, Inc. Virginia
AMF Bowling India Private Ltd. India
AMF Bowling Poland Sp.zo.o. Poland
Broadway Grand Properties California
R.Q.P. Partnership California
Burleigh Recreation, Inc. Wisconsin
AWI No. 1, LLC Delaware
MBI No. 1, LLC Delaware
MJG-O'Hare, Inc. Delaware
AMF Bowling Centers Switzerland Inc. Delaware
AMF Bowling Centers (Aust) International Inc. Virginia
AMF Catering Services Pty. Ltd. New South Wales
AMF Bowling Centers (Canada) International, Inc. Virginia
AMF Bowling Centers (Hong Kong) International, Inc. Virginia
AMF Bowling Centers International, Inc. Virginia
AMF BCO-UK One., Inc. Virginia
AMF BCO-UK Two, Inc. Virginia
AMF BCO-France One, Inc. Virginia
AMF BCO-France Two, Inc. Virginia
AMF Bowling Centers Spain Inc. Delaware
AMF Bowling Mexico Holding, Inc. Delaware
Boliches AMF, Inc. Virginia
AMF BCO-China, Inc. Virginia
AMF Bowling Centers China, Inc. Virginia
AMF International BCO Holdings B.V. Netherlands
AMF Bowling United Kingdom
AMF Bowling France SNC France
Boliches AMF y Compania Mexico
AMF Bowling Centers (China) Company Hong Kong
Worthing North Properties, Ltd. United Kingdom
AMF Bowling de Paris SNC France
AMF Bowling de Lyon la Part Dieu SNC France
Operadora Mexicano de Boliches, SA Mexico
Promotora de Boliches SA de CV Mexico
Inmeubles Minerva, SA Mexico
Inmuebles Obispado SA Mexico
Boliches Mexicanos SA Mexico
AMF Garden Hotel Bowling Center Company China
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports dated February 20, 1998, and to all references to our Firm
included in this Form 10-K Annual Report.
ARTHUR ANDERSEN LLP
Richmond, Virginia
March 25, 1998
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-41773) of AMF Bowling, Inc. of our report
dated June 28, 1996, appearing on page 59 of this Form 10K.
Price Waterhouse LLP
Norfolk, Virginia
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 35,790
<SECURITIES> 0
<RECEIVABLES> 73,991
<ALLOWANCES> 5,012
<INVENTORY> 56,568
<CURRENT-ASSETS> 183,398
<PP&E> 750,885
<DEPRECIATION> 64,480
<TOTAL-ASSETS> 1,832,052
<CURRENT-LIABILITIES> 139,468
<BONDS> 1,033,223
0
0
<COMMON> 748,649
<OTHER-SE> (94,621)
<TOTAL-LIABILITY-AND-EQUITY> 1,832,052
<SALES> 713,668
<TOTAL-REVENUES> 713,668
<CGS> 212,544
<TOTAL-COSTS> 630,743
<OTHER-EXPENSES> 8,152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,385
<INCOME-PRETAX> (43,612)
<INCOME-TAX> (12,776)
<INCOME-CONTINUING> (30,836)
<DISCONTINUED> 0
<EXTRAORDINARY> (24,728)
<CHANGES> 0
<NET-INCOME> (55,564)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
