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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 23, 1998
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EASYRIDERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-14509 33-0811505
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(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification No.)
567 San Nicolas Drive, Suite 400, Newport Beach, California 92660
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(Address of principal executive offices)
Registrant's telephone number, including area code (949) 718-4630
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N/A
(Former name or former address, if changed since last report)
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Item 1 Changes in Control of Registrant.
On September 23, 1998, after approval by the stockholders of Newriders, Inc., a
Nevada corporation ("Newriders"), Easyriders, Inc. (the "Registrant")
consummated a series of transactions (collectively referred to as the
"Reorganization") as described below in this report. See "Item 2. -- Acquisition
or Disposition of Assets." In connection with the Reorganization, three persons,
Mr. Joseph Teresi, Mr. John E. Martin and Mr. William E. Prather, became the
beneficial owners of a number of shares of Registrant's Common Stock, $.001 par
value per share (the "Easyriders Common Stock") representing in the aggregate
approximately sixty-seven percent (67%) of the issued and outstanding shares of
the Easyriders Common Stock as of September 23, 1998. Mr. Teresi is Publisher of
Paisano Publications, Inc., a subsidiary of Registrant. Mr. Martin is the
Chairman of the Board of Directors of Registrant. Mr. Prather is the President,
Chief Executive Officer and a member of the Board of Directors of Registrant.
In connection with the Reorganization, Mr. Teresi received 6,993,507 shares of
the Easyriders Common Stock (representing approximately 35.3% of Easyriders
Common Stock issued and outstanding as of September 23, 1998). Of these shares,
6,493,507 were received as part of the consideration for the contribution by Mr.
Teresi to the Registrant of all of the issued and outstanding common stock of
the companies comprising the Paisano Companies, as described below. See "Item 2
- -- Acquisition or Disposition of Assets." The remaining 500,000 shares were
received by Mr. Teresi upon the exchange of 1,000,000 shares of the Common
Stock, $.001 par value per share of Newriders (the "Newriders Common Stock")
previously acquired by Mr. Teresi in consideration of the forgiveness of
$211,133 in accounts payable owed by Newriders to one or more of the Paisano
Companies, which were then owned by Mr. Teresi.
In connection with the Reorganization, Mr. Martin received 5,282,947 shares of
Easyriders Common Stock (representing approximately 26.6% of Easyriders Common
Stock issued and outstanding as of September 23, 1998). Of these shares,
4,036,797 were received for a purchase price of $12,300,000, of which $5,000,000
was paid in cash, and the balance paid by delivery of the Martin Notes, as
described below. See "Item 2 -- Acquisition or Disposition of Assets." In the
Reorganization, Mr. Martin also exchanged 242,300 shares of Newriders Common
Stock for 121,150 shares of Easyriders Common Stock, and a warrant to purchase
250,000 shares of Newriders Common Stock exercisable at $4.00 per share for a
warrant to purchase 125,000 shares of Easyriders Common Stock exercisable at
$8.00 per share. Mr. Martin also exchanged in the Reorganization, his 49.0%
interest in M & B Restaurants, LLC, a Texas limited liability company which
operates four restaurants under the name El Paso Bar-B-Que ("El Paso") for
1,000,000 shares of Easyriders Common Stock.
In connection with the Reorganization, Mr. Prather and his wife received a total
of 1,000,000 shares of Easyriders Common Stock (representing approximately 5% of
Easyriders Common Stock issued and outstanding as of September 23, 1998), in
consideration for the contribution by Mr. and Mrs. Prather of all of their
interest as members in El Paso, as defined below. See "Item 2 -- Acquisition or
Disposition of Assets."
The following table sets forth certain information with respect to the
beneficial ownership of Easyriders Common Stock, by: (a) each person known by
Registrant to beneficially own more than 5% of the Easyriders Common Stock, (b)
each director of Registrant, (c) all directors and executive officers of
Registrant, as a group, as of September 23, 1998.
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<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK(1)
----------------- --------------
<S> <C> <C>
John E. Martin(2)........................... 5,282,947 26.6%
William E. Prather(3)....................... 1,000,000 5.0%
Wayne L. Knyal(4)........................... 238,027 1.2%
Daniel J. Gallery(5)........................ 37,500 *
Joseph Teresi (6)........................... 8,363,507 42.2%
Ellen Meagher............................... 0 *
Robert Davis................................ 0 *
Joseph J. Jacobs............................ 0 *
All Executive Officers and
Directors of Easyriders as a
group (9 persons)(7)........................ 15,343,131 76.9%
</TABLE>
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*Less than one percent (1%)
(1) As of the date of this Report, there are a total of 19,829,352 issued and
outstanding shares of Easyriders Common Stock.
(2) Includes: (a) warrants to purchase up to 125,000 shares at $8.00 per share
anytime on or before April 21, 1999; (b) 5,157,947 shares held in the John E.
Martin Revocable Trust dated June 16, 1992, of which Mr. Martin is trustee and
beneficiary.
(3) All shares are held jointly by Mr. Prather and his spouse.
(4) Includes an option to purchase up to 15,000 shares of Easyriders Common
Stock exercisable at $5.00 per share. On June 10, 1998, Mr. Knyal purchased
$1,000,000 face value of Newriders convertible debentures. The debentures are
convertible into shares of Easyriders Common Stock at the lesser of $4.75 per
share or 75% of the average closing bid price of Easyriders Common Stock during
the five trading period prior to conversion. For purposes of this table the
conversion ratio of $4.75 per share has been used, which would provide for the
issuance of 210,527 shares of Easyriders Common Stock upon conversion. In
connection with Mr. Knyal's purchase of the debentures, Mr. Knyal was also
issued a warrant which was exchanged in connection with the Reorganization to
purchase up to 12,500 shares of Easyriders Common Stock exercisable at a price
equal to 115% of the conversion price of the debentures.
(5) Mr. Gallery holds a fully vested option to purchase up to 15,000 shares of
Easyriders Common Stock exercisable at $5.00 per share. Shares beneficially
owned also includes 17,500 shares held of record by G3 Holdings, LLC, a limited
liability company in which Mr. Gallery, his brother and his sister are
co-managers and owners.
(6) Includes 1,370,000 shares owned by three unrelated individuals, for which
shares Mr. Teresi holds irrevocable proxies which expire May 29, 2000, and in
which Mr. Teresi has no pecuniary interest.
(7) Registrant has treated as issued and outstanding, 125,000 shares subject to
a warrant exercisable at $8.00 per share in favor of Mr. Martin, 125,000 shares
subject to a warrant exercisable at $8.00 per share in favor of Mr. William R.
Nordstrom, Registrant's Executive Vice President, 27,500 shares
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covered by options granted to Mr. Knyal, 15,000 shares covered by options
granted to Mr. Gallery, and 210,527 shares issuable to Mr. Knyal upon conversion
of certain convertible debentures.
STOCKHOLDER'S AGREEMENT, BOARD OF DIRECTORS AND MANAGEMENT OF REGISTRANT
In connection with the Reorganization, Mr. Martin, Mr. Teresi and the Registrant
have entered into that certain Stockholders' Agreement dated September 23, 1998
(the "Stockholders' Agreement"). The Stockholders' Agreement provides that Mr.
Martin and Mr. Teresi are each entitled to designate four individuals to serve
on the Board of Directors of the Registrant, and that Mr. Martin and Mr. Teresi
shall each vote their shares for the persons designated by the other to so
serve, so long as amounts remain owing to Mr. Teresi for the purchase of the
Paisano Companies. Mr. Martin and Mr. Teresi are respectively the beneficial
owners of, and entitled to vote, approximately 5,157,947 and 6,993,507 shares of
Easyriders Common Stock presently subject to the Stockholders Agreement,
representing an aggregate of approximately 61.3% of the number of shares of
Easyriders Common Stock, Mr. Martin and Mr. Teresi together will control the
election of all of the directors of the Registrant for the foreseeable future
and stockholders other than Mr. Martin and Mr. Teresi will not have any power to
elect directors of the Registrant. The Easyriders Board of Directors presently
has no provision in place to break ties and resolve disagreements.
In addition, Mr. Teresi holds irrevocable proxies to vote 1,370,000 shares of
Easyriders Common Stock, which expire May 29, 2000.
Since consummation of the Reorganization, Registrant has been managed by a Board
of Directors consisting of eight members, all of whom have been designated by
Mr. Martin and Mr. Teresi in accordance with the Stockholders' Agreement. The
following four directors were designated by Mr. Martin: John E. Martin, William
E. Prather, Wayne L. Knyal, and Daniel J. Gallery, each of whom was a director
of Newriders prior to the Reorganization. The following four directors were
designated by Mr. Teresi: Joseph Teresi, Ellen Meagher, Robert Davis, and Joseph
J. Jacobs.
The names and ages of the directors of Registrant appear in the table below:
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
John E. Martin 52 Director and Chairman of the Board
William E. Prather 51 President, Chief Executive Officer and Director
Daniel J. Gallery 43 Director
Wayne L. Knyal 51 Director
Joseph Teresi 56 Director of Registrant and Publisher of Paisano
Publications
Robert Davis 50 Director of Registrant and Chief Financial Officer
of Paisano Publications
Ellen Meagher 43 Director
Joseph J. Jacobs 73 Director
</TABLE>
Mr. John E. Martin has been the Chairman of the Board of Directors of the
Registrant since its inception in May, 1998. He has been Chairman of the Board
of Directors of Newriders since July 1997. He served as Chief Executive Officer
of Newriders from July 1997 until October 1997. Mr. Martin served as President
and Chief Executive Officer of Taco Bell Corp. from August 1983 until October
1995. In
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October 1995, Mr. Martin became Chairman and continued as Chief Executive
Officer of Taco Bell Corp. until October 1996. From October 1996 until June
1997, Mr. Martin was Chairman and Chief Executive Officer of PepsiCo Casual
Dining International, a division of PepsiCo. Mr. Martin is a member of the
Educational Foundation of the National Restaurant Association's Board of
Trustees, and is a founding member of the Chief Executive Round Table at the
University of California, Irvine. Mr. Martin is a director of The Good Guys,
Inc., Williams-Sonoma, Inc., Franchise Mortgage Acceptance Company, LLC ("FMAC")
and Chevy's Mexican Restaurants, Inc.
Mr. William E. Prather has been the President, Chief Executive Officer and a
director of the Registrant since its inception in May, 1998. He has been
President, Chief Executive Officer and a director of Newriders since October
1997. Mr. Prather was employed by Burger King in various capacities beginning
1972 until 1986, which capacities included at different times Regional Manager,
Head of European Operations and Executive Vice President of Worldwide
Operations. Mr. Prather was Chief Executive Officer of Hardee's from March 1986
to July 1991, and the Chief Executive Officer of Furr's Bishop's Cafeteria, Inc.
from February 1992 to October 1994. Mr. Prather is the founder and President of
El Paso.
Mr. Wayne L. "Buz" Knyal has been a director of the Registrant since September
23, 1998. He has served as a director of Newriders since August 1997. Mr. Knyal
has been the President, Chief Executive Officer and a Director of FMAC since its
inception in June 1995. Prior to founding FMAC's predecessor in 1991, Mr. Knyal
founded and owned CBI Insurance Services, Inc. and concurrently served as
President of CBI Mortgage Company, a residential mortgage banker. From 1968 to
1980, Mr. Knyal was an Executive Vice President of Krupp/Taylor Advertising and
served clients in the fast food industry.
Mr. Daniel J. Gallery has been a director of the Registrant since September 23,
1998. He has served as a director of Newriders since August 1997. Mr. Gallery is
a co-founder of Carts of Colorado, Inc., which is engaged in mobile and modular
merchandising and the utilization of non-traditional locations for food service
operations, including airports, stadiums and arenas, convenience stores, and
golf courses. Mr. Gallery continues as Executive Vice President for Carts of
Colorado, Inc., a position he has held for a period of more than five years. He
is a member of the Board of Directors of Cohabaco Cigar Company, a private
venture engaged in cigar marketing, Monterey Pasta Company, a pasta
manufacturing company, and the National Association of Concessionaires.
Mr. Joseph Teresi has been a director of the Registrant since September 23,
1998. He founded Paisano Publications in 1970 and since 1986 has been the sole
stockholder of Paisano Publications. He has served as Chairman of the Board of
Directors of Paisano Publications and the other companies comprising the Paisano
Companies for more than the past five years, respectively, or such shorter time
as they may have been in existence. From 1968 to 1978, Mr. Teresi was involved
with the manufacturing, distribution and retailing of motorcycle parts and
accessories.
Ms. Ellen Meagher has been a director of the Registrant since September 23,
1998. She is also a director of Paisano Publications. Ms. Meagher joined Paisano
Publications in 1986 and has held positions as Controller, Treasurer, Chief
Financial Officer and Chief Operating Officer. Ms. Meagher is also Secretary and
Director of Easyriders Franchising and President of Easyriders of Columbus.
Mr. Robert Davis has been a director of the Registrant since September 23, 1998.
Mr. Davis is the Vice President of Finance of Paisano Publications. Mr. Davis
has been with Paisano Publications since
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January, 1993. Mr. Davis is also Treasurer and Director of Easyriders
Franchising and Treasurer of Easyriders of Columbus.
Mr. Joseph J. Jacobs has been a director of the Registrant since September 23,
1998. Mr. Jacobs has been an independent legal consultant on merger and
acquisition matters since 1992. Between November 1989 and December 1991, he
served as Vice President and General Counsel of Graphic Scanning Corp. where he
negotiated the acquisition of that company by Bell South Corporation, and
subsequent to that acquisition in 1992 was Vice President and General Counsel of
Ram/BSE LP, a wireless and paging partnership in which Bell South Corporation
had a 50% interest. Mr. Jacobs served in various legal positions between 1954
and 1961, with American Broadcasting Company, including Assistant to the
President for Legal and Broadcasting Division Affairs -- Washington, and
Assistant General Counsel, and in 1961 as General Attorney of Metromedia, Inc.
Between 1961 - 1971 he served as Director of Program and Talent Negotiation for
United Artists Television and Vice President and Counsel of United Artists
Broadcasting. Between 1972 - 1987, he was Director of Legal Affairs for ITT
Corporation's Communications Operations Group and Vice President and General
Counsel of both ITT World Communications, Inc. and United States Transmission
Systems, Inc. In 1988, Mr. Jacobs became Counsel to the law firm of Seyfarth,
Shaw, Fairweather and Geraldson. Prior to joining American Broadcasting Company,
he was an Associate with the law firm of Proskauer, Rose, Goetz and Mendelsohn.
The Compensation Committee of the Board of Directors of Easyriders consists of
Joseph J. Jacobs and Daniel J. Gallery. The Audit Committee of the Board of
Directors of Easyriders consists of Joseph J. Jacobs, Ellen Meagher, Daniel J.
Gallery and Wayne L. Knyal. The Executive Officers of Easyriders consists of
John E. Martin, Chairman of the Board, William E. Prather, President and Chief
Executive Officer and William R. Nordstrom, Vice President, Chief Financial
Officer, Treasurer and Secretary.
Item 2. Acquisition or Disposition of Assets.
On September 23, 1998, the Registrant consummated a series of transactions
(collectively referred to as the "Reorganization"), including the following: (i)
the acquisition (the "Paisano Acquisition") by Registrant of all of the
outstanding common stock of Paisano Publications, Inc., a California corporation
("Paisano Publications") and certain affiliated corporations (the "Paisano
Companies"), which are engaged in publishing special interest magazines relating
to motorcycles and tattooing, marketing motorcycle apparel and accessories,
promoting tattoo and motorcycle related events, and franchising retail stores
which market motorcycle apparel and accessories; (ii) the acquisition (the "El
Paso Acquisition") by Registrant of all of the outstanding membership interests
of M & B Restaurants, L.C., a Texas limited liability company ("El Paso"), which
is engaged in the operation of four restaurants under the name "El Paso
Bar-B-Que;" and (iii) the merger (the "Merger") of a subsidiary of Easyriders
("Easyriders Sub") with and into Newriders.
As a result of the Merger (i) the Newriders Common Stock was exchanged for
Easyriders Common Stock on the basis of one share of Easyriders Common Stock for
each two shares of Newriders Common Stock, and the stockholders of Newriders
immediately prior to the Merger became stockholders of Registrant, (ii) all of
the outstanding options, warrants and other convertible securities exercisable
for or convertible into Newriders Common Stock were exchanged for the right to
purchase or convert into one-half the number of shares of Easyriders Common
Stock at an exercise price or conversion ratio per share equal to two times the
exercise price or conversion ratio provided for in the stock option, warrant or
other agreements evidencing such options, warrants or other convertible
securities, and (iii) Newriders, the Paisano Companies and El Paso became
wholly-owned subsidiaries of Registrant. Immediately following
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the Reorganization, Registrant transferred the El Paso membership interests to
Newriders, with the result that El Paso became a wholly-owned subsidiary of
Newriders.
In the Paisano Acquisition, Registrant and a second subsidiary of Registrant
("Easyriders Sub II") received all of the issued and outstanding stock (the
"Paisano Companies Stock") of each of the corporations that comprise the Paisano
Companies. The Paisano Companies are Paisano Publications, Easyriders of
Columbus, Inc., an Ohio corporation ("Columbus"), Easyriders Franchising, Inc.,
a California corporation ("Easyriders Franchising"), Teresi, Inc., a California
corporation ("Teresi, Inc."), Bros Club, Inc., a California corporation ("Bros
Club") and Associated Rodeo Riders on Wheels, a California corporation ("Rodeo
Riders"). Mr. Joseph Teresi, the sole stockholder of each of the Paisano
Companies, received in exchange for the Paisano Companies Stock, total
consideration in the amount of $48,000,000, consisting of 6,493,507 shares of
Easyriders Common Stock (representing approximately 32.7% of Easyriders Common
Stock issued and outstanding immediately following the Reorganization), and
promissory notes aggregating $28,000,000, consisting of a promissory note of
Easyriders Sub II in the principal amount of $15,000,000 which was paid in cash
immediately after the Merger occurred, and three promissory notes of Registrant
(the "Contributor Notes") in the aggregate amount of $13,000,000. The aggregate
amount received by Mr. Teresi is subject to adjustment upward or downward,
dollar for dollar, based on the amount by which the Paisano Companies' combined
working capital exceeded or was less than $4,537,000 as of the consummation of
the Paisano Acquisition. This determination is presently in process. As of June
30, 1998, the Paisano Companies combined working capital was approximately
$2,987,000.
In connection with the Paisano Acquisition, the Paisano Companies distributed
certain assets to Mr. Teresi and Mr. Teresi assumed certain liabilities of the
Paisano Companies with the anticipated effect of increasing the working capital
of the Paisano Companies. As contemplated in connection with the Paisano
Acquisition, Mr. Teresi received a dividend of $7,000,000 from Paisano
Publications, which was funded by a loan in that amount to Paisano Publications,
and was repaid by Paisano Publications upon consummation of the Reorganization.
As of June 30, 1998, the net assets of the Paisano Companies were approximately
$3,780,000. After deducting the $7,000,000 dividend paid to Mr. Teresi, the
deficiency in net assets of the Paisano Companies as of June 30, 1998, on a pro
forma basis, would have been approximately $3,220,000.
Mr. Teresi also has the right, subject to the approval of the Compensation
Committee of Registrant, to recommend that certain employees of the Paisano
Companies who continue to perform services after the Reorganization or are
consultants to any of the Paisano Companies be granted options to purchase an
aggregate of 300,000 shares of Easyriders Common Stock under the Easyriders
Plan, exercisable at $5.00 per share.
The Contributor Notes consist of a subordinated promissory note (the
"Contributor Subordinated Note") in the amount of $5,000,000, a limited recourse
subordinated promissory note (the "Contributor Mirror Note") in the amount of
$5,000,000 secured by the Martin Mirror Note (defined below) and a subordinated
promissory note (the "Contributor Short-Term Subordinated Note") in the amount
of $3,000,000. The Contributor Subordinated Note has a term of five years and
can be extended for an additional term of five years by Registrant and bears
interest at an annual rate between six and ten percent. The Contributor Mirror
Note has a term of five years and will be extended if and to the extent that the
Martin Mirror Note is extended, and bears interest at an annual rate between six
and ten percent. The Contributor Short-Term Subordinated Note has a term of
ninety days and bears interest at an annual rate of ten percent.
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In the El Paso Acquisition, John E. Martin, William E. Prather and his wife,
Marna Prather (collectively, the "El Paso Owners"), who together owned all of
the outstanding membership interests of El Paso prior to the Reorganization,
received a total of 2,000,000 shares of Easyriders Common Stock in exchange for
all of the outstanding membership interests of El Paso.
In connection with the Reorganization, John E. Martin, the Chairman of
Registrant, purchased 4,036,797 shares of Easyriders Common Stock, for a
purchase price of $12,300,000, which he paid $5,000,000 in cash and the balance
by delivery of the Martin Notes. The Martin Notes consist of the Martin Mirror
Note in the amount of $5,000,000, which note has been pledged by Registrant to
secure the Contributor Mirror Note, and the Other Martin Note in the amount of
$2,300,000. The Martin Mirror Note has a term of five years, may be extended by
Mr. Martin for an additional period of five years and bears interest at an
annual rate between six and ten percent. The Other Martin Note has a term of
five years and may be extended by Mr. Martin for an additional five years and
bears interest at an annual rate between six and ten percent.
In connection with the Reorganization, four of the largest shareholders of
Newriders, Inc. ("Newriders") agreed to return to Newriders an aggregate of
6,156,480 shares of Newriders common stock to be cancelled. A total of 4,848,480
of these shares were delivered to Newriders for cancellation at or prior to
closing. One of the four shareholders, Rick L. Pierce, failed to deliver
1,308,000 of the Newriders shares to be cancelled, of which 464,000 Newriders
shares are beneficially owned by another individual, Leon Hatcher, who had
consented to their cancellation. Mr. Teresi waived the condition for
cancellation of the 1,308,000 Newriders shares at closing, on the condition that
Newriders continue to pursue the cancellation of the 1,308,000 Newriders shares.
The Registrant has issued stop transfer instructions concerning the 1,308,000
Newriders shares which is equivalent to 654,000 shares of Easyriders, Inc.
common stock. Following the closing on September 23, 1998, a petition for an
involuntary bankruptcy proceeding under Chapter 11 of the U. S. Bankruptcy Code
involving Mr. Pierce was filed. The Registrant, through its subsidiary,
Newriders, intends to pursue its claim for cancellation of the 1,308,000
Newriders shares in the bankruptcy proceeding involving Mr. Pierce.
TERMS OF THE SENIOR CREDIT AGREEMENT
Newriders and Paisano Publications have received a loan from Nomura Holding
America, Inc. (the "Senior Lender") of $22,000,000 in the aggregate, $17,000,000
of which consists of term loans (the "Term Loans") and $5,000,000 of which
consists of revolving loans (the "Revolving Loans" and collectively with the
Term Loans, the "Senior Loans").
The Term Loans plus up to $3,500,000 of the Revolving Loans was used to repay
the $15,000,000 note issued by Easyriders Sub II to Mr. Teresi and to repay
$7,000,000 of the loan incurred by Paisano Publications in order to fund the
$7,000,000 dividend paid to Mr. Teresi by Paisano Publications prior to the
Paisano Acquisition and $500,000 of expenses. The remaining portion of the
Revolving Loans will be used by Paisano Publications for working capital
purposes. $15,000,000 of the Senior Loans was initially lent to Easyriders Sub
II, which used the proceeds thereof to repay the promissory note in the
principal amount of $15,000,000 issued by it to Mr. Teresi in connection with
the Paisano Acquisition. Simultaneously therewith, Easyriders Sub II was merged
with and into Paisano Publications, with Paisano Publications being the
surviving company and the obligor on the Senior Loans.
The Senior Loans are guaranteed (the "Guarantees") by Registrant and the Paisano
Companies other than Paisano Publications (the "Guarantors"). The Senior Loans
will mature on the third anniversary of
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September 23, 1998, and bear interest at an annual rate equal to the prime rate
of the Senior Lender from time to time plus 1.85%. The Senior Loans and the
Guarantees are secured by a first priority security interest in substantially
all of the tangible and intangible assets (owned or hereafter acquired) of
Registrant and the Paisano Companies, including all of the capital stock or
equity interests of the Paisano Companies, Newriders and El Paso. The Senior
Loans and the Guarantees constitute the sole senior secured indebtedness of
Paisano Publications and the Guarantors and rank senior to all other
indebtedness of Paisano Publications and the Guarantors, including the
$13,000,000 of Contributor Notes.
Paisano Publications is obligated to pay the Senior Lender a fee equal to 0.25%
per annum of the average daily undrawn amount of the Revolving Loans.
At the end of each six-month period in which the Term Loans are outstanding,
Paisano Publications is required to prepay the Term Loans in an aggregate
principal amount equal to 35% of Excess Cash Flow for such period. Excess Cash
Flow will be defined as the sum of (i) net income, plus (ii) net non-cash
charges (net of credits), reduced by allowable capital expenditures and changes
in working capital, plus (or minus) (iii) net losses (or net gains) resulting
from any asset sale.
Subject to certain limitations on dividends, provided that no event of default
has occurred, Paisano Publications may loan funds to Registrant monthly, limited
to the lesser of $100,000 or 35% of the Excess Cash Flow for the preceding
monthly period.
The net proceeds from any public offering or Rule 144A offering or private
placement of debt, equity or hybrid securities, and any funds raised through the
incurrence of bank indebtedness by Easyriders, Paisano Publications or any other
Paisano Company will be applied toward the mandatory prepayment of the principal
of the Term Loans plus accrued interest. Notwithstanding the foregoing,
Easyriders may retain up to $5,000,000 in the aggregate, from the net proceeds
of any approved sale of debt or equity securities for purposes of refinancing
the Contributor Short-Term Subordinated Note or funding operating expenses of
Easyriders.
The Senior Loans may be repaid in whole or in part from time to time, at the
option of Paisano Publications without premium.
Warrants to purchase 348,157 shares of Easyriders Common Stock will be issued
and sold to the Senior Lender on the closing date of the Reorganization at
nominal cost. The exercise price of the Warrants will be $3.00 per share. The
Warrants will be exercisable at any time for a period of seven years from their
date of issuance. The Warrants and the underlying common stock issuable upon
exercise of the Warrants will be covered by agreements which provide for
registration rights.
The Senior Credit Agreement and the Guarantees contain affirmative and negative
covenants concerning Paisano Publications and the Guarantors and their
subsidiaries. Affirmative covenants under the Senior Credit Agreement and the
Guarantees include, but are not limited to, compliance with contractual
obligations and law, maintenance of existence, inspection rights, payment of
taxes and other claims, maintenance of property and insurance, further
assurances and notices and reporting. Negative covenants under the Senior Credit
Agreement and the Guarantees include, but are not limited to, the following:
limitations on liens and negative pledges; limitations on sale/leasebacks;
limitations on indebtedness, capital leases, contingent obligations and
preferred stock; restrictions on the creation of any subsidiaries; limitations
on dividends or any payments on, or redemptions or repurchases of, the capital
stock and other restricted payments; limitations on the sale of assets and
transactions with affiliates; limitations on
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payments under operating leases; limitations on mergers and/or consolidations;
limitations on investments, acquisitions and joint ventures; limitations on
changes of control; and financial covenants including, but not limited to,
minimum net worth, minimum working capital, interest coverage ratio, leverage
ratio and EBITDA levels, provisions related to environmental liabilities, ERISA,
conduct of business and capital expenditures.
The Senior Credit Agreement and the Guarantees contain default provisions
including, but not limited to: failure to pay principal or interest on the
Senior Loans when and as due; failure to comply with any of the covenants or
other terms of the Senior Loans, the Guarantees or other documents (including,
without limitation, security documents); breach of any representation or
warranty in the Senior Credit Agreement, the Guarantees or other documents
(including, without limitation, security documents); cross-default on other
obligations of Paisano Publications or any Guarantor or other subsidiary;
certain events of bankruptcy of Paisano Publications or any Guarantor or other
subsidiary; ERISA -- related events; change of control of Paisano Publications
or Easyriders (Easyriders will be required to own 100% of Paisano Publications);
material judgments against Paisano Publications or any Guarantor or other
subsidiary; failure to maintain perfected security interests for the Senior
Loans or the Guarantee; and invalidity or disaffirmation of any of the
Guarantees.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
(1) NEWRIDERS, INC. AND SUBSIDIARY
Independent Auditors' Report -- Deloitte & Touche LLP.
Consolidated Balance Sheet as of December 31, 1997.
Consolidated Statement of Operations for the Year Ended
December 31, 1997.
Consolidated Statement of Stockholders' Equity for the Year
Ended December 31, 1997.
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1997.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report -- Jones, Jensen & Company.
Consolidated Balance Sheet as of December 31, 1996.
Consolidated Statement of Operations for the Year Ended
December 31, 1996.
Consolidated Statement of Stockholders' Equity for the Year
Ended December 31, 1996.
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1996.
Notes to the Consolidated Financial Statements.
Condensed Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997.
Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
Condensed Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1997 and the Six Months Ended June
30, 1998.
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
Notes to Unaudited Consolidated Financial Statements
(unaudited).
(2) PAISANO PUBLICATIONS, INC. AND AFFILIATES
Independent Auditors' Report.
Combined Balance Sheets as of December 31, 1997 and 1996.
10
<PAGE> 11
Combined Statements of Operations for the Years Ended December
31, 1997, 1996 and 1995 (unaudited).
Combined Statements of Shareholder's Equity for the Years
Ended December 31, 1997, 1996 and 1995 (unaudited).
Combined Statements of Cash Flows for the Years Ended December
31, 1997, 1996 and 1995 (unaudited).
Notes to Combined Financial Statements.
Condensed Combined Balance Sheet as of June 30, 1998
(unaudited).
Condensed Combined Statements of Operations for the Six Months
Ended June 30, 1998 and 1997 (unaudited).
Condensed Combined Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 (unaudited).
Notes to Condensed Combined Financial Statements for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
(3) M & B RESTAURANTS, L.C.
Independent Auditor's Report.
Balance Sheets for the Years Ended December 30, 1997 and
December 31, 1996.
Statements of Operations for the Years Ended December 30, 1997
and December 31, 1996.
Statements of Changes in Members' Equity for the Years Ended
December 30, 1997 and December 31, 1996.
Statements of Cash Flows for the Years Ended December 30, 1997
and December 31, 1996.
Notes to Financial Statements.
Condensed Balance Sheet as of June 30, 1998 (unaudited).
Condensed Statements of Operations for the Six Months Ended
June 30, 1998 and July 1, 1997 (unaudited).
Statements of Cash Flows for the Six Months Ended June 30,
1998 and July 1, 1997 (unaudited).
Notes to Financial Statements for the Six Months Ended June
30, 1998 and July 1, 1997 (unaudited).
The foregoing financial statements are incorporated by reference from
the financial statements set forth in the Prospectus included in
Registrant's Registration Statement on Form S-4, Registration No.
333-58501.
(b) Pro forma financial information.
Newriders Equivalent Per Share Table
Unaudited Pro Forma Combined Condensed Financial Statement
The foregoing pro forma financial information is incorporated by
reference from the information set forth under the same captions in the
Prospectus included as part of Registrant's registration Statement on
Form S-4, Registration No. 333-58501.
(c) Exhibits
11
<PAGE> 12
Exhibit
No. Exhibit Description
- ------- -------------------
2.1 Agreement and Plan of Merger and Reorganization dated June 30, 1998, by
and among Newriders, the Registrant and Easyriders Sub, Inc.,
incorporated by reference from Exhibit 2.1 to Registrant's registration
statement on Form S-4, Registration No. 333-58501. (1)
2.2 Stock Contribution and Sale Agreement, dated June 30, 1998 ("Stock
Contribution and Sale Agreement"), by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Inc., Teresi,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels and Mr. Joseph
Teresi, incorporated by reference from Exhibit 2.2 to Registrant's
registration statement on Form S-4, Registration No. 333-58501. (1)
2.3 LLC Interest Contribution Agreement, dated June 30, 1998 ("LLC Interest
Contribution Agreement"), by and among Newriders, the Registrant,
William E. Prather, Marna Prather, John E. Martin, and M & B
Restaurants, L.C., incorporated by reference from Exhibit 2.3 to
Registrant's registration statement on Form S-4, Registration No.
333-58501. (1)
4.1 Specimen of the Registrant's Common Stock Certificate. (2)
10.4.1 Limited Recourse Subordinated Promissory Note dated September 23, 1998,
executed by Easyriders in favor Joseph Teresi in the amount of
$5,000,000. (2)
10.4.2 Pledge Agreement dated September 23, 1998, executed by Easyriders as
pledgor and Joseph Teresi as pledgee. (2)
10.4.3 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $5,000,000. (2)
10.4.4 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $3,000,000. (2)
10.4.5 Employment Agreement between Paisano Publications, Inc. and Bob Davis
dated September 23, 1998. (2)
10.4.6 Employment Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.7 Consulting Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.8 Stockholders Voting Agreement comprising Exhibit I to Stock
Contribution and Sale Agreement, executed upon consummation of the
Reorganization by John E. Martin and Joseph Teresi. (2)
10.4.9 Promissory Note dated September 23, 1998, executed by Easyriders Sub
II, Inc. in favor Joseph Teresi in the amount of $15,000,000. (2)
10.4.10 Stock Purchase Agreement dated June 30, 1998, between Easyriders and
John E. Martin ("Stock Purchase Agreement"), incorporated by reference
from Exhibit 10.4.10 to Registrant's registration statement on Form
S-4, Registration No. 333- 58501. (1)
10.4.11 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $5,000,000. (2)
12
<PAGE> 13
10.4.12 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $2,300,000. (2)
10.4.18 Letter Agreement dated August 15, 1998, regarding extension of Stock
Contribution and Sale Agreement, by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Factory Tours,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels, and Mr.
Joseph Teresi, incorporated by reference from Exhibit 10.4.18 to
Registrant's registration statement on Form S-4, Registration No. 333-
58501. (1)
10.5.1 Note and Warrant Purchase Agreement between Easyriders, Inc.,
Easyriders Sub II, Inc. and Nomura Holding America, Inc., executed at
consummation of the Reorganization. List of exhibits and schedules to
Note and Warrant Purchase Agreement. (2)
10.5.2 Guarantee of Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels in favor of Senior Secured Lender, executed at
consummation of the Reorganization. (2)
10.5.3 Pledge and Security Agreement in favor of Senior Secured Lender to be
executed by Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels, executed at consummation of the Reorganization. (2)
10.5.4 Intellectual Property Security Agreement in favor of Senior Secured
Lender to be executed by Easyriders, Inc., Easyriders of Columbus,
Inc., Easyriders Franchising, Inc., Teresi, Inc., Bros Club, Inc. and
Associated Rodeo Riders on Wheels, executed at consummation of the
Reorganization. (2)
10.5.5 Warrant to Purchase Shares of Common Stock of Easyriders, Inc., dated
September 23, 1998, in favor of Nomura Holding America, Inc. (2)
10.5.6 Registration Rights Agreement between Easyriders, Inc. and Senior
Secured Lender, executed at consummation of the Reorganization. (2)
- ----------
(1) Incorporated by reference herein.
(2) Filed herewith.
13
<PAGE> 14
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 hereunto duly authorized.
EASYRIDERS, INC.
(Registrant)
Date: October 7, 1998 By: /s/William E. Prather
--------------- -------------------------------------
William E. Prather
President and Chief Executive Officer
14
<PAGE> 15
EXHIBIT INDEX
Exhibit
No. Exhibit Description
- ------- -------------------
2.1 Agreement and Plan of Merger and Reorganization dated June 30, 1998, by
and among Newriders, the Registrant and Easyriders Sub, Inc.,
incorporated by reference from Exhibit 2.1 to Registrant's registration
statement on Form S-4, Registration No. 333-58501. (1)
2.2 Stock Contribution and Sale Agreement, dated June 30, 1998 ("Stock
Contribution and Sale Agreement"), by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Inc., Teresi,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels and Mr. Joseph
Teresi, incorporated by reference from Exhibit 2.2 to Registrant's
registration statement on Form S-4, Registration No. 333-58501. (1)
2.3 LLC Interest Contribution Agreement, dated June 30, 1998 ("LLC Interest
Contribution Agreement"), by and among Newriders, the Registrant,
William E. Prather, Marna Prather, John E. Martin, and M & B
Restaurants, L.C., incorporated by reference from Exhibit 2.3 to
Registrant's registration statement on Form S-4, Registration No.
333-58501. (1)
4.1 Specimen of the Registrant's Common Stock Certificate. (2)
10.4.1 Limited Recourse Subordinated Promissory Note dated September 23, 1998,
executed by Easyriders in favor Joseph Teresi in the amount of
$5,000,000. (2)
10.4.2 Pledge Agreement dated September 23, 1998, executed by Easyriders as
pledgor and Joseph Teresi as pledgee. (2)
10.4.3 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $5,000,000. (2)
10.4.4 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $3,000,000. (2)
10.4.5 Employment Agreement between Paisano Publications, Inc. and Bob Davis
dated September 23, 1998. (2)
10.4.6 Employment Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.7 Consulting Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.8 Stockholders Voting Agreement comprising Exhibit I to Stock
Contribution and Sale Agreement, executed upon consummation of the
Reorganization by John E. Martin and Joseph Teresi. (2)
10.4.9 Promissory Note dated September 23, 1998, executed by Easyriders Sub
II, Inc. in favor Joseph Teresi in the amount of $15,000,000. (2)
10.4.10 Stock Purchase Agreement dated June 30, 1998, between Easyriders and
John E. Martin ("Stock Purchase Agreement"), incorporated by reference
from Exhibit 10.4.10 to Registrant's registration statement on Form
S-4, Registration No. 333- 58501. (1)
10.4.11 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $5,000,000. (2)
10.4.12 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $2,300,000. (2)
10.4.18 Letter Agreement dated August 15, 1998, regarding extension of Stock
Contribution and Sale Agreement, by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Factory Tours,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels, and Mr.
Joseph Teresi, incorporated by reference from Exhibit 10.4.18 to
Registrant's registration statement on Form S-4, Registration No. 333-
58501. (1)
10.5.1 Note and Warrant Purchase Agreement between Easyriders, Inc.,
Easyriders Sub II, Inc. and Nomura Holding America, Inc., executed at
consummation of the Reorganization. List of exhibits and schedules to
Note and Warrant Purchase Agreement. (2)
10.5.2 Guarantee of Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels in favor of Senior Secured Lender, executed at
consummation of the Reorganization. (2)
10.5.3 Pledge and Security Agreement in favor of Senior Secured Lender to be
executed by Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels, executed at consummation of the Reorganization. (2)
10.5.4 Intellectual Property Security Agreement in favor of Senior Secured
Lender to be executed by Easyriders, Inc., Easyriders of Columbus,
Inc., Easyriders Franchising, Inc., Teresi, Inc., Bros Club, Inc. and
Associated Rodeo Riders on Wheels, executed at consummation of the
Reorganization. (2)
10.5.5 Warrant to Purchase Shares of Common Stock of Easyriders, Inc., dated
September 23, 1998, in favor of Nomura Holding America, Inc. (2)
10.5.6 Registration Rights Agreement between Easyriders, Inc. and Senior
Secured Lender, executed at consummation of the Reorganization. (2)
- ----------
(1) Incorporated by reference herein.
(2) Filed herewith.
<PAGE> 1
EXHIBIT 4.1
DESCRIPTION OF SPECIMEN STOCK CERTIFICATE OF REGISTRANT
The face of the stock certificate has a border which is a continuous intricate
design all the way around. The upper left and right corners contain a different
irregular shaped wavy round design. In the center of the face at the top is a
decorative arch. Below the decorative arch is a drawing of a motorcycle below
which appears the company name in logo fashion. Below the company logo in the
center of the certificate is a shaded rectangle in which the words "THIS
CERTIFIES THAT" and "is the record holder of," appears in black ink, and the
word "SPECIMEN" which appears stamped in red ink. The word "SPECIMEN" is also
stamped within the border at the bottom on either side of the corporate seal.
The border, upper left and right corners, the decorative arch and the shaded
areas are all in green ink, the company logo is in red ink and the rest of the
text is in black ink. The certificate is printed on an off-white or ivory
colored paper.
The following is the text which appears in black on the face of the stock
certificate starting in the upper lefthand corner and moving left to right and
down:
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF CUSIP 277848 10 7
THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE OF
EASYRIDERS, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
/s/ SIG /s/ SIG
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
EASYRIDERS, INC.
CORPORATE SEAL
1998
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
The following is the text in black ink which appears on the reverse of the stock
certificate starting in the upper left hand corner and moving left to right and
down:
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED,
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
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)
UNIF TRF MIN ACT -- Custodian (until age )
-----------------------
under Uniform Transfers
---------------
(Minor)
to Minors Act
---------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
[BOX]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________ Shares of the common 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
-----------------------------
x
--------------------------------
x
--------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed
By
----------------------------------------------------------------------------
THE SIGNATURE(S) MUST 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.
<PAGE> 1
EXHIBIT 10.4.1
LIMITED RECOURSE SUBORDINATED PROMISSORY NOTE
$5,000,000 September 23, 1998
FOR VALUE RECEIVED, Easyriders, Inc., a Delaware corporation ("Maker"),
promises to pay to Joseph Teresi ("Payee"), at the place and in the manner
specified below, the principal sum of Five Million Dollars ($5,000,000),
together with interest on the unpaid principal balance hereof at the rate per
annum set forth below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 4 of this Note.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Martin Mirror Note" means that certain Promissory Note of John Martin,
dated the date hereof, in the original principal amount of $5,000,000, payable
to Maker.
"Newco #1 Pledge Agreement" means the pledge agreement, dated as of the
date hereof, between Maker and Payee.
"Note" means this Limited Recourse Promissory Note, as the same may be
amended from time to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 4 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability corporation, partnership, trust or joint
venture).
"Pledged Assets" shall mean the Martin Mirror Note, all principal and
interest paid or distributed and other property which Maker is or may be
entitled to receive in respect of or in exchange for the Martin Mirror Note and
the proceeds, increase and products of any of the foregoing.
"Rate" is defined in Section 2.2 of this Note.
<PAGE> 2
"Stock Contribution and Sale Agreement" means the Stock Contribution and
Sale Agreement dated June 30, 1998, by and among Maker, Payee, Newriders, Inc.,
Easyriders Sub II, Inc. and the Paisano Companies (as defined therein), as
amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. The principal balance of this Note
shall be payable by Maker in lawful money of the United States of America and in
immediately payable funds on September 23, 2003, unless the date for payment of
the Martin Mirror Note is extended, in which case, the date for payment of the
principal balance of this Note shall be similarly extended (as such date may be
so extended, the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount of
this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1999,
the Rate shall be six percent (6%);
(ii) From September 23, 1999 until September 23, 2000,
the Rate shall be seven percent (7%);
(iii) From September 23, 2000 until September 23, 2001,
the Rate shall be eight percent (8%);
(iv) From September 23, 2001 until September 23, 2002,
the Rate shall be nine percent (9%); and
(v) From September 23, 2002 until such time as the
principal balance of this Note shall be paid, the Rate shall be ten percent
(10%).
(b) Accrued interest on the outstanding principal amount of this Note
shall be paid in arrears on the 23rd day of each September, December, March and
June, commencing with the first such date to occur after the date hereof and at
maturity (each an "Interest Payment Date"), until the Obligations are paid in
full, except that Maker shall have the right to defer up to one-half of the
interest payable on any Interest Payment Date during the first two years of this
Note if and to the extent that the analogous right is exercised by John Martin
under the Martin Mirror Note. The amount of interest deferred pursuant to this
Section will be added to the principal balance of this Note on the Interest
Payment Date as of which it is deferred. If the Maturity Date is extended
pursuant to Section 2.1 hereof, then Maker shall pay to Payee on the
date such extension period commences, an amount of principal equal to the amount
of deferred
2
<PAGE> 3
interest which was added to the principal balance of this Note in accordance
with the immediately preceding sentence. Interest hereunder shall be computed on
the basis of a year of 365 days for the actual number of days elapsed. If any
payment of principal or interest hereunder shall become due on a day which is
not a Business Day, such payment shall be due on the next succeeding Business
Day and such extension of time shall be included in computing interest in
connection with such payment. Both principal and interest hereunder are payable
to Payee by wire transfer to such account as Payee may, from time to time,
designate to Maker in writing. If the maker under the Martin Mirror Note makes a
payment thereunder, Maker shall immediately make (or if the payment under the
Martin Mirror Note is paid directly to Payee, Maker shall be deemed to have
made) an identical payment under this Note.
(c) Notwithstanding anything to the contrary contained herein, Maker may
elect to prepay the outstanding principal amount of this Note at any time either
in whole or in part, without penalty. Any such prepayment shall be accompanied
by the amount of accrued interest on the amount prepaid. Maker shall deliver
written notice of such prepayment to Payee at least ten (10) days prior to
prepayment. Each notice of prepayment delivered pursuant to this subsection (c)
shall set forth the amount of such prepayment and the proposed date of such
prepayment. If the Maker under the Martin Mirror Note makes a prepayment
thereunder, Maker shall immediately make (or if the prepayment under the Martin
Mirror Note is paid directly to Payee, Maker shall be deemed to have made) an
identical prepayment under this Note. Upon payment in full of this Note, Payee
shall surrender this Note to Maker for cancellation. Upon prepayment in part of
principal, Payee shall make a notation of such prepayment on the Schedule of
Payments attached as Exhibit A hereto and deliver a copy of such schedule to
Maker. The aggregate unpaid principal amount set forth on such schedule shall be
rebuttably presumptive evidence of the principal amount owing and unpaid
hereunder, but the failure to record any such amount on such schedule shall not
limit or otherwise affect the obligation of the Maker hereunder to make payments
on this Note when due. All payments to be made by the Maker under this Note
shall be made only from the income and the proceeds from the Pledged Assets and
only to the extent that the Maker or the Payee shall have received sufficient
income or proceeds from the Pledged Assets to make such payments. The Payee, by
its acceptance hereof, agrees that all income or proceeds of the Pledged Assets
shall be applied to the payment of the Obligations.
SECTION 3. Non-Recourse; Security Interest
SECTION 3.1 Non-Recourse. Anything in this Note or any other agreement
to the contrary notwithstanding, the Obligations shall be non-recourse to the
Maker and neither the Payee nor its successors or assigns shall have any claim,
remedy or right to proceed (at law or in equity) against the Maker for the
payment of any deficiency or any other sum owing on account of the Obligations;
and the Payee by acceptance of this Note waives and releases any personal
liability of the Maker for and on account of the Obligations and agrees to look
solely to the Pledged Assets for the payment and performance of the Obligations.
3
<PAGE> 4
SECTION 3.2 Security Interest. Payment of all amounts due to Payee
hereunder shall be secured by a security interest in the Pledged Assets, upon
the terms and conditions specified in the Newco #1 Pledge Agreement.
SECTION 4. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any payment of interest on this Note
when the same shall become due and payable, and such failure shall continue for
a period of five (5) days after written notice thereof has been given to Maker
by Payee (a "Payment Default"); provided, however, that Maker shall have the
right to cure any such Payment Default for an additional period of twenty-five
(25) days on two occasions during the term of this Note;
(b) Maker shall fail to pay the principal amount of this Note on
the Maturity Date;
(c) Maker makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates its approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Maker bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of Maker in an involuntary case under
Federal bankruptcy laws as now or hereafter constituted, and such decree or
order remains in effect for more than sixty (60) days, whether or not
consecutive.
then Payee may by notice in writing to Maker declare all amounts owing with
respect to this Note to be, and they shall thereupon forthwith mature and
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. No waiver by Payee of any Event of
Default shall operate as a waiver of any
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<PAGE> 5
other Event of Default or the same Event of Default on a future occasion. No
delay on the part of Payee in the exercise of any right or remedy shall operate
as a waiver thereof, and no single or partial exercise by Payee of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all reasonable
out-of-pocket expenses incurred or sustained by Payee in connection with the
enforcement or protection of the rights of Payee under this Note, including
costs of collection and the fees and disbursements of counsel.
SECTION 5. Miscellaneous.
(a) This Note may not be assigned by Maker or Payee without the
express written consent of the other party.
(b) This Note may not be amended except by a writing signed by
Maker and Payee, provided, however, that no amendment shall be effective without
the written consent of the maker under the Martin Mirror Note. If the Martin
Mirror Note is amended, and such amendment is agreed to in writing by Payee,
this Note shall simultaneously be automatically amended, mutatis mutandis, such
that it remains substantially identical to the Martin Mirror Note.
(c) Whenever in this Note there is reference made to either Payee
or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(d) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, California 92660
Attention: Bill Prather
Fax No.: (714) 719-4999
To Payee:
Joseph Teresi
5
<PAGE> 6
2400 Laguna Drive
Fort Lauderdale, FL 33316
Fax No.: (954) 462-0223
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA AND OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY LITIGATION RELATING THERETO
EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY
CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(f) The Section and subsection titles contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
(g) The invalidity or unenforceability of any provision of this
Note in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Note in that jurisdiction or the validity or enforceability of
this Note, including that provision, in any other jurisdiction. If any
restriction or provision of this Note is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(h) Nothing in this Note is intended or shall be construed to
give any Person other than the parties hereto any legal or equitable right,
remedy or claim under or in respect of this Note or any provision contained
herein.
(i) Upon receipt by Maker of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, Maker will make
and deliver a new Note of like tenor in lieu of this Note against receipt of
Payee's undertaking to indemnify Maker against and hold it harmless from all
reasonable costs arising as a result of its making and delivery of the new Note.
This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
EASYRIDERS, INC.
6
<PAGE> 7
By: /s/ William E. Prather
-------------------------------------------
Name: William E. Prather
Title: President and Chief Executive
Officer
7
<PAGE> 1
EXHIBIT 10.4.2
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated September 23, 1998, between Easyriders, Inc., a
Delaware corporation (the "Pledgor"), and Joseph Teresi ("Pledgee").
It is agreed as follows:
1. Grant of Security Interest. As security for the payment of all of the
liabilities, obligations and indebtedness of Pledgor to Pledgee under that
certain Limited Recourse Promissory Note of Pledgor in the original principal
amount of $5,000,000, dated as of the date hereof, payable to Pledgee (the
"Newco #1 Mirror Note") (including, without limitation, Pledgor's obligations to
make payments of principal and interest to Pledgee thereunder), whether now
existing or hereafter arising, Pledgor pledges and grants to Pledgee a security
interest in the following property:
(a) the Promissory Note of John Martin, in the principal amount
of $5,000,000, dated as of the date hereof, payable to Pledgor (the "Martin
Mirror Note");
(b) all principal and interest paid or distributed and other
property which Pledgor is or hereafter may become entitled to receive in respect
of or in exchange for the Martin Mirror Note; and
(c) the proceeds, increase and products of any of the foregoing
(together with the Martin Mirror Note and the property described in paragraph
(b) above, the "Pledged Assets").
2. Delivery of Certificates and Instruments. Pledgor shall deliver to
Pledgee the original Martin Mirror Note concurrently with the execution and
delivery of this Agreement.
3. Representations, Warranties and Covenants. Pledgor represents,
warrants and covenants that:
(a) the Pledgor has good and marketable title to the Pledged
Assets free and clear of all claims, mortgages, pledges, liens, encumbrances and
security interests of every nature whatsoever, except in favor of Pledgee;
(b) Pledgor will not sell, transfer, assign, pledge or grant a
security interest in the Martin Mirror Note to any person other than Pledgee;
(c) this Agreement constitutes the legal, valid and binding
obligation of Pledgor, enforceable in accordance with its terms;
<PAGE> 2
(d) the execution, delivery and performance of this Agreement
will not violate any law or regulation, or any order or decree of any court or
governmental instrumentality, or any provision of the charter or bylaws of, or
any securities issued by, Pledgor and will not conflict with, or result in the
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, agreement or other instrument to which Pledgor is a party or by which he
is bound, and will not result in the creation or imposition of any lien, charge
or encumbrance upon any of the property of Pledgor pursuant to the provisions of
any of the foregoing; and
(e) no consent of any other person (including, without
limitation, stockholders and creditors of Pledgor) and no consent, license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental instrumentality is
required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
4. Payments of Principal and Interest. Until such time as the Newco #1
Mirror Note shall be paid in full, Pledgee shall be entitled to receive and
retain for its own account any and all principal and interest at any time and
from time to time paid under the Martin Mirror Note.
5. Remedies Upon Default.
(a) If a default or an event of default shall occur under the
Newco #1 Note, Pledgee, without obligation to resort to other security, shall be
entitled to exercise all rights and remedies available to a secured creditor
after default, including without limitation the rights and remedies of secured
creditors under the California Uniform Commercial Code. These rights and
remedies include, without limitation, the right at any time and from time to
time to receive and retain any and all principal and interest at any time and
from time to time paid under the Pledged Assets, or to sell, resell, assign and
deliver, in his discretion, the Pledged Assets, for cash, upon credit or for
future delivery. If the Pledged Assets are sold by Pledgee upon credit or for
future delivery, Pledgee shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure, Pledgee may
resell the Pledged Assets. In no event shall Pledgor or Mr. Martin be credited
with any part of the proceeds of sale of the Pledged Assets until cash payment
thereof has actually been received by Pledgee.
(b) Pledgee shall give Pledgor and Mr. Martin at least ten days'
prior notice of the time and place at which any sale or other disposition is to
be made, which notice Pledgor and Mr. Martin agree is reasonable, all other
demands, advertisements and notices being hereby waived. Pledgee shall not be
obligated to sell the Pledged Assets if he shall determine not to do so,
regardless of the fact that notice of sale may have been given. Pledgee may,
without notice or publication, adjourn any sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In the case of sale of the
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<PAGE> 3
Pledged Assets, Pledgee may deduct from the proceeds of sale all costs and
expenses of every kind for sale or delivery, including brokers' and attorneys'
fees, and Pledgee shall apply any balance of the proceeds of sale to the payment
of the Newco #1 Mirror Note. If any proceeds of sale remain after payment in
full of such costs and expenses and of the Newco #1 Mirror Note, they shall be
paid to Pledgor.
(c) The remedies provided herein in favor of Pledgee shall not
be deemed exclusive, but shall be cumulative, and shall be in addition to all
other remedies in favor of Pledgee existing at law or in equity.
6. Power of Attorney. Pledgor hereby appoints Pledgee as the Pledgor's
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which Pledgee may
deem necessary or advisable to accomplish the purposes hereof. Without limiting
the generality of the foregoing, Pledgee shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to Pledgor representing any payment of principal or interest
under the Pledged Assets and to give full discharge for the same.
7. Further Assurances. Pledgor shall, upon the request of Pledgee, duly
execute and deliver, or cause to be duly executed and delivered, to Pledgee such
further instruments and take and cause to be taken such further actions as may
be necessary or proper in the opinion of Pledgee to carry out the provisions and
purposes of this Agreement.
8. No Waiver. No delay on the part of Pledgee in exercising any of its
options, powers or rights, or partial or single exercise thereof, shall
constitute a waiver thereof.
9. Return of Pledged Assets. Upon payment, performance and satisfaction
in full of the Newco #1 Mirror Note, Pledgor shall be entitled to the return of
the Pledged Assets and all other property and cash held as additional collateral
hereunder which has not been used or applied toward the payment of the Newco #1
Mirror Note. The assignment by Pledgee to Pledgor of the Pledged Assets and
other property shall be without representation or warranty of any nature
whatsoever and wholly without recourse.
10. Notices. All notices and other communications to any party hereunder
shall be in writing and shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by a reputable courier delivery
service or by prepaid telex or telecopy and shall be given to the address or
telex or telecopier number for such party set forth below such party's signature
to this Agreement, or to such other address or telex or telecopier number as
such party may hereafter specify by notice to the other party. Each such notice
or other communication shall be effective (a) if given by telex or telecopier,
when such telex or telecopy is transmitted to the telex or telecopier number
specified by this Section and the appropriate answerback or confirmation is
received, (b) if given by certified mail, 72 hours after such
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<PAGE> 4
communication is deposited with the post office, addressed as aforesaid or (c)
if given by any other means (including, without limitation, by courier), when
delivered at the address specified by this Section.
11. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement shall in any event be effective unless the same shall be in
writing and signed by Pledgee and Pledgor.
12. Governing Law. This Agreement and the rights and obligations of
Pledgee and Pledgor hereunder shall be construed in accordance with and governed
by the law of the State of California (without giving effect to the conflict of
law principles thereof).
13. Submission to Jurisdiction.
(a) Any legal action or proceeding with respect to this
Agreement may be brought in the courts of the State of California or of the
United States of America for the Southern District of California, and, by
execution and delivery of this Agreement, each of Pledgor and Pledgee hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of Pledgor and
Pledgee hereby irrevocably waives, in connection with any such action or
proceeding, (i) trial by jury, (ii) any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions and (iii) the right
to interpose any setoff, counterclaim or cross-claim.
(b) Each of Pledgor and Pledgee irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by certified mail, postage prepaid,
to Pledgor or Pledgee, as the case may be, at its address determined pursuant to
Section 10 hereof.
(c) Nothing herein shall affect the right of the Pledgee or
Pledgor to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against Pledgor or Pledgee in any other
jurisdiction.
14. Benefit of Agreement. This Agreement may not be assigned by Pledgor
or Pledgee without the express written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of Pledgor and Pledgee
and their respective successors and permitted assigns.
15. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so
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<PAGE> 5
executed and delivered shall be an original and all of which shall together
constitute one and the same agreement.
16. Captions. The captions of the sections of this Agreement have been
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have executed this
Agreement or caused this Agreement to be duly executed by their respective
officers duly authorized as of the day and year first above written.
PLEDGOR:
Easyriders, Inc.
------------------------------------
By /s/ William E. Prather
--------------------------------
Name: William E. Prather
Title: President and Chief
Executive Officer
Address: 567 San Nicolas Drive,
Suite 400
Newport Beach, CA 92660
Telex No. (714) 718-4630
PLEDGEE:
/s/ Joseph Teresi
------------------------------------
Joseph Teresi
Address: 2400 Laguna Drive
Fort Lauderdale, FL 33316
Telex No. (954) 462-6114
5
<PAGE> 1
EXHIBIT 10.4.3
SUBORDINATED PROMISSORY NOTE
$5,000,000 September 23, 1998
FOR VALUE RECEIVED, Easyriders, Inc., a Delaware corporation ("Maker"),
promises to pay to Joseph Teresi ("Payee"), at the place and in the manner
specified below, the principal sum of Five Million Dollars ($5,000,000),
together with interest on the unpaid principal balance hereof at the rate per
annum set forth below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 4 of this Note.
"Indebtedness" means, with respect to the Maker, (i) any indebtedness of
such Maker, without duplication, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing capital lease obligations or the balance
deferred and unpaid of the purchase price of any property, as well as all
indebtedness of others secured by a lien on any asset of the Maker (whether or
not such indebtedness is assumed by the Maker) and (ii) to the extent not
included in clause (i), any guarantee by the Maker of any indebtedness of any
other person or entity.
"indefeasible payment in full" or any similar term or phrase when used
in this Note with respect to Senior Debt shall mean the final payment in full of
all Senior Debt in cash or in case of Senior Debt consisting of contingent
obligations under letters of credit, the setting apart of cash sufficient to
discharge such obligations in an account for the exclusive benefit of the
holders of such Senior Debt, in which account such holders shall have been
granted a perfected security interest, which payment and perfected security
interest shall have been retained by such holders for a period in excess of any
applicable preference or other similar period under applicable bankruptcy,
insolvency or creditors' rights law.
"Insolvency Proceeding" shall mean (i) any assignment for the benefit of
creditors by Maker or any other marshaling of the assets and liabilities of
Maker, or (ii) the institution by or against Maker of any proceedings in
insolvency, bankruptcy, receivership, liquidation, arrangement, reorganization,
dissolution, winding up or other similar case or proceeding, whether voluntary
or involuntary.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Note" means this Subordinated Promissory Note, as the same may be
amended from time to time.
<PAGE> 2
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 4 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability corporation, partnership, trust or joint
venture).
"Rate" is defined in Section 2.2 of this Note.
"Senior Credit Agreement" shall mean the Note and Warrant Purchase
Agreement between Easyriders, Inc., Easyriders Sub II, Inc. and Nomura Holding
America Inc. dated September 23, 1998 among the Maker and the lenders from time
to time under such Credit Agreement, as such agreement may be modified, amended,
supplemented, restated, extended, deferred, renewed, replaced, refunded or
refinanced, in whole or in part, from time to time, and each instrument now or
hereafter evidencing, governing, guarantying or securing any Indebtedness under
such Credit Agreement, as such agreement may be modified, amended, supplemented,
restated, extended, deferred, renewed, replaced, refunded or refinanced, in
whole or in part, from time to time.
"Senior Creditors" shall mean the holders from time to time of the
Senior Debt of Maker.
"Senior Debt" shall mean all obligations and liabilities of Maker for
the payment of principal, interest, penalties, fees and other amounts under or
in respect of (i) the Senior Credit Agreement (including without limitation the
contingent obligation of the Maker in respect of letters of credit issued
pursuant thereto), and (ii) any other Indebtedness of the Maker, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to this Note. Without
limitation of the foregoing, Senior Debt shall include any claim by the Senior
Creditors for interest accruing after any Insolvency Proceeding or any claim by
the Senior Creditors for such interest which would have accrued in the absence
of such Insolvency Proceeding, whether or not such interest is allowed as a
claim in such Insolvency Proceeding.
"Stock Contribution and Sale Agreement" means the Stock Contribution and
Sale Agreement dated June 30, 1998, by and among Maker, Payee, Newriders, Inc.,
Easyriders Sub II, Inc. and the Paisano Companies (as defined therein), as
amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
SECTION 2. Terms.
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<PAGE> 3
SECTION 2.1 Repayment of Principal. Subject to Section 3 hereof, the
principal balance of this Note shall be payable by Maker in lawful money of the
United States of America and in immediately payable funds on September 23, 2003;
provided, however, that Maker shall have the right from time to time to extend
the maturity date of this Note for such period(s) of time as Maker shall specify
in a written notice given to Payee at least thirty days prior to the
then-current maturity date of this Note; provided further, however, that the
maturity date of this Note may not be extended past September 23, 2008 (the
maturity date of this Note, as it may be extended from time to time, is referred
to herein as the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount of
this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1999, the
Rate shall be six percent (6%);
(ii) From September 23, 1999 until September 23, 2000,
the Rate shall be seven percent (7%);
(iii) From September 23, 2000 until September 23, 2001,
the Rate shall be eight percent (8%);
(iv) From September 23, 2001 until September 23, 2002,
the Rate shall be nine percent (9%); and
(v) From September 23, 2002 until such time as the
principal balance of this Note shall be paid, the Rate shall be ten percent
(10%).
(b) Accrued interest on the outstanding principal amount of this
Note shall be paid in arrears on the 23rd day of each September, December, March
and June, commencing with the first such date to occur after the date hereof and
at maturity (each an "Interest Payment Date"), until the Obligations are paid in
full, except that Maker shall have the right to defer up to one-half of the
interest payable on any Interest Payment Date during the first two years of this
Note. The amount of interest deferred pursuant to this Section will be added to
the principal balance of this Note on the Interest Payment Date as of which it
is deferred. If the Maturity Date is extended pursuant to Section 2.1 hereof,
then to the extent permitted under the terms of all instruments evidencing any
Senior Debt of the Maker, Maker shall pay to Payee on the date such extension
period commences, an amount of principal equal to the amount of deferred
interest which was added to the principal balance of this Note in accordance
with the immediately preceding sentence. Interest hereunder shall be computed on
the basis of a year of 365 days for the actual number of days elapsed. If any
payment of principal or interest hereunder shall become due on a day which is
not a Business Day, such payment shall be due on the next succeeding Business
Day and such extension of time shall be included in computing interest in
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<PAGE> 4
connection with such payment. Both principal and interest hereunder are payable
to Payee by wire transfer to such account as Payee may, from time to time,
designate to Maker in writing.
(c) Notwithstanding anything to the contrary contained herein,
Maker may elect to prepay the outstanding principal amount of this Note at any
time either in whole or in part, without penalty. Any such prepayment shall be
accompanied by the amount of accrued interest on the amount prepaid. Maker shall
deliver written notice of such prepayment to Payee at least ten (10) days prior
to prepayment. Each notice of prepayment delivered pursuant to this subsection
(c) shall set forth the amount of such prepayment and the proposed date of such
prepayment. Upon payment in full of this Note, Payee shall surrender this Note
to Maker for cancellation. Upon prepayment in part of principal, Payee shall
make a notation of such prepayment on the Schedule of Payments attached as
Exhibit A hereto and deliver a copy of such schedule to Maker. The aggregate
unpaid principal amount set forth on such schedule shall be rebuttably
presumptive evidence of the principal amount owing and unpaid hereunder, but the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligation of the Maker hereunder to make payments on this Note when
due.
SECTION 3. Subordination
SECTION 3.1 Nature of Subordination. Until the Senior Debt has been
indefeasibly paid in full, Payee may not (i) except for interest payments
pursuant to Section 2(b) hereof, receive, directly or indirectly, any payment,
advance, credit, security or new or further evidence of any kind whatsoever on
account of or with respect to any of the obligations evidenced by this Note,
(ii) accelerate any amount owing with respect to this Note, (iii) sue upon, take
or permit to be taken any action to assert, collect or enforce this Note, or
(iv) file or join in the filing of any peti tion to commence any Insolvency
Proceeding.
SECTION 3.2 Insolvency Proceedings.
(a) Upon any distribution of assets of Maker to creditors of
Maker upon or in connection with an Insolvency Proceeding, any payment
or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to
the obligations evidenced by this Note shall be paid or delivered
directly to the Senior Creditors for application (in case of cash) to,
or as collateral (in case of non-cash property or securities) for, the
payment or prepayment of the Senior Debt until the Senior Debt has been
indefeasibly paid in full.
(b) If any Insolvency Proceeding is commenced by or against
Maker, the Senior Creditors are hereby irrevocably authorized and
empowered (in their own names or otherwise), but shall have no
obligation, to (i) demand, sue for, collect and receive every payment or
distribution referred to in subsection (a) above and give acquittance
therefor and (ii) file claims and proofs of claim and take such other
action (including without limitation voting the obligations evidenced by
this Note and enforcing any security interest or other lien securing
payment of this Note) as it may deem necessary or advisable for the
exercise of any of the rights or interests of the Senior Creditors.
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<PAGE> 5
(c) If any Insolvency Proceeding is commenced by or against
Maker, Payee shall duly and promptly take such action as the Senior
Creditors may request to (i) collect the obligations evidenced by this
Note for the account of the Senior Creditors, and file appropriate
claims or proofs of claim in respect of the obligations evidenced by
this Note, (ii) execute and deliver to the Senior Creditors such powers
of attorney, assignments or other instruments as the Senior Creditors
may request in order to enable them to enforce any and all claims with
respect to this Note and any security interests and other liens securing
payment of this Note, and (iii) collect and receive any and all payments
and distributions which may be payable or deliverable upon or with
respect to this Note.
SECTION 3.3 Liens. To the extent that Payee now has or hereafter obtains
a lien or security interest in any assets of Maker:
(a) Such lien or security interest shall be at all times subject
and subordinate to any lien or security interest which the Senior
Creditors now have or hereafter obtain in such assets without regard to
the time or manner in which the respective liens and security interests
of the parties hereto may have been created or perfected; and
(b) Payee may not at any time exercise any rights or remedies
with respect to or otherwise enforce any lien or security interest it
now has or hereafter obtains in Maker's assets, or apply any assets
covered by any such lien or security interest to any claim now or
hereafter existing against Maker.
SECTION 3.4 Waivers. Maker and Payee waive notice of acceptance of this
Note by the Senior Creditors, and Payee waives notice of and consents to the
making, amount and terms of (i) any loans or other extensions of credit which
the Senior Creditors may make to Maker from time to time, (ii) any renewal or
extension thereof and (iii) any action which the Senior Creditors may take or
omit in their sole and absolute discretion with respect thereto.
SECTION 3.5 Rights of the Senior Creditors.
(a) This Subordination Agreement shall constitute a continuing
agreement of subordination and the Senior Creditors may, from time to
time and without notice to Payee, lend money to or make other financial
arrangements with Maker in reliance hereon.
(b) In the event that any payment or distribution, or any
security, proceeds thereof or property or funds payable as protection
for use, sale or lease of such security, is received by Payee, such
property shall be received and held in trust for the benefit of the
Senior Creditors, shall be segregated from other funds and property held
by Payee, and shall be immediately paid over to the Senior Creditors, as
their interests may appear, in the form received (together with any
endorsements or documents as may be necessary to effectively negotiate
or transfer such property) for application (in case of cash) to, or as
5
<PAGE> 6
collateral (in case of non-cash property or securities) for, the payment
or prepayment of the Senior Debt.
(c) Payee authorizes the Senior Creditors, without notice or
demand and without affecting or impairing Payee's obligations hereunder,
from time to time to (i) renew, compromise, extend, increase, accelerate
or otherwise change the time for payment of, or otherwise change any of
the other terms of the Senior Debt or any part thereof, including
without limitation to increase or decrease the rate of interest thereon;
(ii) take and hold security for the payment of the Senior Debt and
exchange, enforce, waive, release and fail to perfect any such security;
(iii) apply such security and direct the order or manner of sale thereof
as the Senior Creditors in their sole discretion may determine; and (iv)
release and substitute any one or more endorsers, warrantors, Maker or
other obligor. The Senior Creditors may without notice assign their
rights under this Note in whole or in part to any other Senior Creditor.
(d) Payee acknowledges and agrees that it shall have the sole
responsibility for obtaining from Maker such information concerning
Maker's financial condition or business operations as Payee may require,
and that the Senior Creditors have no duty at any time to disclose to
Payee any information relating to the business operations or financial
condition of Maker.
(e) The Senior Creditors may notify any assignee, trustee or
interim trustee in bankruptcy, receiver, debtor in possession or other
person or persons of their rights under this Note.
(f) Neither Payee nor Maker shall amend, extend or otherwise
change the terms of this Note without the consent of the Senior
Creditors.
(g) After the Senior Debt has been indefeasibly paid in full, the
Payee shall be subrogated to the rights of the Senior Creditors to
receive payments or distributions applicable to Senior Debt, to the
extent that distributions otherwise payable to Payee have been applied
to the payment of Senior Debt. Payee agrees that the provisions of this
Section 3 shall not be affected by any action, or failure to act, by any
Senior Creditor which results, or may result, in impairing or
extinguishing any right of reimbursement, subrogation or other right or
remedy of Payee.
SECTION 3.6 Third Parties. The provisions of Section 3 of this Note are
intended solely for the purpose of defining the relative rights of the Senior
Creditors and the Payee. Nothing contained in this Section 3 is intended to or
shall effect or impair (i) as between Maker, its creditors (other than the
Senior Creditors) and Payee, the obligation of Maker (which is absolute and
unconditional) to pay the obligations evidenced by this Note in accordance with
the terms hereof, and (ii) the relative rights of Payee and creditors of Maker
other than the Senior Creditors.
6
<PAGE> 7
SECTION 3.7 Subsequent Holders. Any holder of this Note by such holder's
acceptance of this Note agrees to be bound by, and take this Note subject to,
the rights of the Senior Creditors and the obligations of Payee set forth in
this Section 3.
SECTION 4. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any payment of interest on this Note
when the same shall become due and payable, and such failure shall continue for
a period of five (5) days after written notice thereof has been given to Maker
by Payee (a "Payment Default"); provided, however, that Maker shall have the
right to cure any such Payment Default for an additional period of twenty-five
(25) days on two occasions during the term of this Note;
(b) Maker shall fail to pay the principal amount of this Note on
the Maturity Date;
(c) Maker makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates its approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Maker bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of Maker in an involuntary case under
Federal bankruptcy laws as now or hereafter constituted, and such decree or
order remains in effect for more than sixty (60) days, whether or not
consecutive.
then Payee or Assignee may by notice in writing to Maker declare all amounts
owing with respect to this Note to be, and they shall thereupon forthwith mature
and become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. No waiver by Payee of any Event of
Default shall operate as a waiver of any
7
<PAGE> 8
other Event of Default or the same Event of Default on a future occasion. No
delay on the part of Payee in the exercise of any right or remedy shall operate
as a waiver thereof, and no single or partial exercise by Payee of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all reasonable
out-of-pocket expenses incurred or sustained by Payee in connection with the
enforcement or protection of the rights of Payee under this Note, including
costs of collection and the fees and disbursements of counsel.
SECTION 5. Miscellaneous.
(a) This Note may not be assigned by Maker or Payee without the
express written consent of the other party.
(b) This Note may not be amended except by a writing signed by
Maker and Payee.
(c) Whenever in this Note there is reference made to either Payee
or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(d) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: Bill Prather
Fax No.: (714) 719-4999
To Payee:
Joseph Teresi
2400 Laguna Drive
Fort Lauderdale, FL 33316
Fax No.: (954) 462-0223
8
<PAGE> 9
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA AND OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY LITIGATION RELATING THERETO
EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY
CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(f) The Section and subsection titles contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
(g) The invalidity or unenforceability of any provision of this
Note in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Note in that jurisdiction or the validity or enforceability of
this Note, including that provision, in any other jurisdiction. If any
restriction or provision of this Note is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(h) Nothing in this Note is intended or shall be construed to
give any Person other than the parties hereto any legal or equitable right,
remedy or claim under or in respect of this Note or any provision contained
herein.
(i) Upon receipt by Maker of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, Maker will make
and deliver a new Note of like tenor in lieu of this Note against receipt of
Payee's undertaking to indemnify Maker against and hold it harmless from all
reasonable costs arising as a result of its making and delivery of the new Note.
This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
EASYRIDERS, INC.
By: /s/ William E. Prather
------------------------------------
9
<PAGE> 10
Name: William E. Prather
Title: President and Chief Executive
Officer
10
<PAGE> 1
EXHIBIT 10.4.4
SUBORDINATED PROMISSORY NOTE
$3,000,000 September 23, 1998
FOR VALUE RECEIVED, Easyriders, Inc., a Delaware corporation ("Maker"),
promises to pay to Joseph Teresi ("Payee"), at the place and in the manner
specified below, the principal sum of Three Million Dollars ($3,000,000),
together with interest on the unpaid principal balance hereof at the rate per
annum set forth below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 4 of this Note.
"Indebtedness" means, with respect to the Maker, (i) any indebtedness of
such Maker, without duplication, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing capital lease obligations or the balance
deferred and unpaid of the purchase price of any property, as well as all
indebtedness of others secured by a lien on any asset of the Maker (whether or
not such indebtedness is assumed by the Maker) and (ii) to the extent not
included in clause (i), any guarantee by the Maker of any indebtedness of any
other person or entity.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Note" means this Subordinated Promissory Note, as the same may be
amended from time to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 4 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability corporation, partnership, trust or joint
venture).
"Rate" is defined in Section 2.2 of this Note.
"Senior Credit Agreement" shall mean the Note and Warrant Purchase
Agreement between Easyriders, Inc., Easyriders Sub II, Inc. and Nomura Holding
America Inc. dated September 23, 1998 among the Maker and the lenders from time
to time under such Credit Agreement, as such
<PAGE> 2
agreement may be modified, amended, supplemented, restated, extended, deferred,
renewed, replaced, refunded or refinanced, in whole or in part, from time to
time, and each instrument now or hereafter evidencing, governing, guarantying or
securing any Indebtedness under such Credit Agreement, as such agreement may be
modified, amended, supplemented, restated, extended, deferred, renewed,
replaced, refunded or refinanced, in whole or in part, from time to time.
"Senior Creditors" shall mean the holders from time to time of the
Senior Debt of Maker.
"Senior Debt" shall mean all obligations and liabilities of Maker for
the payment of principal, interest, penalties, fees and other amounts under or
in respect of (i) the Senior Credit Agreement (including without limitation the
contingent obligation of the Maker in respect of letters of credit issued
pursuant thereto), and (ii) any other Indebtedness of the Maker, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to this Note. Without
limitation of the foregoing, Senior Debt shall include any claim by the Senior
Creditors for interest accruing after any Insolvency Proceeding or any claim by
the Senior Creditors for such interest which would have accrued in the absence
of such Insolvency Proceeding, whether or not such interest is allowed as a
claim in such Insolvency Proceeding.
"Stock Contribution and Sale Agreement" means the Stock Contribution and
Sale Agreement dated June 30, 1998, by and among Maker, Payee, Newriders, Inc.,
Easyriders Sub II, Inc. and the Paisano Companies (as defined therein), as
amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. Subject to Section 3 hereof, the
principal balance of this Note shall be payable by Maker in lawful money of the
United States of America and in immediately payable funds on September 23, 1998,
subject to Section 3 hereof (the maturity date of this Note, as it may be
extended from time to time, is referred to herein as the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount of
this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1998, the
Rate shall be twelve percent (12%); and
(ii) On the first Business Day of each month beginning on
September 23, 1998, the Rate shall be increased by an additional one percent
(1%), provided, however, that at no time shall the Rate exceed twenty percent
(20%).
2
<PAGE> 3
(b) Accrued interest on the outstanding principal amount of this
Note shall be paid in arrears on the 23rd day of each September, December, March
and June, commencing with the first such date to occur after the date hereof and
at maturity (each an "Interest Payment Date"), until the Obligations are paid in
full. Interest hereunder shall be computed on the basis of a year of 365 days
for the actual number of days elapsed. If any payment of principal or interest
hereunder shall become due on a day which is not a Business Day, such payment
shall be due on the next succeeding Business Day and such extension of time
shall be included in computing interest in connection with such payment. Both
principal and interest hereunder are payable to Payee by wire transfer to such
account as Payee may, from time to time, designate to Maker in writing.
(c) Notwithstanding anything to the contrary contained herein,
Maker may elect to prepay the outstanding principal amount of this Note at any
time either in whole or in part, without penalty. Any such prepayment shall be
accompanied by the amount of accrued interest on the amount prepaid. Maker shall
deliver written notice of such prepayment to Payee at least ten (10) days prior
to prepayment. Each notice of prepayment delivered pursuant to this subsection
(c) shall set forth the amount of such prepayment and the proposed date of such
prepayment. Upon payment in full of this Note, Payee shall surrender this Note
to Maker for cancellation. Upon prepayment in part of principal, Payee shall
make a notation of such prepayment on the Schedule of Payments attached as
Exhibit A hereto and deliver a copy of such schedule to Maker. The aggregate
unpaid principal amount set forth on such schedule shall be rebuttably
presumptive evidence of the principal amount owing and unpaid hereunder, but the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligation of the Maker hereunder to make payments on this Note when
due.
SECTION 3. Subordination.
SECTION 3.1 Nature of Subordination. Until the Senior Debt has been
indefeasibly paid in full, Payee may not (i) except for interest payments
pursuant to Section 2(b) hereof, receive, directly or indirectly, any payment,
advance, credit, security or new or further evidence of any kind whatsoever on
account of or with respect to any of the obligations evidenced by this Note,
(ii) accelerate any amount owing with respect to this Note, (iii) sue upon, take
or permit to be taken any action to assert, collect or enforce this Note, or
(iv) file or join in the filing of any petition to commence any Insolvency
Proceeding.
SECTION 3.2 Insolvency Proceedings.
(a) Upon any distribution of assets of Maker to creditors of
Maker upon or in connection with an Insolvency Proceeding, any payment
or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to
the obligations evidenced by this Note shall be paid or delivered
directly to the Senior Creditors for application (in case of cash) to,
or as collateral (in case of non-cash property or securities) for, the
payment or prepayment of the Senior Debt until the Senior Debt has been
indefeasibly paid in full.
3
<PAGE> 4
(b) If any Insolvency Proceeding is commenced by or against
Maker, the Senior Creditors are hereby irrevocably authorized and
empowered (in their own names or otherwise), but shall have no
obligation, to (i) demand, sue for, collect and receive every payment or
distribution referred to in subsection (a) above and give acquittance
therefor and (ii) file claims and proofs of claim and take such other
action (including without limitation voting the obligations evidenced by
this Note and enforcing any security interest or other lien securing
payment of this Note) as it may deem necessary or advisable for the
exercise of any of the rights or interests of the Senior Creditors.
(c) If any Insolvency Proceeding is commenced by or against
Maker, Payee shall duly and promptly take such action as the Senior
Creditors may request to (i) collect the obligations evidenced by this
Note for the account of the Senior Creditors, and file appropriate
claims or proofs of claim in respect of the obligations evidenced by
this Note, (ii) execute and deliver to the Senior Creditors such powers
of attorney, assignments or other instruments as the Senior Creditors
may request in order to enable them to enforce any and all claims with
respect to this Note and any security interests and other liens securing
payment of this Note, and (iii) collect and receive any and all payments
and distributions which may be payable or deliverable upon or with
respect to this Note.
SECTION 3.3 Liens. To the extent that Payee now has or hereafter obtains
a lien or security interest in any assets of Maker:
(a) Such lien or security interest shall be at all times subject
and subordinate to any lien or security interest which the Senior
Creditors now have or hereafter obtain in such assets without regard to
the time or manner in which the respective liens and security interests
of the parties hereto may have been created or perfected; and
(b) Payee may not at any time exercise any rights or remedies
with respect to or otherwise enforce any lien or security interest it
now has or hereafter obtains in Maker's assets, or apply any assets
covered by any such lien or security interest to any claim now or
hereafter existing against Maker.
SECTION 3.4 Waivers. Maker and Payee waive notice of acceptance of this
Note by the Senior Creditors, and Payee waives notice of and consents to the
making, amount and terms of (i) any loans or other extensions of credit which
the Senior Creditors may make to Maker from time to time, (ii) any renewal or
extension thereof and (iii) any action which the Senior Creditors may take or
omit in their sole and absolute discretion with respect thereto.
SECTION 3.5 Rights of the Senior Creditors.
(a) This Subordination Agreement shall constitute a continuing
agreement of subordination and the Senior Creditors may, from time to
time and without notice to Payee, lend money to or make other financial
arrangements with Maker in reliance hereon.
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<PAGE> 5
(b) In the event that any payment or distribution, or any
security, proceeds thereof or property or funds payable as protection
for use, sale or lease of such security, is received by Payee, such
property shall be received and held in trust for the benefit of the
Senior Creditors, shall be segregated from other funds and property held
by Payee, and shall be immediately paid over to the Senior Creditors, as
their interests may appear, in the form received (together with any
endorsements or documents as may be necessary to effectively negotiate
or transfer such property) for application (in case of cash) to, or as
collateral (in case of non-cash property or securities) for, the payment
or prepayment of the Senior Debt.
(c) Payee authorizes the Senior Creditors, without notice or
demand and without affecting or impairing Payee's obligations hereunder,
from time to time to (i) renew, compromise, extend, increase, accelerate
or otherwise change the time for payment of, or otherwise change any of
the other terms of the Senior Debt or any part thereof, including
without limitation to increase or decrease the rate of interest thereon;
(ii) take and hold security for the payment of the Senior Debt and
exchange, enforce, waive, release and fail to perfect any such security;
(iii) apply such security and direct the order or manner of sale thereof
as the Senior Creditors in their sole discretion may determine; and (iv)
release and substitute any one or more endorsers, warrantors, Maker or
other obligor. The Senior Creditors may without notice assign their
rights under this Note in whole or in part to any other Senior Creditor.
(d) Payee acknowledges and agrees that it shall have the sole
responsibility for obtaining from Maker such information concerning
Maker's financial condition or business operations as Payee may require,
and that the Senior Creditors have no duty at any time to disclose to
Payee any information relating to the business operations or financial
condition of Maker.
(e) The Senior Creditors may notify any assignee, trustee or
interim trustee in bankruptcy, receiver, debtor in possession or other
person or persons of their rights under this Note.
(f) Neither Payee nor Maker shall amend, extend or otherwise
change the terms of this Note without the consent of the Senior
Creditors.
(g) After the Senior Debt has been indefeasibly paid in full, the
Payee shall be subrogated to the rights of the Senior Creditors to
receive payments or distributions applicable to Senior Debt, to the
extent that distributions otherwise payable to Payee have been applied
to the payment of Senior Debt. Payee agrees that the provisions of this
Section 3 shall not be affected by any action, or failure to act, by any
Senior Creditor which results, or may result, in impairing or
extinguishing any right of reimbursement, subrogation or other right or
remedy of Payee.
5
<PAGE> 6
SECTION 3.6 Third Parties. The provisions of Section 3 of this Note are
intended solely for the purpose of defining the relative rights of the Senior
Creditors and the Payee. Nothing contained in this Section 3 is intended to or
shall effect or impair (i) as between Maker, its creditors (other than the
Senior Creditors) and Payee, the obligation of Maker (which is absolute and
unconditional) to pay the obligations evidenced by this Note in accordance with
the terms hereof, and (ii) the relative rights of Payee and creditors of Maker
other than the Senior Creditors.
SECTION 3.7 Subsequent Holders. Any holder of this Note by such holder's
acceptance of this Note agrees to be bound by, and take this Note subject to,
the rights of the Senior Creditors and the obligations of Payee set forth in
this Section 3.
SECTION 4. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any payment of interest on this Note
when the same shall become due and payable, and such failure shall continue for
a period of five (5) days after written notice thereof has been given to Maker
by Payee (a "Payment Default"); provided, however, that Maker shall have the
right to cure any such Payment Default for an additional period of twenty-five
(25) days on two occasions during the term of this Note;
(b) Maker shall fail to pay the principal amount of this Note on
the Maturity Date;
(c) Maker makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates its approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Maker bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of Maker in an involuntary case under
Federal bankruptcy laws as now or hereafter constituted, and such decree or
order remains in effect for more than sixty (60) days, whether or not
consecutive.
then Payee or Assignee may by notice in writing to Maker declare all amounts
owing with respect to this Note to be, and they shall thereupon forthwith mature
and become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
6
<PAGE> 7
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. No waiver by Payee of any Event of
Default shall operate as a waiver of any other Event of Default or the same
Event of Default on a future occasion. No delay on the part of Payee in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by Payee of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all reasonable
out-of-pocket expenses incurred or sustained by Payee in connection with the
enforcement or protection of the rights of Payee under this Note, including
costs of collection and the fees and disbursements of counsel.
SECTION 5. Miscellaneous.
(a) This Note may not be assigned by Maker or Payee without the
express written consent of the other party.
(b) This Note may not be amended except by a writing signed by
Maker and Payee.
(c) Whenever in this Note there is reference made to either Payee
or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(d) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: Bill Prather
Fax No.: (714) 719-4999
7
<PAGE> 8
To Payee:
Joseph Teresi
2400 Laguna Drive
Fort Lauderdale, FL 33316
Fax No.: (954) 462-0223
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA AND OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY LITIGATION RELATING THERETO
EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY
CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(f) The Section and subsection titles contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
(g) The invalidity or unenforceability of any provision of this
Note in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Note in that jurisdiction or the validity or enforceability of
this Note, including that provision, in any other jurisdiction. If any
restriction or provision of this Note is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(h) Nothing in this Note is intended or shall be construed to
give any Person other than the parties hereto any legal or equitable right,
remedy or claim under or in respect of this Note or any provision contained
herein.
(i) Upon receipt by Maker of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, Maker will make
and deliver a new Note of like tenor in lieu of this Note against receipt of
Payee's undertaking to indemnify Maker against and hold it harmless from all
reasonable costs arising as a result of its making and delivery of the new Note.
8
<PAGE> 9
This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
EASYRIDERS, INC.
By: /s/ William E. Prather
-----------------------------------------
Name: William E. Prather
Title: President and Chief Executive
Officer
9
<PAGE> 1
EXHIBIT 10.4.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of September 23, 1998, by and between Paisano Publications, Inc., a California
corporation (the "Company") and Robert Davis (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the publishing of special interest
magazines directed to motorcycle and tattoo enthusiasts;
WHEREAS, the Executive, by education and experience, possesses
extraordinary qualifications to serve as an executive officer of the Company;
and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment with the Company, in each case upon the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company, subject to the terms and conditions set
forth herein.
2. TERM. Subject to the provisions hereof, the term of the Executive's
employment by the Company under this Agreement shall be for a period of one (1)
year commencing on the date hereof; provided that such term of employment shall
continue thereafter unless and until terminated by either the Company or the
Executive upon no less than sixty (60) days' prior written notice to the other
of the desire to terminate such employment. The term of the Executive's
employment hereunder, including any continuation of the original term, is
hereinafter referred to as the "Employment Period."
3. POSITION AND DUTIES. During the Employment Period, the Executive shall serve
as Chief Financial Officer of the Company, with such assignments, powers and
duties as are assigned or delegated to him by the Board of Directors or
President of the Company. Such assignments, powers and duties may, from time to
time, be modified by the Company, as the Company's needs may require. The
Executive shall also, at the request of the Company, perform similar services
for any Affiliate (as hereinafter defined) of the Company without additional
compensation. The Executive agrees to devote all of his business time, skill,
attention and best efforts to the business of the Company and its Affiliates in
the advancement of
<PAGE> 2
the best interests of the Company and its Affiliates. As used in this Agreement,
the term "Affiliate" of the Company means any person, corporation or other
entity that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the Company.
Notwithstanding anything to the contrary contained herein, the Executive shall
be subject to and be bound by all employment-related agreements and policies
adopted by the Company and applicable to the Company's employees generally.
4. COMPENSATION. For all services rendered by the Executive to the Company
during the Employment Period, the Company shall pay to the Executive a salary at
the annual rate of One Hundred Sixty Three Thousand ($163,000). The compensation
is to be payable, subject to such withholdings as are required by law, in
installments in accordance with the Company's customary payroll practices.
5. EXPENSES. The Company shall reimburse the Executive for such travel,
entertainment and other business expenses reasonably incurred by him in
connection with the business of the Company and the performance of his duties
hereunder upon presentation by the Executive to the Company of substantiating
evidence thereof in such form as the Company reasonably may require from time to
time.
6. OFFICE FACILITIES. During the Employment Period, the Company will furnish the
Executive, without charge, with suitable office facilities for the purpose of
performing his duties hereunder, which facilities shall include secretarial,
telephone, clerical and support personnel and services.
7. TERMINATION.
A. TERMINATION DUE TO DEATH OR DISABILITY. If the Executive dies or
becomes disabled during the Employment Period, the Executive's salary and other
rights under this Agreement or as an employee of the Company shall terminate at
the end of the month during which death or disability occurs. For purposes of
this Agreement, the Executive shall be deemed to be "disabled" if, at any time
during the Employment Period, the Executive shall have been unable to perform
the duties of his employment hereunder for ninety (90) days in a period of two
hundred seventy (270) days.
B. TERMINATION FOR CAUSE. If the Executive fails to perform his duties
hereunder or to comply with any of the material provisions hereof or commits any
act of misconduct, malfeasance, gross negligence or disloyalty or disregards or
seriously neglects his duties as an executive and employee of the Company, the
Employment Period and the Executive's salary and other rights under this
Agreement as an employee of the Company shall terminate effective upon notice
from the Company to the Executive, but such termination shall not affect the
liability of the Executive by reason of his misconduct, malfeasance, gross
negligence or disloyalty.
<PAGE> 3
C. TERMINATION FOR REASONS OTHER THAN CAUSE, DEATH OR DISABILITY. If the
Executive's employment shall be terminated by the Company for reasons other than
as stated in Sections 7(A) or (B), the Company shall continue to pay the
Executive as damages the salary specified in Section 4 for the remainder of the
Employment Period, subject to the Executive's obligation under law to mitigate
such damages or to offset such damages by amounts earned by the Executive
subsequent to the termination of this Agreement.
8. COVENANT NOT TO DISCLOSE. The Executive covenants and agrees that he will
not, at any time during or after the termination of his employment by the
Company, communicate or disclose to any person, corporation or other entity, or
use for his own account, or advise, discuss with, or in any way assist any other
person, corporation or other entity in obtaining or learning about, without the
prior written consent of the Company, confidential information concerning the
business and affairs of the Company or any of its Affiliates. The Executive
further covenants and agrees that he shall retain all such knowledge and
information concerning the foregoing in trust for the sole benefit of the
Company and its Affiliates and their respective successors and assigns.
9. COVENANT NOT TO COMPETE. The Executive covenants and agrees that, during the
Employment Period and for a period of one (1) year after the termination of the
Employment Period, the Executive will not, directly or indirectly, own, render
services or advice to, or be engaged in a business which is similar to or in
competition with the business of the Company or any of its Affiliates, except
upon the written consent of the Company. The foregoing prohibition shall
specifically extend to (a) soliciting any employees of the Company for any
reason and (b) soliciting any customers, suppliers, sponsors or promoters of the
Company with respect to any activities similar to those engaged in by the
Company.
10. ESSENTIAL NATURE OF COVENANTS. The covenants contained in Sections 8 and 9
of this Agreement shall be construed as independent of any other provision of
this Agreement and the existence of any claim or cause of action of the
Executive against the Company or any of its Affiliates, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of said covenants. The Executive understands that the covenants
contained in Sections 8 and 9 are essential elements of the transactions
contemplated by this agreement and, but for the agreement of the Executive to
Sections 8 and 9, the Company would not have agreed to enter into such
transactions. The Executive has been advised to consult with his counsel in
order to be informed in all respects concerning the reasonableness and propriety
of Sections 8 and 9 with specific regard to the nature of the business conducted
by the Company, and the Executive acknowledges that Sections 8 and 9 are
reasonable in all respects.
11. REMEDIES. In the event of a breach or threatened breach by the Executive of
Section 8 or 9, the Company shall be entitled to make application for a
temporary restraining order and an injunction restraining the Executive from the
commission of such breach. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.
<PAGE> 4
12. WAIVER OR BREACH. The waiver by the Company of a breach of any provision of
this Agreement by the Executive shall not operate or be construed as a waiver of
any subsequent breach by the Executive.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective permitted successors,
assigns, heirs and legal representatives. The Company may assign this Agreement
to an Affiliate without the consent of the Executive. The Executive may not
assign this Agreement.
14. SEVERABILITY. The invalidity of all or any part of any section of this
Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section. If any provision of this Agreement is so broad as to
be unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall, when executed, be deemed to be an original, but all of
which together shall constitute one and the same instrument.
16. GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with the laws of the state of California.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto and supersedes all prior agreements, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PAISANO PUBLICATIONS, INC.
By: /s/ William Prather /s/ Robert Davis
------------------------------ -----------------------------
Name: William Prather ROBERT DAVIS
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of September 23, 1998, by and between Paisano Publications, Inc., a California
corporation (the "Company") and Joseph Teresi (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in a combined publishing, entertainment,
apparel, accessory and restaurant business which markets services and products
to persons who identify with the "freedom of the road" lifestyle surrounding the
American-made cruiser motorcycle;
WHEREAS, the Executive, by education and experience, possesses
extraordinary qualifications to serve as an executive officer of the Company;
and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment with the Company, in each case upon the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company, subject to the terms and conditions set
forth herein.
2. TERM. Subject to the provisions hereof, the term of the Executive's
employment by the Company under this Agreement shall be for a period of (a) five
(5) years or (b) the date on which the principal and interest on the Newco #1
Notes, as this term is defined in Section 2.2(b) of that certain Stock
Contribution and Sale Agreement, dated June 30, 1998, by and among Newriders,
Inc., a Nevada corporation, the Company, Easyriders Sub II, Inc., a California
corporation, the Executive, Paisano Publications, Inc., a California corporation
("Paisano Publications") and certain affiliated companies of Paisano
Publications, is fully paid, whichever comes first, commencing on the date
hereof; provided that such term of employment shall continue thereafter unless
and until terminated by either the Company or the Executive upon no less than
sixty (60) days' prior written notice to the other of the desire to terminate
such employment. The term of the Executive's employment hereunder, including any
continuation of the original term, is hereinafter referred to as the "Employment
Period."
3. POSITION AND DUTIES. During the Employment Period, the Executive shall serve
as Chairman and Publisher of Paisano Publications, Inc., a wholly-owned
subsidiary of the Company, with such assignments, powers and duties as are
assigned or delegated to him by the Board of Directors of the Company. Such
assignments, powers and duties may, from time to
<PAGE> 2
time, be modified by the Company, as the Company's needs may require. The
Executive shall also, at the request of the Company, perform similar services
for any Affiliate (as hereinafter defined) of the Company without additional
compensation. The Executive agrees to devote such amount of his business time,
skill, attention and best efforts to the business of the Company and its
Affiliates in the advancement of the best interests of the Company and its
Affiliates as was devoted by him to Paisano Publications, Inc. and its
affiliates during the year 1997. The nature of the services performed by the
Executive and the place of their performance will be consistent with the
Executive's desire to continue as a resident of the state of Florida. As used in
this Agreement, the term "Affiliate" of the Company means any person,
corporation or other entity that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Company. Notwithstanding anything to the contrary contained herein, the
Executive shall be subject to and be bound by all employment-related agreements
and policies adopted by the Company and applicable to the Company's employees
generally.
4. COMPENSATION. For all services rendered by the Executive to the Company
during the Employment Period, the Company shall pay to the Executive a salary at
the annual rate of One Hundred Fifty Thousand Dollars ($150,000). The
compensation is to be payable, subject to such withholdings as are required by
law, in installments in accordance with the Company's customary payroll
practices.
5. EXPENSES. The Company shall reimburse the Executive for such travel,
entertainment and other business expenses reasonably incurred by him in
connection with the business of the Company and the performance of his duties
hereunder upon presentation by the Executive to the Company of substantiating
evidence thereof in such form as the Company reasonably may require from time to
time.
6. OFFICE FACILITIES. During the Employment Period, the Company will furnish the
Executive, without charge, with the same office facilities and secretarial
support as was used by the Executive during the year 1997.
7. TERMINATION.
A. TERMINATION DUE TO DEATH OR DISABILITY. If the Executive dies or
becomes disabled during the Employment Period, the Executive's salary and other
rights under this Agreement or as an employee of the Company shall terminate at
the end of the month during which death or disability occurs. For purposes of
this Agreement, the Executive shall be deemed to be "disabled" if, at any time
during the Employment Period, the Executive shall have been unable to perform
the duties of his employment hereunder for ninety (90) days in a period of two
hundred seventy (270) days.
B. TERMINATION FOR CAUSE. If the Executive fails to perform his duties
hereunder or to comply with any of the material provisions hereof or commits any
act of misconduct, malfeasance, gross negligence or disloyalty or disregards or
seriously neglects his duties as an executive and employee of the Company, the
Employment Period and the Executive's salary and other rights under this
Agreement as an employee of the Company shall
<PAGE> 3
terminate effective upon notice from the Company to the Executive, but such
termination shall not affect the liability of the Executive by reason of his
misconduct, malfeasance, gross negligence or disloyalty.
C. TERMINATION BY MUTUAL AGREEMENT. The Executive and the Company, by
mutual agreement, may terminate this Agreement at any time.
D. OTHER TERMINATIONS. If the Executive's employment shall be terminated
by the Company for reasons other than as stated in Sections 7(A), (B) or (C),
the Company shall continue to pay the Executive as damages the salary specified
in Section 4 for the remainder of the Employment Period, subject to the
Executive's obligation under law to mitigate such damages or to offset such
damages by amounts earned by the Executive subsequent to the termination of this
Agreement.
8. COVENANT NOT TO DISCLOSE. The Executive covenants and agrees that he will
not, at any time during or after the termination of his employment by the
Company, communicate or disclose to any person, corporation or other entity, or
use for his own account, or advise, discuss with, or in any way assist any other
person, corporation or other entity in obtaining or learning about, without the
prior written consent of the Company, confidential information concerning the
business and affairs of the Company or any of its Affiliates. The Executive
further covenants and agrees that he shall retain all such knowledge and
information concerning the foregoing in trust for the sole benefit of the
Company and its Affiliates and their respective successors and assigns.
9. ESSENTIAL NATURE OF COVENANTS. The covenant contained in Section 8 of this
Agreement shall be construed as independent of any other provision of this
Agreement and the existence of any claim or cause of action of the Executive
against the Company or any of its Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of said covenant. The Executive understands that the covenant contained
in Section 8 is an essential element of the transactions contemplated by this
agreement and, but for the agreement of the Executive to Section 8, the Company
would not have agreed to enter into such transactions. The Executive has been
advised to consult with his counsel in order to be informed in all respects
concerning the reasonableness and propriety of Section 8 with specific regard to
the nature of the business conducted by the Company, and the Executive
acknowledges that Section 8 is reasonable in all respects.
10. REMEDIES. In the event of a breach or threatened breach by the Executive of
Section 8, the Company shall be entitled to make application for a temporary
restraining order and an injunction restraining the Executive from the
commission of such breach. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.
11. FOUNDING PUBLISHER. At the option of the Executive, upon expiration of the
Employment Period, the Executive shall continue to be listed as the "founding
publisher" (or similar term) in the masthead of "Easyriders" magazine.
<PAGE> 4
12. WAIVER OR BREACH. The waiver by the Company of a breach of any provision of
this Agreement by the Executive shall not operate or be construed as a waiver of
any subsequent breach by the Executive.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective permitted successors,
assigns, heirs and legal representatives. The Company may assign this Agreement
to an Affiliate without the consent of the Executive. The Executive may not
assign this Agreement.
14. SEVERABILITY. The invalidity of all or any part of any section of this
Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section. If any provision of this Agreement is so broad as to
be unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall, when executed, be deemed to be an original, but all of
which together shall constitute one and the same instrument.
16. GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with the laws of the state of California.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto and supersedes all prior agreements, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PAISANO PUBLICATIONS, INC.
By: /s/ Robert Davis /s/ Joseph Teresi
------------------------------ -----------------------------
Name: Robert Davis JOSEPH TERESI
Title: Vice President, CFO
<PAGE> 1
EXHIBIT 10.4.7
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of
September, 1998, by and between Paisano Publications, Inc., a California
corporation (the "Company") and Joseph Teresi ("Consultant").
WITNESSETH:
WHEREAS, the Company is acquiring from Consultant,
simultaneously with the execution of this Agreement, all of the outstanding
common stock of the Company and related entities (the "Paisano Companies"),
pursuant to a stock contribution and sale agreement, dated June 30, 1998, among
Easyriders, Inc., Newriders, Inc., Easyriders Sub II, Inc., Consultant and the
Paisano Companies (the "Contribution Agreement");
WHEREAS, Consultant has substantial knowledge and information
regarding, and experience with, the businesses engaged in by the Paisano
Companies (the "Business");
WHEREAS, the parties recognize that during a limited
transition period, a higher level of personal service may be required of
Consultant than that which is contemplated in his employment agreement with the
Company;
WHEREAS, Consultant desires to render certain transitional
consulting and business services to the Company and its affiliates commencing on
the Closing Date (as defined in the Contribution Agreement) and the Company and
its affiliates desire to receive such services from Consultant; and
WHEREAS, the parties hereto desire to set forth in writing
their agreement and understanding regarding such services.
NOW THEREFORE, in consideration of the agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consulting Services. Consultant shall provide
transitional consulting and business services to the Company and its affiliates
and render such advice, training and assistance respecting the management and
operation of the Business as the Company and its affiliates shall from time to
time request. The place where such services are rendered shall be consistent
with Consultant's desire to remain a resident of the state of Florida.
2. Term. This Agreement shall terminate without any further
liability or obligation hereunder on the date the Company's board of directors
notifies Consultant of its intent to terminate this Agreement.
<PAGE> 2
3. Consideration. In consideration of the consulting
services to be provided by Consultant and to the extent this Agreement has not
been earlier terminated, the Company shall pay to Consultant the following:
a. $5,000 on October 23, 1998;
b. $5,000 on November 23, 1998;
c. $5,000 on December 23, 1998;
d. $7,500 on January 23, 1999;
e. $10,000 on February 23, 1999;
f. $12,500 on March 23, 1999;
g. $15,000 on April 23, 1999;
h. $17,500 on May 23, 1999;
i. $20,000 on June 23, 1999;
j. $22,500 on July 23, 1999;
k. $25,000 on the 23rd day of each month that this Agreement is
in effect from and after August 23, 1999;
4. Enforceability; Severability. If any provision of this
Agreement is adjudicated to be invalid or unenforceable, then such provision
shall be deemed modified so as to be enforceable or, if required, deleted
herefrom, as the case may be, to render the remainder of this Agreement valid
and enforceable. The invalidity or unenforceability of any provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
5. Notices. All notices, demands, requests, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and shall be effective upon receipt if delivered by hand, or sent by
certified or registered United States mail, postage prepaid and return receipt
requested, or by prepaid overnight express service. Notices shall be sent to the
parties at the following addresses (or at such other address for
2
<PAGE> 3
a party as is specified by like notice; provided that such notice shall be
effective only upon receipt thereof):
If to the Company:
Paisano Publications, Inc.
c/o Easyriders, Inc.
1040 East Herndon Avenue
Suite 102
Fresno, California 93720
If to Consultant:
Joseph Teresi
at his then current address included in the personnel records
of the Company.
6. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Company and Consultant and their
respective heirs, legal representatives, successors and permitted assigns.
Consultant may not assign or transfer any of his rights or obligations under
this Agreement without the prior written consent of the Company. The Company may
assign this Agreement, in whole or in part.
7. Entire Agreement. This Agreement contains the entire
understanding between the Company and Consultant with respect to the subject
matter hereof and supersedes all prior negotiations and understandings between
the Company and Consultant with respect hereto. This Agreement may not be
amended or modified except by a written instrument signed by both the Company
and Consultant.
8. Waiver. No provision of this Agreement shall be deemed
waived by course of conduct, unless such waiver is made in a writing signed by
both parties hereto stating that it is intended specifically to modify this
Agreement, nor shall any course of conduct operate or be construed as a waiver
of any subsequent breach of this Agreement, whether of a similar or dissimilar
nature.
9. Applicable Law; Submission to Jurisdiction. This
Agreement and the rights, obligations and relations of the parties hereto shall
be governed by and construed and enforced in accordance with the laws of the
State of California without giving effect to the principles of conflicts of law
thereof. The parties hereto (a) submit for themselves, and any legal action or
proceeding relating to this Agreement or for recognition and enforcement of any
judgment in respect hereof, to the exclusive jurisdiction of the courts of the
State of California, the courts of the United States of America for the Southern
District of California, and appellate courts from any of the foregoing, (b)
consent that any action or proceeding shall be brought in such
3
<PAGE> 4
courts, and waive any objection that each may now or hereafter have to the
venue of any such action or proceeding in any such court, (c) agree that service
of process of any such action or proceeding may be effected by certified mail
(or any substantially similar form of mail), postage prepaid, to the appropriate
party at its or his address as provided herein, and service made shall be deemed
to be completed upon the earlier of actual receipt or five (5) days after the
same shall have been posted as aforesaid, and (d) agree that nothing herein
shall affect the right to effect service of process in any other manner
permitted by law.
10. Headings. The headings of sections of this Agreement are
for convenience of reference only and are not to be considered in construing
this Agreement.
11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which, when taken together, shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PAISANO PUBLICATIONS, INC.
By: /s/ Robert Davis
------------------------------------
Name: Robert Davis
Title: Vice President and CFO
/s/ Joseph Teresi
----------------------------------------
Joseph Teresi
4
<PAGE> 1
EXHIBIT 10.4.8
STOCKHOLDERS' VOTING AGREEMENT
Stockholders' Voting Agreement, dated as of September 23, 1998, by and
between John Martin ("Martin") and Joseph Teresi ("Teresi").
WHEREAS, Newriders, Inc., a Nevada corporation ("Newriders"), Easyriders,
Inc., a Delaware corporation and wholly-owned subsidiary of Newriders ("Newco
#1"), Easyriders Sub II, Inc., a California corporation and wholly-owned
subsidiary of Newco #1 ("Newco #3"), Teresi and several companies owned by
Teresi (the "Paisano Companies") entered into a stock contribution agreement
(the "Paisano Agreement") whereby Teresi will contribute to Newco #1 all of the
outstanding shares of capital stock of the Paisano Companies in exchange for
6,483,507 shares of common stock of Newco #1, a promissory note of Newco #3 in
the principal amount of $15,000,000 payable at closing, assumption of $7,000,000
of debt and three notes in an aggregate principal amount of $13,000,000 (the
"Teresi Notes"), as part of a transaction described in Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Newriders, Newco #1, William Prather and Marna Prather
(collectively, "Prather"), Martin and M & B Restaurants, L.C., a Delaware
limited liability company, d/b/a El Paso Barbeque Company entered into an LLC
interest contribution agreement (the "El Paso Agreement") whereby Martin and
Prather will contribute to Newco #1 all of their limited liability company
interests in El Paso in exchange for an aggregate of 2,000,000 shares of common
stock of Newco #1, as part of a transaction described in Section 351 of the
Code;
WHEREAS, Newriders, Newco #1 and Easyriders Sub, Inc., a Nevada corporation
and wholly-owned subsidiary of Newco #1 ("Newco #2), will enter into an
Agreement and Plan of Merger and Reorganization (the "Agreement and Plan of
Merger and Reorganization") whereby (i) Newco #2 will merge into Newriders, (ii)
the common stock of Newco #2 held by Newco #1 will be converted into one share
of Newriders common stock (constituting all of the outstanding capital stock of
Newriders) and (iii) the common stock of Newriders not held by Newco #1 will be
converted into common stock of Newco #1 on a one-for-one basis, all as part of a
transaction described in Sections 351, 368(a)(1)(A) and 368(a)(2)(E) of the
Code;
WHEREAS, immediately following consummation of the transactions
contemplated by the Paisano Agreement, the El Paso Agreement and the Agreement
and Plan of Merger and Reorganization, Martin and Teresi will be the beneficial
owners of, and be entitled to vote, approximately 5,132,947 and 6,993,507 shares
of common stock of Newco #1, respectively (along with all other voting
securities of Newco #1 beneficially owned by Martin and Teresi, respectively,
and all voting securities of Newco #1 purchased by (whether through open market
purchases, privately negotiated transactions or otherwise) or which otherwise
become beneficially owned by Martin and Teresi, respectively, after the date
hereof, the "Shares");
WHEREAS, Martin desires to vote his Shares in favor of Teresi's Director
Designees (as defined below) and Teresi desires to vote his Shares in favor of
Martin's Director Designees; and
WHEREAS, Martin desires to appoint Teresi as his attorney in fact and proxy
and Teresi desires to appoint Martin as his attorney in fact and proxy, with
respect to the Shares each is entitled to vote at any meeting of stockholders of
Newco #1 or by written consent of the holders of voting securities of Newco #1
without a meeting, on, and only on, the election and removal of directors of
Newco #1;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1. Election of Directors.
(a) Each of Martin and Teresi shall be entitled to designate to the other
four individuals to be voted for and to serve on the board of directors of Newco
#1 (each a "Director Designee") (provided that such individuals have not been
involved in any legal proceedings of the type specified in Item 401(f) of
Regulation S-K). Each of Martin and Teresi shall, and shall use his best efforts
to cause each of their respective affiliates (as used in this Agreement,
"affiliate" shall include, without limitation, any person or entity which,
directly or indirectly, controls, is controlled by or under common control with
such person or entity, members of any individual's immediate family and any
trusts, the trustee and all beneficiaries of which are such persons or members
of such individual's immediate family), to (i) nominate for election and
1
<PAGE> 2
(ii) vote all of his Shares entitled to vote thereon for the election of the
other party's Director Designees at any meeting of stockholders of Newco #1 or
by written consent of the holders of voting securities of Newco #1 without a
meeting.
(b) If at any time either Martin or Teresi shall notify Newco #1 of such
party's desire to have one or more of their respective Director Designees
removed, each of Martin and Teresi shall, and shall use his best efforts to
cause each of their respective affiliates to, subject to all applicable
requirements of law, vote all of his Shares entitled to vote thereon for the
removal of such director at any meeting of the stockholders of Newco #1 or by
written consent of the holders of voting securities of Newco #1 without a
meeting.
(c) Whenever any Director Designee ceases to serve on the board of
directors of Newco #1 (whether by reason of death, resignation, removal or
otherwise), the successor director shall be acceptable to the party who
designated the Director Designee creating the vacancy. In the event the board of
directors of Newco #1 fills a vacancy with a person not acceptable to the party
who designated the Director Designee creating the vacancy, Martin and Teresi
agree to immediately jointly request the Secretary of Newco #1 to call a special
meeting of stockholders of Newco #1 for the election of directors.
(d) Martin and Teresi agree to jointly request the Secretary of Newco #1 to
call a special meeting of stockholders of Newco #1 if either Martin or Teresi
requests such a meeting.
SECTION 2. Irrevocable Proxy. Each of Martin and Teresi hereby irrevocably
constitutes and appoints the other as his attorney in fact and proxy pursuant to
the provisions of Section 212(c) of the Delaware General Corporation Law, with
full power of substitution, to vote all of such party's Shares entitled to vote
thereon for the election or removal of the other party's Director Designees at
any meeting of stockholders of Newco #1 or by written consent of the holders of
voting securities of Newco #1 without a meeting and to execute and deliver any
and all consents, instruments or other agreements or documents in order to take
any and all such actions in connection with or in furtherance of the obligations
of each of Martin and Teresi set forth in this Section 2. THIS PROXY AND POWER
OF ATTORNEY IS IRREVOCABLE, SUBJECT TO SECTION 3, AND COUPLED WITH AN INTEREST.
Each of Martin and Teresi hereby revokes all other proxies and powers of
attorney with respect to their Shares that he may have heretofore appointed or
granted, and no subsequent proxy or power of attorney shall be given or written
consent executed (and if given or executed, shall not be effective) by each of
Martin and Teresi with respect thereto. All authority herein conferred or agreed
to be conferred shall survive the death or incapacity of Martin or Teresi and
any obligation of Martin and Teresi under this Agreement shall be binding upon
the heirs, personal representatives, successors and assigns of Martin and
Teresi.
SECTION 3. Termination. This Agreement shall terminate on the date the
outstanding principal of, and any and all accrued but unpaid interest on, the
Teresi Notes is repaid in full or the date on which Teresi advises the Secretary
of Newco #1 that he elects to waive the benefit of this Agreement, whichever
first occurs.
SECTION 4. Transfer of Shares. During the term of this Agreement, the
parties shall be free to transfer their Shares to any person, except that no
such transfer shall be made unless prior thereto the other party to this
Agreement shall have been notified of such proposed transfer and the transferee
shall have agreed in writing to be bound by the provisions of this Agreement as
if a party named herein.
SECTION 5. Legend. A copy of this Agreement shall be filed with the
Secretary of Newco #1 and shall be kept at its principal executive office. Upon
the execution of this Agreement, each of the parties hereto shall cause each
certificate representing Shares to carry a legend as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A STOCKHOLDERS' VOTING AGREEMENT, DATED AS OF ,
1998, AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT AS THEREIN PROVIDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
OFFICES OF THE COMPANY.
2
<PAGE> 3
SECTION 6. Notices. All notices and other communications shall be effective
(a) upon receipt if (i) hand delivered or (ii) sent by facsimile transmission
and confirmed by mail, (b) the third day after mailing, postage prepaid return
receipt requested and (c) one day after sending by recognized "over-night"
delivery service. Any notice not contemplated above shall be effective upon
receipt. For the purposes of this Section 6, the addresses of the parties to
which notices shall be sent shall be as follows:
If to Martin:
John Martin
18931 Glenmont Terrace
Irvine, California 92612
with a copy to:
Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP
2603 Main Street, Suite 1300
Irvine, California 92614
Attention: Alan Wiener, Esq.
If to Teresi:
Joseph Teresi
c/o Paisano Publications
28210 Dorothy Drive
Agoura Hills, California 91310
with a copy to:
Joseph J. Jacobs
6380 Sweet Maple Lane
Boca Raton, Florida 33433
Each of the parties hereto may change the address to which such
communications are to be directed by notice to the other parties as provided in
this Section 6.
SECTION 7. Complete Agreement. This is the complete agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations and agreements with respect thereto. There are no representations,
warranties, covenants, conditions, terms, agreements, promises, understandings,
commitments or other arrangements with respect to the subject matter hereof
other than those expressly set forth herein.
SECTION 8. Governing Law. This Agreement shall be governed by, construed
under and enforced in accordance with, the laws of the State of California
without regard to any conflict of law principles thereof.
SECTION 9. Binding Agreement; Successors. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and each
of their respective successors, assigns, heirs and other representatives.
SECTION 10. Headings. The section headings herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement, nor are they deemed to constitute a part of this Agreement.
SECTION 11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
SECTION 12. Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable and actual attorneys' fees (including any such fees incurred in
connection with enforcement of any judgments) in addition to his costs and
expenses and any other available remedies.
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<PAGE> 4
SECTION 13. Waiver; Amendment. Any waiver of any provision or breach of
this Agreement must be in writing, executed by the waiving party. No waiver of
any provision or breach of this Agreement shall be a waiver of any other
provision or breach of this Agreement or any subsequent breach. Any amendment or
modification of this Agreement must be in writing and executed by all of the
parties hereto.
SECTION 14. Specific Performance. Each of the parties hereto acknowledges
that money damages would be both incalculable and an insufficient remedy for any
breach of this Agreement by a party hereto and that any such breach would cause
the other party hereto irreparable harm. Accordingly, each party hereto agrees
that in the event of any actual or threatened breach of this Agreement by any
party hereto, the other parties hereto shall be entitled to specific
performance. Such remedy shall not be the exclusive remedy for any breach of
this Agreement, but shall be in addition to all other remedies available at law
or equity to such party.
SECTION 15. Interpretation. The parties hereto agree that each party has
participated in the drafting and preparation of this Agreement, and,
accordingly, in any construction or interpretation of this Agreement, the same
shall not be construed against any party by reason of the source of drafting.
SECTION 16. Further Assurances. Each party shall execute and deliver such
further instruments and take such further actions as the other party may
reasonably request in order to carry out the intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written.
/s/ JOHN MARTIN
-------------------
John Martin
/s/ JOSEPH TERESI
-------------------
Joseph Teresi
ACKNOWLEDGMENT OF STOCKHOLDERS' VOTING AGREEMENT
Easyriders, Inc. hereby acknowledges the existence of the foregoing
Stockholders' Voting Agreement.
EASYRIDERS, INC.
By: /s/ WILLIAM E. PRATHER
--------------------------------------
Name: William E. Prather
Title: Chief Executive Officer,
President and Director
4
<PAGE> 1
EXHIBIT 10.4.9
PROMISSORY NOTE
$15,000,000 September 23, 1998
FOR VALUE RECEIVED, Easyriders Sub II, Inc., a California corporation
("Maker"), promises to pay to Joseph Teresi ("Payee") the principal sum of
Fifteen Million Dollars ($15,000,000), without interest, immediately after the
filing with and acceptance by the Secretary of State of the State of Nevada of
the Articles of Merger referred to in Section 2.2(c) of the Stock Contribution
and Sale Agreement dated as of June 21, 1998 by and among Newriders, Inc.,
Easyriders, Inc., Payee and certain other parties, by wire transfer of
immediately available funds to such account as Payee shall designate.
This Note may not be assigned by Maker or Payee without the express
written consent of the other party.
This Note may not be amended except by a writing signed by Maker and
Payee.
Whenever in this Note there is reference made to either Payee or Maker,
such reference shall be deemed to include a reference to the successors and
permitted assigns of such party and the provisions of this Note shall be binding
upon and inure to the benefit of said successors and permitted assigns.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY CONSENT TO SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE
UNITED STATES OF AMERICA LOCATED IN THE STATE OF CALIFORNIA (THE "CALIFORNIA
COURTS") FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS NOTE (AND AGREE
NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVE
ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE CALIFORNIA
COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY CALIFORNIA COURT THAT SUCH
LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
<PAGE> 2
This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
EASYRIDERS SUB II, INC.
By: /s/ William E. Prather
--------------------------------
Name: William E. Prather
Title: President and Chief
Executive Officer
2
<PAGE> 1
EXHIBIT 10.4.11
PROMISSORY NOTE
$5,000,000 September 23, 1998
FOR VALUE RECEIVED, John Martin ("Maker") promises to pay to Easyriders,
Inc., a Delaware corporation ("Payee"), at the place and in the manner specified
below, the principal sum of Five Million Dollars ($5,000,000), together with
interest on the unpaid principal balance hereof at the rate per annum set forth
below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 3 of this Note.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Newco #1 Mirror Note" means that certain Limited Recourse Promissory
Note of Payee, dated the date hereof, in the original principal amount of
$5,000,000, payable to Joseph Teresi.
"Note" means this Promissory Note, as the same may be amended from time
to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 3 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability company, partnership, trust or joint venture).
"Rate" is defined in Section 2.2 of this Note.
"Stock Contribution and Sale Agreement" means the Stock Contribution and
Sale Agreement, dated as of June 30, 1998, by and among Payee, Newriders, Inc.,
Easyriders Sub II, Inc., Joseph Teresi and the Paisano Companies (as defined
therein), as amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
<PAGE> 2
SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. The principal balance of this Note
shall be payable by Maker in lawful money of the United States of America and in
immediately payable funds on September 23, 2003; provided, however, that Maker
shall have the right from time to time to extend the maturity date of this Note
for such period(s) of time as Maker shall specify in a written notice given to
Payee at least thirty days prior to the then-current maturity date of this Note;
provided further, however, that the maturity date of this Note may not be
extended past September 23, 2008 (the maturity date of this Note, as it may be
extended from time to time, is referred to herein as the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount of
this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1999, the
Rate shall be six percent (6%);
(ii) From September 23, 1999 until September 23, 2000,
the Rate shall be seven percent (7%);
(iii) From September 23, 2000 until September 23, 2001,
the Rate shall be eight percent (8%);
(iv) From September 23, 2001 until September 23, 2002,
the Rate shall be nine percent (9%); and
(v) From September 23, 2002 until such time as the
principal balance of this Note shall be repaid, the Rate shall be ten percent
(10%).
(b) Accrued interest on the outstanding principal amount of this
Note shall be paid in arrears on the 23rd day of each September, December, March
and June, commencing with the first such date to occur after the date hereof and
at maturity (each an "Interest Payment Date"), until the Obligations are paid in
full, except that Maker shall have the right to defer up to one-half of the
interest payable on any Interest Payment Date during the first two years of this
Note. The amount of any interest deferred pursuant to this Section will be added
to the principal balance of this Note on the Interest Payment Date as of which
it is deferred. If the Maturity Date of this Note is extended pursuant to
Section 2.1 hereof, Maker shall pay to Payee on the date such extension period
commences, an amount of principal equal to the amount of deferred interest which
was added to the principal balance of this Note in accordance with the
immediately preceding sentence. Interest hereunder shall be computed on the
basis of a year of 365 days for the actual number of days elapsed. If any
payment of principal or interest hereunder shall become due on a day which is
not a Business Day, such payment shall be due on the next succeeding Business
Day, and such extension of time shall be included in computing interest in
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<PAGE> 3
connection with such payment. Both principal and interest hereunder are payable
to Payee or such other Person as Payee may from time to time designate to Maker
in writing (an "Assignee"), by wire transfer to such account as Payee may from
time to time designate to Maker in writing. Unless otherwise directed by Payee
in writing, Payee hereby designates Joseph Teresi as the Assignee.
(c) Anything in this Note or any other agreement to the contrary
notwithstanding, with respect to each Interest Payment Date hereunder, each
installment of principal and interest payable hereunder on such Interest Payment
Date shall be in an amount at least sufficient to pay in full the principal and
interest due and payable on such Interest Payment Date under the Newco #1 Mirror
Note.
(d) Notwithstanding anything to the contrary contained herein,
Maker may elect to prepay the outstanding principal amount of this Note, at any
time in whole or in part, without penalty. Any such prepayment shall be
accompanied by the amount of accrued interest on the amount prepaid. Maker shall
deliver written notice of such prepayment to Payee at least ten (10) days prior
to prepayment. Each notice of prepayment delivered pursuant to this subsection
(d) shall set forth the amount of such prepayment and the proposed date of such
prepayment. Upon payment in full of this Note, Payee shall surrender this Note
to Maker for cancellation. Upon prepayment in part of principal, Payee shall
make a notation of such prepayment on the Schedule of Payments attached as
Exhibit A hereto and deliver a copy of such schedule to Maker. The aggregate
unpaid principal amount set forth on such schedule shall be rebuttably
presumptive evidence of the principal amount owing and unpaid hereunder, but the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligation of the Maker hereunder to make payments on this Note when
due.
SECTION 2.3 Recourse. This Note is a full recourse note.
SECTION 2.4 Right of Offset. Reference is made to that certain Term
Sheet for Annual Incentive Awards/Long-Term Incentive Performance Awards to John
Martin (the "Bonus Agreement") between Maker and Payee providing for, among
other things, (i) annual bonus payments from Payee to Maker in the amount of the
annual interest due from Maker under this Note and another promissory note of
even date herewith executed by Maker in favor of Payee in the original principal
amount of $2,300,000 (the "Other Martin Note"), subject to achievement by Payee
of certain predetermined levels of EBITDA and (ii) a bonus in the amount of the
principal amount of this Note and the Other Martin Note (and any accrued
interest hereunder or thereunder) upon Payee's successful completion of a public
or private offering of equity or debt securities and the application of the
proceeds thereof to the payment in full of (a) all amounts due pursuant to the
Payee's Senior Credit Agreement (as such term is defined in the Stock
Contribution and Sale Agreement), and (b) the Contributor Notes (as such term is
defined in the Stock Contribution and Sale Agreement), subject to achievement by
Payee of certain predetermined levels of EBITDA. To the extent Maker shall be
entitled to amounts pursuant to the Bonus Agreement which have not been timely
paid to Maker, Maker shall be entitled to offset amounts otherwise due from
Maker to Payee pursuant to this Note. To the extent Payee
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<PAGE> 4
pays amounts directly to Joseph Teresi pursuant to the Newco #1 Mirror Note,
this Note shall be deemed paid in the same amounts.
SECTION 3. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any required payment of interest on
this Note when the same shall become due and payable, and such failure shall
have continued for a period of five (5) days after written notice thereof has
been given to Maker by Payee or Assignee (a "Payment Default"); provided,
however that Maker shall have the right to cure any such Payment Default for an
additional period of twenty-five (25) days on two occasions during the term of
this Note;
(b) Maker shall fail to pay the principal amount of this Note on
the Maturity Date;
(c) Maker makes an assignment for the benefit of creditors, or
admits in writing his inability to pay or generally fails to pay his debts as
they mature or become due or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates his approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Maker bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of Maker in an involuntary case under
Federal bankruptcy laws as now or hereafter constituted, and such decree or
order remains in effect for more than sixty (60) days, whether or not
consecutive;
then Payee or Assignee may by notice in writing to Maker declare all amounts
owing with respect to this Note to be, and they shall thereupon forthwith mature
and become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. If the payee under the Newco #1 Mirror
Note shall grant a waiver to Payee
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<PAGE> 5
thereunder, Payee shall grant to Maker a similar waiver under this Note. The
remedies provided herein are cumulative and are not exclusive of any other
remedies available to Payee at law or in equity. No waiver by Payee of any Event
of Default shall operate as a waiver of any other Event of Default or the same
Event of Default on a future occasion. No delay on the part of Payee in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by Payee of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all reasonable
out-of-pocket expenses incurred or sustained by Payee in connection with the
enforcement or protection of the rights of Payee under this Note, including
costs of collection and the fees and disbursements of counsel.
SECTION 4. Miscellaneous.
(a) Demand, presentment, protest and notice of nonpayment and
protest and all rights to interpose any defense, setoff or counterclaim of any
nature or description, are hereby waived by Maker.
(b) Other than Payee's right to assign this Note to Joseph
Teresi, this Note may not be assigned by either party without the express
written consent of the other party.
(c) This Note may not be amended except by a writing signed by
Maker and Payee; provided, however, that no amendment shall be effective without
the written consent of the payee under the Newco #1 Mirror Note. If the Newco #1
Mirror Note is amended, and such amendment is agreed to in writing by Maker,
this Note shall simultaneously be automatically amended, mutatis mutandis, such
that it remains substantially identical to the Newco #1 Mirror Note.
(d) Whenever in this Note there is reference made to either Payee
or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(e) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
John Martin
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
5
<PAGE> 6
Fax No.: (714) 719-4999
To Payee:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: William E. Prather
Fax No.: (714) 719-4999
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA AND OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY LITIGATION RELATING THERETO
EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY
CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(g) The Section and subsection titles contained herein are for
convenience only and shall not control or affect the meaning or construction of
any provision hereof.
(h) The invalidity or unenforceability of any provision of this
Note in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Note in that jurisdiction or the validity or enforceability of
this Note, including that provision, in any other jurisdiction. If any
restriction or provision of this Note is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(i) Nothing in this Note is intended or shall be construed to
give any Person other than the parties hereto and any Assignee any legal or
equitable right, remedy or claim under or in respect of this Note or any
provision contained herein.
(j) Upon receipt by Maker of evidence reasonably satisfactory to
him of the loss, theft, destruction or mutilation of this Note, Maker will make
and deliver a new Note of like
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<PAGE> 7
tenor in lieu of this Note against receipt of Payee's undertaking to indemnify
Maker against and hold him harmless from all reasonable costs arising as a
result of its making and delivery of the new Note.
This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
/s/ JOHN MARTIN
------------------------------------
John Martin
7
<PAGE> 1
EXHIBIT 10.4.12
PROMISSORY NOTE
$2,300,000 September 23, 1998
FOR VALUE RECEIVED, John Martin ("Maker") promises to pay to
Easyriders, Inc., a Delaware corporation ("Payee"), at the place and in the
manner specified below, the principal sum of Two Million Three Hundred Thousand
Dollars ($2,300,000), together with interest on the unpaid principal balance
hereof at the rate per annum set forth below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 3 of this Note.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Martin Mirror Note" means that certain Promissory Note of Maker, dated
the date hereof, in the original principal amount of $5,000,000, payable to
Payee.
"Note" means this Promissory Note, as the same may be amended from time
to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 3 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability company, partnership, trust or joint venture).
"Rate" is defined in Section 2.2 of this Note.
"Stock Contribution and Sale Agreement" means the Stock Contribution
and Sale Agreement, dated as of June 30, 1998, by and among Payee, Newriders,
Inc., Easyriders Sub II, Inc., Joseph Teresi and the Paisano Companies (as
defined therein), as amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
<PAGE> 2
SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. The principal balance of this
Note shall be payable by Maker in lawful money of the United States of America
and in immediately payable funds on September 23, 2003, unless the date for
payment of the Martin Mirror Note is extended, in which case, the date for
payment of the principal balance of this Note shall be similarly extended (as
such date may be so extended, the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount
of this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1999,
the Rate shall be six percent (6%);
(ii) From September 23, 1999 until September 23,
2000, the Rate shall be seven percent (7%);
(iii) From September 23, 2000 until September 23,
2001, the Rate shall be eight percent (8%);
(iv) From September 23, 2001 until September 23,
2002, the Rate shall be nine percent (9%); and
(v) From September 23, 2002 until such time as the
principal balance of this Note shall be repaid, the Rate shall be ten percent
(10%).
(b) Accrued interest on the outstanding principal amount of
this Note shall be paid in arrears on the 23rd day of each September, December,
March and June, commencing with the first such date to occur after the date
hereof and at maturity (each an "Interest Payment Date"), until the Obligations
are paid in full, except that Maker shall have the right to defer up to one-half
of the interest payable on any Interest Payment Date during the first two years
of this Note if, and to the extent, that interest is so deferred under the
Martin Mirror Note. The amount of any interest deferred pursuant to this Section
will be added to the principal balance of this Note on the Interest Payment Date
as of which it is deferred. If the Maturity Date of this Note is extended
pursuant to Section 2.1 hereof, Maker shall pay to Payee on the date such
extension period commences, an amount of principal equal to the amount of
deferred interest which was added to the principal balance of this Note in
accordance with the immediately preceding sentence. Interest hereunder shall be
computed on the basis of a year of 365 days for the actual number of days
elapsed. If any payment of principal or interest hereunder shall become due on a
day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment. Both principal and interest
hereunder are payable to Payee or such other Person as
2
<PAGE> 3
Payee may from time to time designate to Maker in writing, by wire transfer to
such account as Payee may from time to time designate to Maker in writing.
(c) Notwithstanding anything to the contrary contained
herein, Maker may elect to prepay the outstanding principal amount of this Note,
at any time in whole or in part, without penalty. Any such prepayment shall be
accompanied by the amount of accrued interest on the amount prepaid. Maker shall
deliver written notice of such prepayment to Payee at least ten (10) days prior
to prepayment. Each notice of prepayment delivered pursuant to this subsection
(c) shall set forth the amount of such prepayment and the proposed date of such
prepayment. Upon payment in full of this Note, Payee shall surrender this Note
to Maker for cancellation. Upon prepayment in part of principal, Payee shall
make a notation of such prepayment on the Schedule of Payments attached as
Exhibit A hereto and deliver a copy of such schedule to Maker. The aggregate
unpaid principal amount set forth on such schedule shall be rebuttably
presumptive evidence of the principal amount owing and unpaid hereunder, but the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligation of the Maker hereunder to make payments on this Note when
due.
SECTION 2.3 Recourse. This Note is a full recourse note.
SECTION 2.4 Right of Offset. Reference is made to that certain Term
Sheet for Annual Incentive Awards/Long-Term Incentive Performance Awards to John
Martin (the "Bonus Agreement") between Maker and Payee providing for, among
other things, (i) annual bonus payments from Payee to Maker in the amount of the
annual interest due from Maker under this Note and the Martin Mirror Note,
subject to achievement by Payee of certain predetermined levels of EBITDA and
(ii) a bonus in the amount of the principal amount of this Note and the Martin
Mirror Note (and any accrued interest hereunder or thereunder) upon Payee's
successful completion of a public or private offering of equity or debt
securities and the application of the proceeds thereof to the payment in full of
(a) all amounts due pursuant to the Payee's Senior Credit Agreement (as such
term is defined in the Stock Contribution and Sale Agreement), and (b) the
Contributor Notes (as such term is defined in the Stock Contribution and Sale
Agreement), subject to achievement by Payee of certain predetermined levels of
EBITDA. To the extent Maker shall be entitled to amounts pursuant to the Bonus
Agreement which have not been timely paid to Maker, Maker shall be entitled to
offset amounts otherwise due from Maker to Payee pursuant to this Note.
SECTION 3. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any required payment of
interest on this Note when the same shall become due and payable, and such
failure shall have continued for a period of five (5) days after written notice
thereof has been given to Maker by Payee (a "Payment Default"); provided,
however that Maker shall have the right to cure any such Payment Default for an
additional period of twenty-five days on two occasions during the term of this
Note;
(b) Maker shall fail to pay the principal amount of this
Note on the Maturity Date;
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<PAGE> 4
(c) Maker makes an assignment for the benefit of creditors,
or admits in writing his inability to pay or generally fails to pay his debts as
they mature or become due or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates his approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating Maker bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of Maker in an involuntary case
under Federal bankruptcy laws as now or hereafter constituted, and such decree
or order remains in effect for more than sixty (60) days, whether or not
consecutive;
then Payee may by notice in writing to Maker declare all amounts owing with
respect to this Note to be, and they shall thereupon forthwith mature and
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. The remedies provided herein are
cumulative and are not exclusive of any other remedies available to Payee at law
or in equity. No waiver by Payee of any Event of Default shall operate as a
waiver of any other Event of Default or the same Event of Default on a future
occasion. No delay on the part of Payee in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Payee of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all
reasonable out-of-pocket expenses incurred or sustained by Payee in connection
with the enforcement or protection of the rights of Payee under this Note,
including costs of collection and the fees and disbursements of counsel.
4
<PAGE> 5
SECTION 4. Miscellaneous.
(a) Demand, presentment, protest and notice of nonpayment
and protest and all rights to interpose any defense, setoff or counterclaim of
any nature or description, are hereby waived by Maker.
(b) This Note may not be assigned by either party without
the express written consent of the other party.
(c) This Note may not be amended except by a writing signed
by Maker and Payee.
(d) Whenever in this Note there is reference made to either
Payee or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(e) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
John Martin
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Fax No.: (714) 719-4999
To Payee:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: William E. Prather
Fax No.: (714) 719-4999
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
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<PAGE> 6
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE UNITED STATES OF AMERICA
LOCATED IN THE STATE OF CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION
ARISING OUT OF OR RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY
LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO
PLEAD OR CLAIM IN ANY CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(g) The Section and subsection titles contained herein are
for convenience only and shall not control or affect the meaning or construction
of any provision hereof.
(h) The invalidity or unenforceability of any provision of
this Note in any jurisdiction shall not affect the validity or enforceability of
the remainder of this Note in that jurisdiction or the validity or
enforceability of this Note, including that provision, in any other
jurisdiction. If any restriction or provision of this Note is held unreasonable,
unlawful or unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(i) Nothing in this Note is intended or shall be construed
to give any Person other than the parties hereto any legal or equitable right,
remedy or claim under or in respect of this Note or any provision contained
herein.
(j) Upon receipt by Maker of evidence reasonably
satisfactory to him of the loss, theft, destruction or mutilation of this Note,
Maker will make and deliver a new Note of like tenor in lieu of this Note
against receipt of Payee's undertaking to indemnify Maker against and hold him
harmless from all reasonable costs arising as a result of its making and
delivery of the new Note.
This Note has been executed and delivered at Los Angeles, California,
on the date first above written.
/s/ JOHN MARTIN
-------------------------------------
John Martin
6
<PAGE> 1
EXHIBIT 10.5.1
================================================================================
EASYRIDERS, INC.
EASYRIDERS SUB II, INC.
(to be merged with and into PAISANO PUBLICATIONS, INC.)
NOTE AND WARRANT PURCHASE AGREEMENT
with
NOMURA HOLDING AMERICA INC.
Up to $5,000,000 Senior Secured Guaranteed Revolving Notes Due 2001
$17,000,000 Senior Secured Guaranteed Term Notes Due 2001
Warrants to Purchase Shares of Common Stock
Dated as of September 23, 1998
================================================================================
<PAGE> 2
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") dated as of
September 23, 1998, by and among EASYRIDERS, INC., a Delaware corporation of
which the Company is a wholly-owned Subsidiary (together with its successors,
the "Parent"), EASYRIDERS SUB II, INC. (to be merged with and into PAISANO
PUBLICATIONS, INC.), a California corporation ("Easyriders Sub II") and NOMURA
HOLDING AMERICA INC., a Delaware corporation (together with its successors,
assigns and transferees, the "Purchaser").
RECITALS
WHEREAS, the Parent and Paisano Publications (capitalized terms used
herein without definition have the meanings provided in Section 1 hereof) have
agreed to consummate the Reorganization, which will include (i) the acquisition
(the "Paisano Acquisition") by the Parent of all the outstanding Capital Stock
of Paisano Publications and the other Paisano Companies, pursuant to the Paisano
Stock Contribution Agreement, (ii) the acquisition (the "El Paso Acquisition")
by the Parent of all of the membership interests of El Paso pursuant to the El
Paso Contribution Agreement and (iii) the merger (the "Newriders Merger") of
Easyriders Sub, Inc., a Nevada corporation and Wholly-owned Subsidiary of the
Parent ("Easyriders Sub I") with and into Newriders Inc., a Nevada corporation
("Newriders") pursuant to the Newriders Merger Agreement. As a result of the
Newriders Merger, Newriders, the Paisano Companies and El Paso will become
Wholly-owned Subsidiaries of the Parent. Immediately following the
Reorganization, Easyriders will transfer the El Paso membership interests to
Newriders.
WHEREAS, in the Paisano Acquisition, the Parent and Easyriders Sub II will
receive all of the issued and outstanding stock (the "Paisano Companies Stock")
of each of the corporations that comprise the Paisano Companies. Mr. Joseph
Teresi ("Teresi"), the sole stockholder of each of the Paisano Companies, will
receive in exchange for the Paisano Companies Stock, 6,493,507 shares of
Easyriders Common Stock, a promissory note of Easyriders Sub II in the principal
amount of $15,000,000 (the "Easyriders Sub II Note") which is payable in cash
immediately after the Newriders Merger has occurred, and the Subordinated Seller
Notes.
WHEREAS, immediately following the Newsriders Merger, Easyriders Sub II
will merge with and into Paisano Publications, with Paisano Publications as the
surviving corporation (the "Paisano Merger").
<PAGE> 3
WHEREAS, in order to provide financing to repay a portion of the
Easyriders Sub II Note simultaneously with the consummation of the Paisano
Merger, to refinance certain existing Indebtedness of Paisano Publications and
to provide working capital and funds for other general corporate purposes, the
Company has proposed to issue and sell to the Purchaser (i) its Senior Secured
Guaranteed Revolving Notes Due 2001 in an aggregate principal amount not to
exceed $5,000,000 at any time outstanding and (ii) its Senior Secured Guaranteed
Term Notes Due 2001 in an aggregate principal amount of $17,000,000, all for the
consideration and upon the terms and conditions hereinafter provided.
WHEREAS, in consideration of the purchase of such notes by the Purchaser,
the Parent has agreed to issue to the Purchaser its warrants to purchase under
certain circumstances up to an aggregate of 355,920 shares of Common Stock then
outstanding at an initial exercise price of $3.00 per share (subject to
adjustment as therein provided).
NOW, THEREFORE, the Parent, the Company and the Purchaser agree as
follows:
Section 1. Definitions.
Section 1.1. Defined Terms. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"ABC" has the meaning specified in Section 4.37.
"Accountants" has the meaning specified in Section 7.
"Accounts" means, as at any date of determination, with respect to any
Person, all "accounts" (as such term is defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof), customer accounts,
claims, rights of action, book debts and ancillary rights, of such Person,
including, without limitation, the unpaid portion of the obligation of a
customer of such Person in respect of Inventory purchased by and shipped to such
customer, or in respect of services rendered to such customer, as stated on the
respective invoice of such Person, net of any credits, rebates or offsets owed
to such customer.
"Affiliate" means, as to any Person, any Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person. For purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (a) to vote or direct the voting of 5% or more of the
outstanding shares of Voting Stock of such Person, or (b) to direct or cause the
direction of the management and policies of such Person whether by ownership of
Capital Stock, by contract or otherwise; provided, however, that the Purchaser
shall not be deemed to be an Affiliate of any Credit Party by reason of its
ownership of any Capital Stock of the Parent or Warrants.
"After Acquired Real Property" has the meaning specified in Section 9.5.
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<PAGE> 4
"Assignee" has the meaning specified in Section 14.4(b).
"Assignment of Representations, Warranties, Covenants and Indemnitees" has
the meaning specified in Section 5.11.
"Authorized Officer" means, for any corporation, the President, the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of such
corporation.
"Bankruptcy Code" means 11 U.S.C. Sec. 101 et seq., as from time to time
hereafter amended, and any successor or similar statute.
"Base Rate" means, in respect of interest accrued on the Notes during each
calendar month (or portion thereof) during the period in which the Notes shall
be outstanding, the Prime Rate per annum which normally is published in the
"Money Rates" section of The Wall Street Journal (or if such rate ceases to be
so published, as quoted from such other generally available and recognizable
source as the Purchaser may select). The Base Rate shall be determined (i) on
the first Business Day immediately prior to the Closing Date and (ii)
thereafter, on the last Business Day of each calendar month for calculation of
interest for the following month. It is understood and agreed that the Base Rate
as herein defined is not necessarily the lowest rate of interest charged by the
Purchaser in connection with promissory notes and other debt instruments
purchased by it.
"Benefit Plans" has the meaning provided in Section 4.19(a).
"Blocked Account Agreement" means an agreement substantially in the form
of Exhibit M hereto, with respect to one or more Depositary Accounts now or
hereafter maintained by any Credit Party, among the Credit Party maintaining
such Depositary Account, the bank, broker, dealer, other financial intermediary
or other institution at which such Depositary Account is maintained, and the
Purchaser.
"Business Day" means any day on which commercial banks are not authorized
or required to close in New York City.
"Capital Expenditures" means the expenditures of any Person which should
be capitalized on the balance sheet of such Person in accordance with GAAP
(including that portion of Capitalized Lease Obligations which should be
capitalized on a consolidated balance sheet of such Person in accordance with
GAAP) and which are made in connection with the purchase, construction or
improvement of items properly classified on such balance sheet as property,
plant, equipment or other fixed assets or intangibles.
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<PAGE> 5
"Capital Stock" means and includes (a) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (b) all partnership interests (whether general or limited) in
any Person which is a partnership, (c) all membership interests or limited
liability company interests in any limited liability company, and (d) all equity
or ownership interests in any Person of any other type.
"Capitalized Lease" means, as to any Person, a lease of (or other
agreement conveying the right to use) real and/or personal Property to such
Person as lessee, with respect to which the obligations of such Person to pay
rent or other amounts are required to be classified and accounted for as a
capital lease on a balance sheet of such Person in accordance with GAAP
(including Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board).
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a Capitalized Lease and, for
purposes of this Agreement, the amount of such obligation shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Cash Equivalents" means (a) marketable obligations maturing within six
months after acquisition thereof issued or fully guaranteed by the United States
of America or an instrumentality or agency thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof), (b)
open market commercial paper, maturing within 180 days after acquisition
thereof, which has the highest credit rating of either Standard & Poor's
Corporation or Moody's Investors Service, Inc., (c) certificates of deposit or
bankers acceptances or other obligations maturing within six months after
acquisition thereof issued by a domestic commercial bank which is a member of
the Federal Reserve System and has capital and surplus and undivided profits in
excess of $500,000,000, and (d) other certificates of deposit maturing within
six months after acquisition thereof in respect of deposits fully insured by the
Federal Deposit Insurance Corporation. Notwithstanding the foregoing, (x) items
referred to in the foregoing clauses (a) and (b) shall constitute Cash
Equivalents only if held on behalf of a Credit Party in a Depositary Account
with a bank, securities broker or dealer or other financial intermediary
reasonably satisfactory to the Purchaser and with which such Credit Party shall
have entered into a Blocked Account Agreement covering such items; and (y) items
referred to in the foregoing clauses (c) and (d) shall constitute Cash
Equivalents only if pledged and delivered to the Purchaser in accordance with
the provisions of the Security Agreement.
"Casualty" means any actual or constructive loss of any Property of any
Credit Party by reason of fire, explosion, theft or other casualty occurrence.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, as amended.
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<PAGE> 6
"Certified" when used with respect to any financial information of any
Person to be certified by any of its officers, indicates that such information
is to be accompanied by a certificate to the effect that such financial
information has been prepared in accordance with GAAP consistently applied,
subject in the case of interim financial information to normal year-end audit
adjustments and absence of the footnotes required by GAAP, and presents fairly,
in all material respects, the information contained therein as at the dates and
for the periods covered thereby.
"Change of Control" means any transaction or event as a direct or indirect
result of which (i) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of Parent
(together with any new directors (x) whose election by such Board of Directors
or whose nomination for election by the shareholders of Parent was approved by a
vote of 66-2/3% of the directors of Parent then still in office who were either
directors at the beginning of such period or whose election was previously so
approved or (y) who are appointed or elected by Martin or Teresi pursuant to the
Shareholders' Agreement) cease for any reason to constitute a majority of the
Board of Directors of Parent then in office, (ii) any Person (other than the
Permitted Holders) is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of greater than 25%
of the outstanding shares of Voting Stock of the Parent, (iii) the Parent owns
less than 100% of the outstanding shares of Capital Stock of any Paisano Company
or (iv) Teresi shall no longer be the Company's Chairman and Publisher or no
longer have substantially the same duties and responsibilities as on the Closing
Date.
"Closing Date" has the meaning specified in Section 2.4(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, all Property of the Credit Parties in
which any of such Person is granting or may hereafter grant a Lien to the
Purchaser pursuant to the Security Documents.
"Commitment Letter" has the meaning specified in Section 2.6(a).
"Common Stock" means the Parent's common stock, no par value, and any
Capital Stock of any other class of the Parent hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Parent.
"Company" means at any time prior to the Paisano Merger, Easyriders Sub
II, and, at any time from and after the Paisano Merger, Paisano Publications.
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<PAGE> 7
"Consigned Inventory" shall mean Inventory of any Credit Party consisting
of magazines which are on consignment to distributors in the ordinary course of
business.
"Consolidated Current Assets" means, as of any date with respect to the
Paisano Group, all assets of the Paisano Group on a consolidated basis as of
such date which, in accordance with GAAP, are properly classified as current
assets, excluding cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as of any date with respect to
the Paisano Group, all liabilities of the Paisano Group on a consolidated basis
as of such date which, in accordance with GAAP, are properly classified as
current liabilities, excluding current maturities of long-term Indebtedness and
excluding Indebtedness under the Revolving Notes.
"Consolidated EBITDA" means, for any period, with respect to the Paisano
Group, the sum of (a) Consolidated Net Income (Loss) plus (b) in each case to
the extent deducted in determining such Consolidated Net Income (Loss), the sum
of (i) Consolidated Interest Expense, plus (ii) Consolidated Income Tax Expense,
plus (iii) depreciation expense, plus (iv) amortization expense, plus (v) all
other non-cash charges, all as determined for the Paisano Group for such period
on a consolidated basis in accordance with GAAP.
"Consolidated Income Tax Expense" means, for any period, with respect to
the Paisano Group, the amount which, in conformity with GAAP, should be included
as provision for current and deferred income taxes on a consolidated income
statement of the Paisano Group for such period.
"Consolidated Interest Expense" means, for any period, with respect to the
Paisano Group, all amounts which, in conformity with GAAP, should be included as
interest expense on a consolidated income statement of the Paisano Group for
such period.
"Consolidated Net Income (Loss)" means, for any period, with respect to
either (i) the Paisano Group or (ii) the Parent and its Subsidiaries (other than
the Restaurant Subsidiaries) (collectively, the "Applicable Person"), the net
income (or loss) of the Applicable Person on a consolidated basis for such
period taken as a single accounting period, determined in accordance with GAAP;
provided that in determining Consolidated Net Income (Loss) there shall be
excluded (a) the income (or loss) of any other Person which is not a Subsidiary
of the Applicable Person, except to the extent of the amount of dividends or
other distributions actually paid to the Applicable Person by such other Person
during such period, (b) the income (or loss) of any other Person accrued prior
to the date it becomes a Subsidiary of the Applicable Person or is merged into
or consolidated with the Applicable Person or that other Person's assets are
acquired by the Applicable Person, (c) the proceeds of any life insurance
policy, (d) gains (or losses) from the sale, exchange, transfer or other
disposition of Property not in the ordinary course of business of the Applicable
Person, (e)
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<PAGE> 8
any other extraordinary or non-recurring gains (or losses) of the Applicable
Person, (f) the income of any Subsidiary of the Applicable Person to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or of any agreement, instrument, judgment, decree, Order or
Statute applicable to that Subsidiary, and (g) the Newriders Management Fees.
"Consolidated Net Worth" as of any date of determination with respect to
the Parent shall mean (a) stated capital, plus (b) the amount of surplus and
retained earnings (or, in the case of a deficit in the amount of surplus or
retained earnings, minus the amount of such deficit), minus (c) cost of treasury
shares, minus (d) minority interests in consolidated Subsidiaries of such Person
(other than the Restaurant Subsidiaries), if any, all as determined as of such
date for the Parent and its Subsidiaries (other than Restaurant Subsidiaries) on
a consolidated basis in accordance with GAAP.
"Consolidated Total Indebtedness" means, as of any date with respect to
the Paisano Group, the total amount of Indebtedness of the Paisano Group,
determined as of such date on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, at any time, Consolidated Current
Assets less Consolidated Current Liabilities.
"Contingent Obligations" means any guarantee, suretyship or other
contingent liability (other than any endorsement for collection or deposit in
the ordinary course of business), direct or indirect, with respect to any
obligations of another Person, through an agreement or otherwise, including,
without limitation, (a) any other endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect similar to a
guarantee in respect of any such obligations and (b) any agreement (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligations, (ii) to purchase, sell or lease Property, products, materials or
supplies, or transportation or services, in respect of enabling such other
Person to pay any such obligation or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the Property, products, materials
or supplies or transportation or services or (iii) to make any loan, advance or
capital contribution to or other investment in, or to otherwise provide funds to
or for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment or
expense) or to assure any financial ratio, minimum net worth, working capital or
other balance sheet condition in respect of any such obligation. The amount of
any Contingent Obligation shall be equal to the outstanding amount of the
obligations directly or indirectly guaranteed.
"Continuing Indebtedness" has the meaning specified in Section 4.10(a).
"Contributor Short-Term Subordinated Note" has the meaning specified in
the definition of Subordinated Seller Notes.
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"Copyrights" has the meaning provided in paragraph (c) of the definition
of Intellectual Property.
"Credit Parties" means the Parent and each of its Subsidiaries (other than
the Restaurant Subsidiaries).
"Default" means any event or condition which, with due notice or lapse of
time or both, would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.1(b).
"Depositary Account" means with respect to any Person any demand, time,
savings, passbook, money market or other depositary account maintained by such
Person with any bank, savings and loan association, credit union or other
depositary institution, other than an account evidenced by a certificate of
deposit, or any securities account maintained by such Person with any bank,
securities broker or dealer, or other financial intermediary, in which such
bank, broker, dealer or financial intermediary either directly or through a
nominee or depository holds investment securities for the account of such
Person.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Easyriders Common Stock" means the Easyriders' Common Stock, $.001 par
value.
"Easyriders of Columbus" means Easyriders of Columbus, Inc., an Ohio
corporation.
"Easyriders Sub I" has the meaning in the specified in the Recitals.
"Easyriders Sub II" has the meaning set forth in the introductory
paragraph of this Agreement.
"Easyriders Sub II Note" has the meaning specified in the Recitals.
"El Paso" means M&B Restaurants, L.C., a Texas limited liability company.
"El Paso Acquisition" has the meaning specified in the Recitals.
"El Paso Contribution Agreement" means the LLC Interest Contribution
Agreement, dated as of June 30, 1998, among Newriders, the Parent, El Paso,
Martin, Prather and Marna Prather.
"Employment Agreements" has the meaning specified in Section 5.26.
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<PAGE> 10
"Environmental Laws" means any and all Federal, state, local, and foreign
Statutes, Orders, permits, authorizations, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution, the
protection of the environment or the generation, treatment, storage, handling,
processing, use, maintenance, recycling, transportation, release, destruction or
disposal of Hazardous Materials, including, without limitation, CERCLA, the
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right to Know Act, the Safe Drinking Water Act, the Hazardous Materials
Transportation Act, the Clean Air Act, the Clean Water Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Noise Control Act, the
Occupational Safety and Health Act, the Toxic Substances Control Act, any
so-called "Superfund" or "Superlien" law, and any regulation promulgated under
any of the foregoing, all as now or at any time hereafter may be in effect.
"Environmental Matter" means any claim, investigation, litigation or
administrative proceeding, whether pending or threatened, or judgment or Order,
asserted, arising or entered under or pursuant to any Environmental Law, or
relating to any Hazardous Materials, in each case against or pertaining to any
Credit Party, the respective operations of such Persons, or any Properties
owned, leased or used by any of such Persons.
"ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time amended.
"ERISA Affiliate" means any corporation which is a member of the same
controlled group (within the meaning of Section 414(b) of the Code) of
corporations or other Persons as the Parent or which is under common control
(within the meaning of Section 414(c) of the Code) with the Parent or any
corporation or other Person which is a member of an affiliated service group
(within the meaning of Section 414(m) of the Code) with the Parent or any
corporation or other Person which is required to be aggregated with the Parent
pursuant to Section 414(o) of the Code or the regulations promulgated
thereunder.
"Estoppel Letter" means an estoppel letter, subordination and
nondisturbance agreement or other agreement, waiver or confirmation executed by
any bailee or lessor which owns or operates any location where any Credit Party
maintains any of the Collateral, each of which shall be in substantially the
form of Exhibit N hereto or such other form as shall be acceptable to the
Purchaser in its sole discretion.
"Event of Default" has the meaning specified in Section 11.1.
"Excess Cash Flow" means, for any period, the sum of (a) Consolidated Net
Income (Loss) plus (b) in each case to the extent deducted in determining such
Consolidated Net Income (Loss), the sum of (i) depreciation expense, plus (ii)
amortization expense, plus (iii) all other non-cash charges (net of credits),
minus (c) Capital Expenditures, minus (or plus) (d) any increase (any decrease)
in Consolidated Working Capital during such period, plus
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(or minus) (e) any net losses (or gains) on the sale of assets, all as
determined with respect to the Paisano Group in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar statute then in effect, and a reference to a particular section
thereof shall include a reference to the comparable section, if any, of any such
similar statute.
"Fair Market Value" means what a willing buyer would pay to a willing
seller in an arm's-length transaction.
"Financial Statements" has the meaning specified in Section 4.5(a).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America, applied on a consistent basis both
as to classification of items and amounts.
"Governmental Body" means any federal, state, provincial, county, city,
town, village, municipal or other government or governmental department,
commission, council, board, bureau, agency, authority or instrumentality, of or
within the United States of America or its territories or possessions, or of or
within any other country, or of any international community established by
treaty.
"Guarantee" means the Guarantee, in the form of Exhibit C, to be executed
and delivered by the Parent and each Subsidiary of the Parent (other than the
Company and the Restaurant Subsidiaries) on or prior to the Closing Date
pursuant to Section 5.8, and to be executed and delivered by any future
Subsidiary of the Parent (other than the Company and the Restaurant
Subsidiaries) pursuant to Section 9.6.
"Hazardous Material" and "Hazardous Materials" shall mean as follows:
(a) any "hazardous substance" as defined in, or for purposes of, the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.A. Sections 9601 & 9602, as may be amended from time to time, or any
other so-called "superfund" or "superlien" law and any judicial
interpretation of any of the foregoing;
(b) any "regulated substance" as defined pursuant to 40 C.F.R. Part
280;
(c) any "pollutant or contaminant" as defined in 42 U.S.C.A. Section
9601(33);
(d) any "hazardous waste" as defined in, or for purposes of, the
Resource Conservation and Recovery Act;
(e) any "hazardous chemical" as defined in 29 C.F.R. Part 1910;
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<PAGE> 12
(f) any "hazardous material" as defined in, or for purposes of, the
Hazardous Materials Transportation Act; and
(g) any other substance, regardless of physical form, or form of
energy or pathogenic agent that is subject to any other past, present or
future law or requirement of any Governmental Body regulating, relating
to, or imposing obligations, liability, or standards of conduct concerning
the protection of human health, plant life, animal life, natural
resources, Property or the reasonable enjoyment of life or Property from
the presence in the environment of any solid, liquid, gas, odor, pathogen
or form of energy, from whatever source.
Without limiting the generality of the foregoing, the term "Hazardous
Material" thus includes, but is not limited to, any material, waste or substance
that contains petroleum or any fraction thereof, asbestos, or polychlorinated
biphenyls, or that is flammable, explosive or radioactive.
"Indebtedness" with respect to any Person means, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) any obligation incurred
for all or any part of the purchase price of Property or services, other than
(i) accounts payable and accrued expenses included in current liabilities in
accordance with GAAP and incurred in respect of Property or services purchased
in the ordinary course of business and (ii) deferred subscription and
advertising income incurred in the ordinary course of business, (c) indebtedness
or obligations evidenced by bonds, notes or similar written instruments, (d) all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments, (e) any obligation (whether or not such Person has assumed
or become liable for the payment of such obligation) secured by a Lien on any
Property of such Person, (f) Capitalized Lease Obligations of such Person, (g)
all obligations, contingent or otherwise, of such Person with respect to any
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest rate or expense risks either generally or under specific
contingencies, (h) all obligations, contingent or otherwise, of such Person
under any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations in
currency values, and (i) all Contingent Obligations of such Person of
obligations of any other Person of the types described in clauses (a) through
(h) of this definition, inclusive.
"Intangible Personal Property" has the meaning specified in Section 4.24.
"Intellectual Property" of any Person means:
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<PAGE> 13
(a) all trademarks, trade names, trade styles, service marks, logos,
emblems, prints and labels, all elements of package or trade dress of
goods, and all general intangibles of like nature, of such Person,
together with the goodwill of such Person's business connected with the
use thereof and symbolized thereby, and all applications, registrations
and recordings thereof, including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark
Office or in any similar office or agency of the United States of America
or in any office of the Secretary of State (or equivalent) of any state
thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, together with all extensions,
renewals and corrections thereof and all licenses thereof or pertaining
thereto, including, without limitation, all License Agreements with
respect thereto (collectively the "Marks"),
(b) all letters patent of such Person and applications therefor, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States
of America or any state thereof, or in any similar office or agency of any
country or political subdivision thereof throughout the world, together
with all re-examinations, reissues, continuations, continuations-in-part,
divisions, improvements and extensions thereof and all licenses and claims
for infringement thereof or pertaining thereto including, without
limitation, all License Agreements with respect thereto, and the rights to
make, use and sell, and all other rights with respect to, the inventions
disclosed or claimed therein, all inventions, designs, proprietary or
technical information, know-how, other data or information, software,
databases, all embodiments or fixations thereof and the Reorganization
Documents, and all other trade secret rights not described above,
(c) all copyrights of such Person in works of authorship of any
kind, and all applications, registrations and recordings thereof in the
Office of the United States Register of Copyrights, Library of Congress,
or in any similar office or agency of any country or political subdivision
thereof throughout the world, together with all extensions, renewals and
corrections thereof and all licenses and claims for infringement thereof
or pertaining thereto, including, without limitation, all License
Agreements with respect thereto (collectively, "Copyrights"), and
(d) all customer lists and other records of such Person relating to
the distribution of products bearing any of the items described in
subparagraphs (a), (b) or (c) of this definition.
"Intellectual Property Security Agreement" means the Intellectual Property
Security Agreement, in the form of Exhibit E, to be executed and delivered by
the Parent and each Subsidiary of the Parent (other than the Restaurant
Subsidiaries) on or
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prior to the Closing Date pursuant to Section 5.9, and to be executed and
delivered by any future Subsidiary of the Parent (other than the Restaurant
Subsidiaries) pursuant to Section 9.6.
"Intercreditor Agreement" means the intercreditor and subordination
agreement executed and delivered by Teresi pursuant to Section 5.14(b) with
respect to the Subordinated Seller Notes.
"Internal Revenue Service" means the United States Internal Revenue
Service and any successor or similar agency performing similar functions.
"Inventory" means with respect to any Person all of the "inventory" (as
such term is defined in the Uniform Commercial Code in effect in the State of
New York on the date hereof) of such Person, including, but not limited to, all
merchandise, raw materials, parts, supplies, work-in-process, property in stock
and finished goods intended for sale, together with all the containers, packing,
packaging, shipping and similar materials related thereto, and including such
inventory as is temporarily out of such Person's custody or possession,
including inventory on the premises of others and items in transit.
"Investment" when used with reference to any Person means any investment
of such Person so classified under GAAP, and, whether or not so classified,
includes (a) any Indebtedness owed by any other Person to such Person, (b) any
Contingent Obligation or other contingent obligation of such Person of
Indebtedness or other obligations of any other Person, and (c) any Capital Stock
held by such Person in any other Person; and the amount of any Investment shall
be the original principal or capital amount thereof less all cash returns of
principal or equity thereof (and without adjustment by reason of the financial
condition of such other Person).
"Leases" has the meaning specified in Section 5.26.
"License Agreement" with respect to any Person means any agreement entered
into by such Person, whether as licensor or licensee, providing for the license
or use of any Intellectual Property and related or similar rights, and all
rights of such Person in connection with any of the foregoing and in connection
with any agreement related thereto.
"Lien" means any security interest, mortgage, pledge, hypothec, lien,
claim, charge, prior claim, encumbrance, assignment, resolutory right, trust,
conditional sale or title retention agreement, lessor's interest under a
Capitalized Lease or analogous instrument, in, of or on any of a Person's
Property (whether held on the date hereof or hereafter acquired), or any signed
or filed financing statement which names such Person as the debtor, or the
execution of any security agreement or the like authorizing any other Person as
the secured party thereunder to file such a financing statement.
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<PAGE> 15
"Marks" has the meaning provided in paragraph (a) of the definition of
Intellectual Property.
"Martin" means Mr. John E. Martin.
"Martin Equity Investment" has the meaning specified in Section 5.13(b).
"Martin Notes" has the meaning specified in Section 5.13(b).
"Material Adverse Effect" means any change or changes or effect or effects
that individually or in the aggregate are materially adverse to (a) the assets,
business, operations, income, prospects or condition (financial or otherwise) of
the Company, individually, or the Credit Parties, taken as a whole, (b) the
legality, validity or enforceability of this Agreement, the Notes, the Warrants
or any other Note Documents, or (c) the ability of any Credit Party to fulfill
its obligations under this Agreement, the Notes, the Warrants or any other Note
Documents.
"Material Contract" means any contract or agreement (including, without
limitation any supply agreement, requirements contract, customer agreement,
services agreement, lease, License Agreement, franchise agreement, royalty
agreement, distribution agreement, marketing agreement, advertising agreement,
joint venture agreement, partnership agreement, stockholders agreement, asset
purchase agreement, stock purchase agreement, merger agreement, escrow
agreement, tax sharing agreement, agency agreement, investment banking
agreement, fidelity or surety contract, power of attorney, non-competition
agreement) to which any Credit Party is a party and which either (a) has a face
amount or otherwise involves aggregate payments or obligations in excess of
$50,000, (b) if terminated is reasonably likely to cause a Material Adverse
Effect , (c) is otherwise material to the business of the Credit Parties taken
as a whole or (d) is a "Material Contract" as defined in the Paisano Stock
Contribution Agreement.
"Material Loss Amount" means an amount equal to $150,000.
"Maturity Date" means September 23, 2001.
"Maximum Revolving Commitment" means as of any time of determination (a)
$5,000,000, minus, (b) the aggregate amount of all reductions therein (if any)
pursuant to Section 3.4, and shall be $0 upon any termination of the obligations
of the Purchaser to purchase Revolving Notes hereunder pursuant to Section
3.1(a), 3.4, 11.1 or otherwise.
"Mortgage" means any mortgage, trust deed or deed of trust executed (i) on
or prior to the Closing Date pursuant to Section 5.9(g) and (ii) after the
Closing Date pursuant to Section 9.5 in respect of After Acquired Real Property.
"Mortgage Policies" has the meaning specified in Section 5.9(g)(ii).
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"Multiemployer Plan" means a multiemployer plan as defined in Section
3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code contributed
to by any Credit Party or any ERISA Affiliate.
"Net Cash Proceeds" means, with respect to any Credit Party (a) an
incurrence by any such Person of any Indebtedness or (b) the issuance and sale
by such Person of any of its Capital Stock, the aggregate amount of cash
consideration received by such Person in connection with such transaction after
deduction of all reasonable and customary fees, costs and expenses directly
incurred by such Credit Party in connection therewith, including, without
limitation, reasonable and customary underwriting discount, brokerage or selling
commissions, if any, taxes paid or reasonably anticipated to be payable as a
result of such transaction, and the reasonable fees and disbursements of counsel
paid by such Credit Party in connection therewith.
"Newriders" has the meaning specified in the Recitals.
"Newriders Merger" has the meaning set forth in the Recitals.
"Newriders Merger Agreement" means the Agreement and Plan of Merger and
Reorganization, dated as of June 30, 1998, by and among Newriders, the Parent
and Easyriders Sub I.
"Newriders' Executive Compensation Plan" means the Newriders' 1997
Executive Incentive Compensation Plan.
"Newriders Management Agreement" means a management security agreement
between Newriders and the Company in form and substance satisfactory to the
Purchaser.
"Newriders Management Fees" means fees payable by the Company to Newriders
under the Newriders Management Agreement; provided such fee shall be paid only
by advances made by Newriders to the Company under the Newriders Subordinated
Note.
"Newriders Subordinated Note" means a subordinated promissory note in form
and substance satisfactory to the Purchaser which evidences advances made by
Newriders to the Company used to pay the Newriders Management Fees, which note
shall be unsecured and subordinated in subject of payment to the Obligations,
have a maturity date no earlier than September 30, 2003 and provide that no
principle or interest payments are payable until the Obligations have been paid
in full and the Termination Date has occurred.
"Non-Continuing Indebtedness" has the meaning specified in Section
4.10(a).
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"Note Documents" means this Agreement, the Notes, the Warrants, the
Registration Rights Agreement, the Guarantee, the Security Documents, the
Intercreditor Agreement, the Assignment of Representations, Warranties,
Covenants and Indemnities and all other agreements, instruments and documents
now or hereafter executed and delivered pursuant to or in connection therewith,
as each of such agreements, instruments and documents may from time to time be
amended, modified or supplemented in accordance with its terms.
"Notes" means collectively the Revolving Notes and the Term Notes and
"Note" means any one of such Notes. The Revolving Notes and Term Notes are each
sometimes referred to herein as a "class" of Notes.
"NRS" has the meaning specified in Section 5.18.
"Obligations" mean, collectively, (a) the obligations of the Company to
pay any and all of the unpaid principal of, and interest on (including, without
limitation, interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for postfiling or post-petition interest
is allowed in such proceeding) the Notes, (b) the obligations of the Credit
Parties to pay any and all fees, expenses, costs, indemnities and other amounts,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the Notes or any other Note Document, and (c) the
obligations of the Credit Parties to pay, perform, discharge, observe and comply
with any and all covenants, agreements and other obligations required to be
performed, discharged, observed or complied with by such Credit Party pursuant
to this Agreement, the Notes and the other Note Documents.
"Officer's Certificate" means with respect to any corporation, a
certificate signed by an Authorized Officer of the specified corporation.
"Operating Lease" means any lease of real or personal Property (other than
any Capitalized Lease) having an original term greater than one year (including
any option to renew or extend such lease, whether or not exercised).
"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
Governmental Body.
"Paisano Acquisition" has the meaning set forth in the Recitals.
"Paisano Companies" means Paisano Publications, Easyriders of Columbus,
Inc. Easyriders Franchising, Inc., a California corporation, Teresi, Inc., a
California corporation, Bros Club, Inc., a California corporation, Associated
Rodeo Riders on Wheels, a California corporation, and any Subsidiary now or
hereafter existing of any such Person.
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"Paisano Companies Stock" has the meaning set forth in the Recitals.
"Paisano Group" means the Paisano Companies other than Easyriders of
Columbus.
"Paisano Merger" has the meaning set forth in the Recitals.
"Paisano Merger Agreement" means the Agreement of Merger, dated as of
September 23, 1998, by and among Easyriders Sub II and Paisano Publications,
Inc.
"Paisano Publications" means Paisano Publications, Inc., a California
corporation.
"Paisano Stock Contribution Agreement" means the Stock Contribution and
Sale Agreement, dated as of June 30, 1998, among, Newriders, the Parent,
Easyriders Sub II, the Paisano Companies and Teresi.
"Parent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Parent 1998 Executive Compensation Plan" shall mean the Parent's 1998
Executive Incentive Compensation Plan as in effect on the Closing Date pursuant
to which up to 2,800,000 shares of Common Stock may be issued.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
agency or Governmental Body performing similar functions.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, excluding any Multiemployer Plans, established,
maintained by or contributed to by any Credit Party or any ERISA Affiliate.
"Permitted Business" means the business of publishing special interest
magazines and other publications relating to hot rods, motorcycles, tattooing
and airbrushing, marketing motorcycle apparel and accessories, promoting tattoo
and motorcycle related events, mail order sales of various products, licensing
the use of various trademarks, the production and distribution of motorcycle
related videos, sales of road side assistance plans for motorcycles, sales of
videos to pay-per-view television, the development, production and distribution
of other forms of media related to hot rods, motorcycles and tattooing and
franchising retail stores which market motorcycles and motorcycle apparel and
accessories and any businesses which are reasonably related thereto.
"Permitted Holders" means Teresi, Martin and Prather.
"Permitted Lien" means any of the Liens permitted by Section 10.2.
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"Permitted Subordinated Indebtedness Amount" shall mean $5,000,000 minus
the aggregate amount of Net Cash Proceeds received by any Credit Party after
the Closing Date from the issuance or sale of any Capital Stock (other than
shares of Common Stock issued pursuant to the Parent 1998 Executive
Compensation Plan or upon exercise of the Warrants and other than Capital Stock
sold to another Credit Party).
"Person" means and includes an individual, a partnership, an association,
a joint venture, a corporation, a limited liability company, a trust, a
syndicate, an unincorporated organization and any Governmental Body.
"Plan" and "Plans" means any employee benefit plan as defined in Section
3(3) of ERISA, established, maintained or contributed to for the benefit of
employees of any Credit Party or any ERISA Affiliate.
"Prather" means Mr. William E. Prather.
"Principal Office" means the principal office of the Purchaser, located at
the address of the Purchaser set forth in Section 14.5 hereof, or at such other
location as the Purchaser may from time to time hereafter specify by written
notice to the Company.
"Property" with respect to any Person, means any interest in any kind of
property or asset, whether real, personal or mixed, movable or immovable,
tangible or intangible, corporeal or incorporeal, of such Person.
"Protected Countries" has the meaning specified in Section 4.24.
"Publications" has the meaning specified in Section 4.36.
"Purchaser" has the meaning specified in the first paragraph hereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, to be dated as of and entered into on the Closing Date, between the
Parent and the Purchaser, in the form of Exhibit F-2.
"Registration Statement" means the Registration Statement on Form S-4 of
the Parent, Registration No.333-58501, as filed with the SEC under the
Securities Act on July 6, 1998, as amended by Amendment No. 1, as filed with the
SEC under the Securities Act on August 27, 1998.
"Reorganization" shall mean the Paisano Acquisition, the El Paso
Acquisition, the Newriders Merger, the Paisano Merger, the Martin Equity
Investment and the other transactions contemplated by the Reorganization
Documents.
"Reorganization Documents" means the Registration Statement, Paisano Stock
Contribution Agreement, the El Paso Contribution Agreement, the Newriders Merger
Agreement, the Paisano Merger Agreement, the Subordinated Seller Notes, and all
other agreements, instruments and documents executed pursuant thereto or in
connection therewith.
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"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder for which the 30-day notice requirement is
not waived.
"Restaurant Subsidiaries" means El Paso and Newriders and each of their
Subsidiaries.
"Restricted Investment" means any Investment other than
(a) any Investment in Cash Equivalents,
(b) any Investment existing on the Closing Date after giving
effect to the Transactions contemplated to occur on the Closing Date, and
described in Schedule 4.10B,
(c) the Guarantee,
(d) Indebtedness permitted under Sections 10.1(c), (f) and (g)
hereof,
(e) any Investment in or capital contribution by the Parent to
any member of the Paisano Group, and
(f) Investments received by the Credit Parties in connection with
barter arrangements for excess advertising space entered into in the
ordinary course of business consistent with part practices so long as in
any fiscal year the fair market value of such advertising space does not
exceed $175,000 in the aggregate.
"Restricted Payment" means, with respect to any Person,
(a) the declaration or payment of any dividend or other
distribution on, or the incurrence of any liability to make any other
payment in respect of, Capital Stock of such Person, other than (i)
Restricted Payments payable solely in the same class of Capital Stock of
such Person and (ii) so long as no Event of Default has occurred and is
continuing, dividends by the Company to the Parent in an amount per fiscal
month which, when added to the principal of intercompany loans made by the
Company to the Parent during such fiscal month pursuant to Section
10.1(f), is not in excess of the lesser of (x) 35% of Excess Cash Flow for
the preceding fiscal month and (y) $100,000,
(b) any payment or distribution on account of the purchase,
redemption, defeasance (including in-substance or legal defeasance) or
other retirement by any Person of any Capital Stock of such Person, or of
any warrant, option or other right to acquire such Capital Stock (whether
directly or indirectly, and including, without limitation, any purchase or
other acquisition of such Capital
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<PAGE> 21
Stock, or of any warrant, option or other right to acquire such Capital
Stock, by any Subsidiary of such Person),
(c) any other payment or distribution by such Person in respect
of its Capital Stock, whether directly or indirectly or through any
Subsidiary of such Person, excluding the declaration and payment of cash
dividends by a Wholly-owned Subsidiary of the Company on its Capital Stock
to the Company,
(d) any payment or distribution by such Person on account of the
principal of or prepayment charge, if any, or, interest or other amounts,
with respect to any Indebtedness of any Credit Party which is subordinated
in right of payment to the prior payment of any of the Notes (including,
without limitation, any such payment or distribution on account of the
Indebtedness represented by the Subordinated Seller Notes), other than
regularly scheduled interest payments on the Subordinated Seller Notes to
the extent permitted under the Subordinated Seller Notes (including
without limitation the subordination provisions thereof) as in effect on
the Closing Date and the Intercreditor Agreement, and
(e) any management fee, consulting fee, advisory fee, investment
banking or transaction fee or commission, bonus, salary, or similar
remuneration paid or payable to any holder of Capital Stock of such Person
or to any Affiliate of any such holder, excluding (i) directors' fees
payable in the ordinary course of business, (ii) amounts payable under the
Employment Agreements, (iii) amounts payable under the Parent 1998
Executive Compensation Plan and any other employee compensation and
benefits payable in the ordinary course of business, in each case, to any
officer or employee of the Credit Parties (other than Teresi, Martin and
Prather), (iv) so long as no Default or Event of Default has occurred and
is continuing, awards payable to Martin under Exhibit A to the Parent 1998
Executive Compensation Plan, (v) so long as no Default or Event of Default
has occurred and is continuing and the payment of such fees are
subordinated (on terms and conditions satisfactory to the Purchaser) in
right of payment to the prior payment of the Notes pursuant to a written
agreement between the Purchaser and Teresi satisfactory to the Purchaser,
consulting fees to Teresi in an amount not to exceed $25,000 per month,
(vi) fees payable to Imperial Capital LLC to the extent described in
Section 4.15, and (vii) payments made by any Credit Party to the Parent
pursuant to a tax sharing agreement which is in form and substance
satisfactory to the Purchaser and which complies with the treasury
regulations under Section 1502 of the Code.
The amount of any Restricted Payment made in the form of Property shall be
deemed to be the greater of the Fair Market Value or the net book value of such
Property.
"Revolving Note" and "Revolving Notes" have the meanings specified in
Section 2.1(a)(i).
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"Revolving Note Purchase Request" has the meaning specified in Section
2.2(b).
"SEC" means the Securities and Exchange Commission and any successor
agency, authority, commission or Governmental Body.
"Securities Act" means as of any date the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute.
"Security Agreement" means the Security Agreement, in the form of Exhibit
D, to be executed and delivered by the Parent and each Subsidiary of the Parent
(other than the Restaurant Subsidiaries) on or prior to the Closing Date
pursuant to Section 5.9, and to be executed and delivered by any future
Subsidiary of the Parent (other than the Company and the Restaurant
Subsidiaries) pursuant to Section 9.6.
"Security Documents" means the Security Agreement, the Intellectual
Property Security Agreement, the Mortgages, the Blocked Account Agreements,
trust deeds, short form mortgages, financing statements, fixture filings,
assignments and other agreements, instruments and documents in respect of the
Collateral and the Liens of the Purchaser therein that may now or hereafter be
executed, delivered, filed or recorded pursuant thereto or in connection
therewith, or pursuant to Section 5.9, 9.5, 9.6, 9.7 or 9.9 of this Agreement.
"Shareholders' Agreement" has the meaning specified in Section 5.26.
"Solvent" means, when used with respect to any Person, that (a) the fair
value of the property of such Person is greater than the total amount of
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liabilities of
such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (d) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's assets
would constitute unreasonably small capital. For such purposes, any contingent
liability (including, without limitation, pending litigation, Contingent
Obligations, pension plan liabilities and claims for federal, state, local and
foreign taxes, if any) is valued at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Statute" means any statute, ordinance, code, treaty, directive, law, rule
or regulation of any Governmental Body.
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"Subordinated Seller Notes" means (i) the subordinated promissory note in
the original aggregate principal amount of $5,000,000, (ii) the limited recourse
subordinated promissory note in the original aggregate principal amount of
$5,000,000 and (iii) the subordinated promissory note (the "Contributor
Short-Term Subordinated Note") in the original aggregate principal amount
$3,000,000, in each case issued to Teresi by the Parent in connection with
Reorganization.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which at least a majority of the outstanding Voting Stock is at the
time directly or indirectly owned or controlled by such Person or by one or more
of any entities directly or indirectly owned or controlled by such Person. For
the purposes of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Taking" shall mean a taking of the ownership or use of any Property of
any Credit Party, or any part thereof, pursuant to eminent domain or
condemnation proceedings, or by any settlement or compromise of such
proceedings.
"Taxes" has the meaning specified in Section 3.6(a).
"Teresi" has the meaning set forth in the Recitals.
"Term Note" and "Term Notes" have the meanings specified in Section
2.1(a)(ii).
"Termination Date" means the earlier of (i) the Maturity Date or (ii) any
date on which the Maximum Revolving Commitment of the Purchaser shall be or
shall have been reduced to $0, whether pursuant to the provisions of Section
3.2, or pursuant to an acceleration of the maturity of the Notes pursuant to
Section 11.1, or by reason of the passage of time, or otherwise.
"Transaction Documents" means the Note Documents and the Reorganization
Documents.
"Transactions" means the Reorganization, the purchase of the Notes by, and
issuance of the Warrants to, the Purchaser on the Closing Date as provided
herein, and the other transactions contemplated by the Transaction Documents to
occur on or prior to the Closing Date.
"UFOCs" has the meaning specified in Section 4.38(c).
"U.S. Government" means the federal government of the United States of
America or any department, agency or instrumentality thereof.
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"U.S. Person" means a citizen or resident of the United States of America,
a corporation, partnership or other entity created or organized in or under any
laws of the United States of America or of any State thereof, or any estate or
trust that is subject to federal income taxation regardless of the source of its
income.
"U.S. Taxes" has the meaning specified in Section 3.6(b).
"Voting Stock" with respect to any Person shall mean Capital Stock of such
Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of members of the
Board of Directors (or Persons performing similar functions) of such Person.
"Warrant" and "Warrants" have the meanings specified in Section 2.1(c).
"Warrant Stock" means (i) all shares of Common Stock issued or issuable
upon the exercise of any Warrant, and (ii) any securities issued or issuable by
the Parent with respect to shares of such Common Stock referred to in the
foregoing clause (i) by way of a stock dividend or stock split or in connection
with a combination or subdivision of shares, reclassification, merger,
consolidation or other reorganization of the Parent.
"Wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the shares of Capital Stock of which, other
than directors' qualifying shares, are owned, beneficially and of record, by
such Person and/or one or more Wholly-owned Subsidiaries of such Person.
Section 1.2. Accounting Terms. All accounting terms used in this Agreement
shall be applied on a consolidated basis for the applicable person and its
Subsidiaries, unless otherwise specifically indicated herein, provided that all
accounting terms used in this Agreement with respect to the Parent on a
consolidated basis shall exclude the Restaurant Subsidiaries. Any accounting
terms not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP.
Section 1.3. Rules of Construction. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Section or subsection. Reference herein to any Section
or subsection refers to such Section or subsection (as the case may be) hereof.
Words in the singular include the plural, and words in the plural include the
singular. Each covenant or agreement contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant
or agreement contained herein, so that compliance with any one covenant or
agreement shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant or agreement. Where any provision
herein refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such
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Person. All references to any instruments or agreements, including references to
any of the Transaction Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof, in each case,
made in accordance with the terms of the Transaction Documents. All references
to Persons include their respective successors and assigns (to the extent
permitted under the Note Documents).
Section 2. Sale and Purchase of Notes and Warrants.
Section 2.1. Authorization of Notes and Warrants.
(a) The Company has duly authorized the issue, sale and delivery of:
(i) its Senior Secured Guaranteed Revolving Notes Due
2001, in an aggregate principal amount at any time outstanding not
to exceed the Maximum Revolving Commitment, to be dated the date of
issue thereof, to bear interest from such date on the unpaid
principal amount thereof (calculated on the basis of a 360-day year
and actual days elapsed) at a variable rate per annum equal at any
time to the sum of (a) the Base Rate in effect at such time plus (b)
1.85%, such interest to be payable monthly in arrears on the first
day of each month (commencing October 1, 1998), and at maturity, to
mature on the Maturity Date, and to be substantially in the form of
Exhibit A-1 hereto attached (all such Notes issued pursuant to this
Agreement, or delivered in substitution or exchange for any thereof,
being collectively called the "Revolving Notes" and individually a
"Revolving Note");
(ii) its Senior Secured Guaranteed Term Notes Due 2001,
in the aggregate principal amount of $17,000,000, to be dated the
date of issue thereof, to bear interest from such date on the unpaid
principal amount thereof (calculated on the basis of a 360-day year
and actual days elapsed) at a rate per annum equal at any time to
the sum of (a) the Base Rate in effect at such time plus (b) 1.85%,
such interest to be payable monthly in arrears on the first day of
each month (commencing October 1, 1998), and at maturity, to mature
on the Maturity Date, and to be substantially in the form of Exhibit
A-2 hereto attached (all such Notes issued pursuant to this
Agreement, or delivered in substitution or exchange for any thereof,
being collectively called the "Term Notes" and individually a "Term
Note");
(b) So long as any Default or Event of Default shall have occurred
and be continuing and at the election of the Purchaser confirmed by written
notice to the Company, the interest rates applicable to the Notes shall be
increased by three percent (3%) per annum above the rates of interest otherwise
applicable hereunder ("Default Rate"), and all outstanding Obligations shall
bear interest at the Default Rate applicable to such Obligations. Interest at
the Default Rate shall accrue from the initial date of such Default or
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Event of Default until that Default or Event of Default is cured or waived and
shall be payable upon demand.
(c) The Parent has duly authorized the issuance and sale of its
warrants to the Purchaser, which warrants shall be exercisable under certain
circumstances to purchase up to an aggregate of 355,920 shares of Common Stock
then outstanding at an initial exercise price of $3.00 per share (subject to
adjustment as therein provided), each to be substantially in the form of Exhibit
F-1 hereto attached (all such warrants issued pursuant to this Agreement, or
delivered in substitution or exchange for any thereof, being collectively called
the "Warrants" and individually a "Warrant").
Section 2.2. Sale and Purchase of Revolving Notes.
(a) Subject to the applicable terms and conditions set forth in this
Agreement (including, without limitation, the applicable conditions set forth in
Section 6 hereof), the Company will issue, reissue and sell to the Purchaser,
and the Purchaser will purchase from the Company, from time to time during the
period from and including the Closing Date to but not including the Termination
Date or, if earlier, the date on which the Maximum Revolving Commitment of the
Purchaser shall have been reduced to $0, Revolving Notes at a purchase price
equal to 100% of the principal amount thereof; provided that the aggregate
outstanding principal amount of the Revolving Notes shall not exceed the Maximum
Revolving Commitment then in effect.
(b) Each issuance and sale of Revolving Notes hereunder shall be
made upon written notice by the Company to the Purchaser in the form of Exhibit
B hereto (each such notice a "Revolving Note Purchase Request") delivered not
later than 11:00 A.M. (New York City time) on the fifth Business Day prior to
the date such sale is to be effected, which notice shall specify (i) the
requested date of such sale (which shall not be on or after the Termination
Date) and (ii) the aggregate principal amount of Revolving Notes to be sold to
the Purchaser on such date (which shall be $250,000 or any greater amount which
is an integral multiple of $50,000). Not more than two sales of Revolving Notes
shall be effected during any one calendar month.
(c) The closing of each sale of Revolving Notes shall take place at
12:00 noon (New York City time) at the Principal Office of the Purchaser or at
such other place or places as the Company and the Purchaser may agree (except
for any sale of Revolving Notes effected on the Closing Date, which shall take
place at the time and place provided in Section 2.4).
(d) The Revolving Notes issued pursuant hereto shall evidence the
principal amount of Revolving Notes sold on the Closing Date (if any) and all
subsequent principal amounts of Revolving Notes sold hereunder, and the date and
the principal amount of each sale of Revolving Notes to the Purchaser by the
Company, as well as each payment
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or prepayment made on account of the principal thereof, and the resulting
aggregate unpaid principal balance thereof, shall be noted by the Purchaser on
the schedule attached to the Revolving Note held by it or any extension thereof;
provided, further, that failure by the Purchaser to make any such notation shall
not affect the obligations of the Company hereunder or under such Revolving
Note. Each such notation by the Purchaser shall be conclusive and binding for
all purposes in the absence of manifest error.
Section 2.3. Sale and Purchase of Term Notes and Warrants. Subject to the
applicable terms and conditions set forth in this Agreement, on the Closing
Date, the Company will issue and sell to the Purchaser, and the Purchaser will
purchase from the Company, Term Notes as provided in Section 2.4(b)(ii) in the
aggregate principal amount of $17,000,000 and the Warrants, at an aggregate
purchase price equal to 100% of the principal amount of the Term Notes.
Section 2.4. Closing.
(a) The initial closing of the sale and delivery of Notes and
Warrants shall take place at the offices of Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, New York, New York at 10:00 A.M., New York time on
September 23, 1998 or such other date as the parties shall agree (herein called
the "Closing Date").
(b) On the Closing Date, the Company will deliver to the Purchaser:
(i) a single Revolving Note registered in the name of
the Purchaser or its nominee, duly executed and dated the Closing
Date, in the principal amount of $5,000,000, and
(ii) a single Term Note registered in the name of the
Purchaser or its nominee, duly executed and dated the Closing Date,
in the principal amount of $17,000,000,
(c) On the Closing Date, the Company will deliver to the Purchaser
the Warrants in such denominations as the Purchaser shall specify, duly executed
by the Parent and dated the Closing Date.
Section 2.5. Payments. Each payment by the Company hereunder of the
principal amount of the Notes, interest thereon, fees, costs, expenses,
indemnities and other amounts due hereunder shall be made in Dollars by wire
transfer or other immediately available funds, without deduction (except as
provided in Section 3.6(b)), set-off or counterclaim, to the Purchaser at the
Principal Office, not later than 2:00 P.M. (New York City time) on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a
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Business Day, that payment shall be made on the next succeeding Business Day and
the extension of time shall be included in the computation of interest due
thereon.
Section 2.6. Fees.
(a) On the Closing Date, the Company will pay to Nomura Securities
International, Inc. a non-refundable Structuring Fee referred to in paragraph
4(a) of that certain letter agreement (the "Commitment Letter") dated June 18,
1998, among Newriders, the Company and the Purchaser.
(b) In addition to all other fees and other amounts payable or paid
by the Company pursuant to this Agreement, the Note Documents or otherwise, on
the Closing Date, the Company shall pay to the Purchaser the non-refundable
Funding Fee referred to in paragraph 4(b) of the Commitment Letter.
(c) In addition to all other fees and other amounts payable or paid
by the Company pursuant to this Agreement, the Note Documents or otherwise, the
Company shall pay to the Purchaser an unused facility fee equal to 0.25% per
annum on the average daily balance of the excess of the Maximum Revolving
Commitment over the aggregate unpaid principal amount of Revolving Notes,
payable in arrears (i) for the preceding calendar month, on the first Business
Day of the succeeding calendar month commencing October 1, 1998, and (ii) on the
Termination Date. All computations of the foregoing fee shall be made by the
Purchaser on the basis of a three hundred sixty (360) day year, and for the
actual number of days occurring in the period for which such fee is payable.
(d) The Purchaser is hereby authorized to, and at its sole
discretion may, charge to the balance of the Revolving Notes (which shall
constitute an issuance and purchase of Revolving Notes hereunder) on behalf of
the Company and cause to be paid in full all fees, expenses, charges and costs
and interest and principal (other than principal of the Revolving Notes) owing
by the Credit Parties under this Agreement or any of the other Note Documents if
and to the extent any Credit Party fails to promptly pay any such amounts as and
when due, even if such charges would cause the aggregate principal amount of the
outstanding Revolving Notes of the Purchaser to exceed the Maximum Revolving
Commitment and notwithstanding the provisions of Section 2.2(b); provided that,
so long as no Default or Event of Default has occurred and is continuing, the
Purchaser shall give the Company 3 Business Days prior notice that any such
fees, expenses, charges and costs (other than principal and interest) are due
and owing prior to so charging the balance of the Revolving Notes. At the
Purchaser's option and to the extent permitted by law, any charges so made shall
constitute part of the principal under the outstanding Revolving Notes.
Section 2.7. Interest Rate Limitation. Notwithstanding any provisions of
this Agreement, the Notes or the other Note Documents, in no event shall the
amount of interest paid or agreed to be paid by the Company exceed an amount
computed at the highest rate of
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interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Notes or the
other Note Documents at the time performance of such provision shall be due,
shall involve exceeding the interest rate limitation validly prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligations to be fulfilled shall be reduced to an amount computed at
the highest rate of interest permissible under applicable law, and if for any
reason whatsoever the Purchaser shall ever receive as interest an amount which
would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Notes outstanding
hereunder (whether or not then due and payable), without prepayment charge,
premium or penalty, and not to the payment of interest, or shall be refunded to
the Company if such principal and all other obligations of the Company to such
Purchaser have been paid in full.
Section 2.8. Allocation of Purchase Price. It is hereby agreed that, for
purposes of Treasury Regulations 1.1273-2(h),(A)(i) the aggregate "issue price"
of the investment unit consisting of the Term Notes and the Warrants to be
issued pursuant to this Agreement on the Closing Date is equal to 100% of the
principal amount of such Term Notes, (ii) the aggregate fair market value and
aggregate purchase price of the Term Notes is the aggregate principal amount
thereof less the amount referred to in clause (iii) of this Section, (iii) the
aggregate fair market value and aggregate purchase price of the Warrants is
$431,714.68, and (iv) the aggregate fair market value and aggregate purchase
price of any Revolving Notes issued on or after the Closing Date is equal to
100% of the principal amount of such Notes. The Credit Parties and the Purchaser
agree to use the foregoing issue price, purchase prices and fair market values
for U.S. federal income tax purposes with respect to this transaction (unless
otherwise required by a final determination by the Internal Revenue Service or a
court of competent jurisdiction).
Section 3. Prepayments of Notes.
Section 3.1. Mandatory Payments and Prepayments.
(a) On the Maturity Date, the unpaid principal balance of the Notes
to the extent not sooner paid or prepaid hereunder, shall be paid in full,
together with accrued interest and fees thereon and all expenses, indemnities
and other amounts payable under the terms of the Notes, this Agreement or the
other Note Documents, and the Maximum Revolving Commitment shall automatically
and without notice or other action on the part of any Person be permanently
reduced to $0.
(b) In the event that the aggregate unpaid principal amount of the
Revolving Notes shall at any time and for any reason (including, without
limitation, a reduction in the Maximum Revolving Commitment pursuant to Section
3.4 exceed the amount of the Maximum Revolving Commitment then in effect, the
Company shall, without notice or demand by the Purchaser, (i) immediately notify
the Purchaser in writing of such
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event, specifying the amount of such excess and (ii) within one (1) Business Day
thereafter pay the amount of such excess to the Purchaser for application to the
unpaid principal amounts of the outstanding Revolving Notes in accordance with
the applicable provisions of Section 3.3 hereof, together with accrued interest
and fees on the principal amount so paid to the date of such payment, without
prepayment charge, premium or penalty.
(c) Commencing with the six-month period ending on March 31, 1999
and for each six-month period thereafter beginning on the first day after the
end of the previous six-month period, not later than 20 days after the end of
such period the Company shall deliver to the Purchaser an Officer's Certificate
setting forth in reasonable detail a calculation of Excess Cash Flow for such
period. Unless within 10 days after receipt of such notice, the Purchaser shall
deliver a written notice to the Company declining to accept any prepayment of
Notes from such Excess Cash Flow, not later than thirty (30) days after the end
of such period, an amount in cash equal to the lesser of (i) 35% of such Excess
Cash Flow and (ii) the aggregate unpaid principal amount of the Term Notes shall
be paid to the Purchaser, for application to the unpaid principal amounts of the
outstanding Term Notes in accordance with the applicable provisions of Section
3.3, without prepayment charge, premium or penalty. Nothing in this subsection
(c) shall be construed to permit, or to waive any required consent with respect
to, any transaction that is prohibited by another provision of this Agreement or
the other Note Documents.
(d) Not later than 30 days prior to any date on which (i) any Credit
Party shall issue or sell any of its Capital Stock (other than shares of Common
Stock issued pursuant to the Parent 1998 Executive Compensation Plan or upon
exercise of the Warrants and other than Capital Stock sold to another Credit
Party), or (ii) any Credit Party shall incur any Indebtedness for borrowed money
(other than Indebtedness permitted by Section 10.1(a)-(g)), the Company shall
deliver to the Purchaser an Officer's Certificate setting forth in reasonable
detail a description of such issuance or sale of Capital Stock or incurrence of
Indebtedness (as the case may be), and stating the date such issuance or sale of
Capital Stock or incurrence of Indebtedness is expected to occur and the amount
of the Net Cash Proceeds expected to be received by such Person in connection
therewith and, if applicable, whether the Parent proposes to use any such Net
Cash Proceeds for the purposes described in the last sentence of this clause
(d). Concurrently with the receipt by such Person of such Net Cash Proceeds, an
amount in cash equal to the lesser of (i) 100% of such Net Cash Proceeds and
(ii) the aggregate unpaid principal amount of the Term Notes shall be paid to
the Purchaser, for application to the unpaid principal amounts of the
outstanding Term Notes in accordance with the applicable provisions of Section
3.3, without prepayment charge, premium or penalty. Nothing in this subsection
(d) shall be construed to permit or to waive any required consent with respect
to any transaction that is prohibited by another provision of this Agreement or
the Reorganization Documents. Notwithstanding the foregoing, the Parent shall be
permitted to retain up to $5,000,000 in the aggregate of the Net Cash Proceeds
resulting from the transactions described in clauses (i) and/or (ii) of the
first sentence of this subsection (d), to the extent that the Parent uses such
Net Cash Proceeds (x) to repay, within
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five (5) Business Days of receipt of such Net Cash Proceeds, principal and
interest owing under the Contributor Short-Term Subordinated Note and/or (y) to
fund up to $2,000,000 of operating expenses of any Credit Party.
Section 3.2. Optional Prepayments of the Notes.
(a) Upon notice given as provided in Section 3.2(b), the Company, at
its option, may prepay at any time all or from time to time any part (in an
aggregate amount of $250,000 or any greater amount which is an even multiple of
$50,000, or in an amount equal to the aggregate principal balance of all of the
Notes) of the principal amount of the Notes, together with accrued but unpaid
interest on the principal amount being prepaid to the date of such prepayment,
but without prepayment charge, premium or penalty; provided that not more than
two prepayments pursuant to this Section 3.2(a) shall be made in any calendar
month. Each prepayment made pursuant to this Section 3.2(a) shall be applied as
provided in Section 3.3(c).
(b) The Company shall call Notes for prepayment pursuant to Section
3.2(a) by giving written notice thereof to the Purchaser, not less than 5
Business Days prior to the date fixed for such prepayment, which notice shall
specify (i) the date fixed for such prepayment, (ii) the principal amount to be
prepaid on such date, and (iii) the amount of accrued interest to be paid or
anticipated to be paid on such date. Notice of prepayment having been so given,
the aggregate principal amount of the Notes so to be prepaid as specified in
such notice, together with interest accrued thereon to such date fixed for
prepayment, shall become due and payable on the specified prepayment date.
Section 3.3. Application of Principal Payments.
(a) All payments and prepayments of the principal amount of the
Notes made pursuant to Section 3.1(c) or (d) shall be applied to the outstanding
principal amount of the Term Notes until paid in full. The Term Notes, to the
extent paid or prepaid as herein provided, shall not be reissued.
(b) All payments and prepayments of principal made pursuant to
Section 3.1(b) shall be applied to the outstanding principal amount of the
Revolving Notes, any such payment or prepayment shall not affect the Maximum
Revolving Commitment and such Revolving Notes, notwithstanding such payment or
prepayment, may be reissued and sold in the manner and to the extent provided in
Section 2.2.
(c) All payments and prepayments of principal made pursuant to
Section 3.2(a) shall be applied first to the outstanding principal amount of the
Revolving Notes until such principal amount shall be reduced to $0, and
thereafter shall be applied to the outstanding principal amount of the Term
Notes. Amounts applied to the Revolving Notes pursuant to this subsection (c)
shall not affect the Maximum Revolving Commitment,
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and such Revolving Notes, notwithstanding such prepayment, may be reissued and
sold in the manner and to the extent provided in Section 2.2. The Term Notes, to
the extent prepaid as herein provided, shall not be reissued.
(d) In the event that, at the time any payment or prepayment
provided for herein shall be applied to the Revolving Notes or the Term Notes,
more than one Revolving Note or more than one Term Note shall be outstanding,
then such payment or prepayment shall be applied to the Revolving Notes or the
Term Notes (as the case may be) pro rata in accordance with the respective
outstanding principal amounts of the Notes of the applicable type.
(e) In any case in which a payment of the principal amount of the
Term Notes made pursuant to Section 3.1 (c) or (d) or Section 3.2 shall include
the entire unpaid principal amount of all Term Notes at the time outstanding,
such payment shall be accompanied by a payment of all interest accrued on such
principal amount to the date of such payment. In the case of any payment
pursuant to any of such provisions of less than the entire unpaid principal
amount of the Term Notes, interest accrued on the principal amount so paid to
the date of such payment shall be paid on the next regular date for payment of
interest on the Term Notes as provided in Section 2.1(a). In any case in which a
payment of the principal amount of the Revolving Notes made pursuant to Section
3.1(b) shall include the entire unpaid principal amount of all Revolving Notes
at the time outstanding, such payment shall be accompanied by a payment of all
interest accrued on such principal amount to the date of such payment. In the
case of any payment pursuant to such provision of less than the entire unpaid
principal amount of the Revolving Notes, interest accrued on the principal
amount so paid to the date of such payment shall be paid on the next regular
date for payment of interest on the Revolving Notes as provided in Section
2.1(a).
Section 3.4. Reductions of Commitments. The Company may terminate or
reduce the amount of the Maximum Revolving Commitment at any time or from time
to time, provided that (i) the Company shall give written notice to the
Purchaser of each such termination or reduction at least 5 Business Days prior
to the effective date thereof, which notice shall specify such effective date
and the amount of such reduction, (ii) each partial reduction of the Maximum
Revolving Commitment shall be in an aggregate amount at least equal to $250,000
or any greater amount which is an even multiple of $50,000, (iii) each such
reduction of the Maximum Revolving Commitment, and any such termination, shall
be irrevocable and permanent and (iv) no such reduction shall reduce the Maximum
Revolving Commitment to an amount that is less than the aggregate principal
amount of the Revolving Notes at the time outstanding.
Section 3.5. Purchase of Notes. The Company will not, nor will it permit
any of its Subsidiaries or Affiliates to, acquire directly or indirectly by
purchase or prepayment or otherwise any of the outstanding Notes except by way
of payment or prepayment in accordance with the provisions of such Notes and of
this Agreement. If the Company or any
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of its Subsidiaries or Affiliates acquires any Notes in violation of this
Section 3.5 or in any other manner, such Notes shall thereafter be cancelled and
shall not be reissued, no Note shall be issued in substitution therefor, and
such Notes shall not be deemed to be outstanding for any purpose under this
Agreement.
Section 3.6. Taxes.
(a) All payments by the Company under this Agreement or the Notes to
the Purchaser shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings imposed on or with respect to such payments, and all liabilities
with respect thereto, excluding (except as provided in subsection (b) of this
Section 3.6) net income or franchise taxes imposed on or measured by such
holder's net income and imposed as a result of the holder being organized under
the laws of, or having its lending office in, the jurisdiction imposing such tax
(other than any office arising solely from the holder having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement in such jurisdiction) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes").
(b) If the Company shall be required by law to deduct any taxes,
levies, imposts, deductions, charges or withholdings imposed by the United
States of America or any taxing authority thereof ("U.S. Taxes") from or in
respect of any sum payable hereunder to any holder which is not a U.S. Person,
(i) except as provided in subsection (f) below, the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.6), such holder receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Company shall make such deductions and
(iii) the Company shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. Upon the
occurrence of any event giving rise to the operation of this Section 3.6(b) with
respect to any holder, such holder shall, if requested by the Company, use
reasonable efforts to designate another office of such holder through which its
Notes are held, with the object of preventing the consequence of the event
giving rise to the operation of this Section 3.6(b); provided that such
designation would not (y) result, in the sole opinion of the holder, in any
material cost, expense or other detriment to such holder, or (z) violate any
Statute or Order to which such holder or the Company is then subject.
(c) In addition, the Company agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made under this Agreement or the
Notes or from the execution, delivery, transfer, enforcement or registration of,
or otherwise with respect to, this Agreement, the Notes or any other Note
Document (hereinafter referred to as "Other Taxes").
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(d) Except as provided in subsection (f) of this Section 3.6, the
Company will indemnify each holder of Notes for the full amount of Taxes, U.S.
Taxes or Other Taxes imposed by any jurisdiction and paid by such holder, and
any liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes, U.S. Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date such holder makes written demand therefor
(which demand shall identify the nature and amount of Taxes, U.S. Taxes or Other
Taxes for which indemnification is being sought and shall include a copy of the
relevant portion of any written assessment from the relevant taxing authority
demanding payment of such Taxes, U.S. Taxes or Other Taxes).
(e) Within 30 days after the date of any payment of Taxes, U.S.
Taxes or Other Taxes, the Company will furnish to the Purchaser the original or
a certified copy of any receipt furnished by the relevant taxing authority
evidencing payment thereof.
(f) The Company shall have no obligation to pay additional amounts
in respect of U.S. Taxes to any holder of Notes which is not a U.S. Person
pursuant to subsection (b) of this Section 3.6, or to indemnify such holder in
respect of such U.S. Taxes pursuant to subsection (d) of this Section 3.6, if
such U.S. Taxes are imposed solely by reason of such holder's failure (i) to
provide the Company, immediately prior to the time such Person becomes a holder,
with two duly completed copies of United States Internal Revenue Service Form
1001 or 4224 or successor applicable form, as the case may be, certifying in
each case that the holder is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax, or (ii) to provide the Company, on or before the date that any form
previously supplied to the Company pursuant to this Section 3.6(f) expires or
becomes obsolete or immediately subsequent to the occurrence of any event
requiring a change in the form most recently supplied by it to the Company, two
further copies of such Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, certifying that the holder is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and is exempt from United States backup withholding tax
unless a change in treaty, law or regulation or interpretation thereof has
occurred prior to the date on which the delivery of the forms required by this
Section 3.6(f)(ii) would otherwise be due renders any such form inapplicable or
prevents the holder from duly completing and delivering any such form and the
holder advises the Company that it is no longer capable of receiving payments
without deduction or withholding. Each holder agrees that it will designate a
different lending office to receive payments on the Notes if such designation
will avoid the need for, or reduce the amount of, such Taxes and will not, in
the sole opinion of such holder, be disadvantageous to such holder.
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(g) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 3.6
shall survive the payment in full of principal, interest, fees and any other
amounts payable hereunder (other than amounts payable pursuant to this Section
3.6).
Section 4. Representations and Warranties of the Parent and the Company.
The Parent and the Company jointly and severally represent and warrant to the
Purchaser that:
Section 4.1. Corporate Existence and Power. Each Credit Party is a
corporation, partnership and/or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is duly qualified to do business in each additional
jurisdiction where the failure to so qualify is reasonably likely to have a
Material Adverse Effect. Each Credit Party has all requisite organizational
power to own its Properties and to carry on its businesses as now being
conducted and as proposed to be conducted and to execute, deliver and perform
its obligations under this Agreement, the Notes, the Warrants and the other
Transaction Documents to which it is a party.
Section 4.2. Corporate Authority. The execution, delivery and performance
by each Credit Party of this Agreement, the Notes, the Warrants and the other
Transaction Documents to which it is a party are within its organizational power
and have been duly authorized by all necessary organizational action on the part
of its Board of Directors and stockholders.
Section 4.3. Binding Effect. This Agreement, the Notes, the Warrants and
each of the other Transaction Documents to which any Credit Party is a party
have been duly executed and delivered by such Credit Party which is a party
thereto, and are the legal, valid and binding obligations of such Credit Party,
as the case may be, enforceable against it in accordance with their terms,
except, in each of the foregoing cases, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relative to or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity.
Section 4.4. Capital Stock.
(a) As of the Closing Date after giving effect to the Transactions,
the authorized and issued shares of each class of Capital Stock of each Credit
Party are as set forth in Schedule 4.4 hereto. All of the issued and outstanding
shares of Capital Stock of each Credit Party are validly issued, fully paid and
non-assessable. As of the Closing Date after giving effect to the Transactions,
except for the Warrants and as otherwise set forth on Schedule 4.4 hereto, there
are no securities outstanding that are convertible into or exchangeable for any
shares of Capital Stock of any Credit Party, nor are there outstanding any
rights to subscribe for or purchase, or any options or warrants for the purchase
of, or any agreements (contingent or otherwise) providing for the issuance of,
or any calls, commitments or claims of any character relating to, any shares of
Capital Stock of any Credit
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Party or any securities convertible into or exchangeable for any such shares.
Each Credit Party has good title to all of the shares of Capital Stock it owns,
free and clear in each case of any Lien (except Liens created by the Security
Documents).
(b) On the Closing Date, after giving effect to the Transactions, no
Credit Party will be subject to any obligation (contingent or otherwise) to
repurchase, acquire or retire (i) any of its Capital Stock, (ii) any securities
convertible into or exchangeable for any of its Capital Stock, or (iii) any
options, warrants or other rights to subscribe for, purchase or acquire any of
its Capital Stock, except for shareholders' appraisal rights in connection with
the Reorganization under Nevada law and the obligation of Parent to convert
and/or exchange options and warrants to acquire shares of common stock of
Newriders into or for options and/or warrants for Common Stock.
(c) The shares of Common Stock issuable upon exercise of the
Warrants have been duly and validly reserved for issuance upon such exercise
and, when issued and delivered against payment therefor as provided therein,
will be duly authorized, validly issued, fully paid and non-assessable and
subject to no Liens in respect of the issuance thereof.
Section 4.5. Business Operations and Other Information: Financial
Condition.
(a) The Credit Parties have delivered to the Purchaser true and
complete copies of (i) the audited consolidated balance sheets of each of (1)
the Paisano Companies, (2) Newriders and its Subsidiaries and (3) El Paso and
its Subsidiaries, in each case as of December 31, 1996 and 1997, and the related
audited consolidated statements of income, shareholders' equity and cash flows
for each of the fiscal years then ended of each of (1) the Paisano Companies,
(2) Newriders and its Subsidiaries and (3) El Paso and its Subsidiaries,
together with the notes thereto and the reports thereon of Deloitte & Touche LLP
(or with respect to Newriders and its Subsidiaries as of and for the fiscal year
ended December 31, 1996, Jones, Jensen & Company), and (ii) the unaudited
balance sheets of each of (1) of the Paisano Companies, (2) Newriders and its
Subsidiaries and (3) El Paso and its Subsidiaries, in each case as of March 31,
1998 and June 30, 1998, and the related unaudited statements of income,
shareholders' equity and cash flows for each of the fiscal quarters then ended,
together with the notes thereto (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP (subject, in the
case of the unaudited quarterly financial statements, to normal year-end audit
adjustments and absence of certain of the notes required by GAAP), and present
fairly, in all material respects, the consolidated financial position and
related consolidated results of operations and cash flows of the Paisano
Companies, Newriders and El Paso, as applicable, as at each of the dates and for
each of the periods respectively covered thereby.
(b) As of the date of each of the balance sheets included in the
Financial Statements, no Credit Party had any Indebtedness or liability,
absolute or contingent, liquidated or unliquidated, except Indebtedness and
liabilities reflected or reserved against
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on such respective balance sheets or described in the notes thereto. Except as
set forth on Schedule 4.5B, since December 31, 1997, no Material Adverse Effect
has occurred;
(c) Attached hereto as Schedule 4.5C is a true and complete copy of
the latest (as of the Closing Date) projections of the consolidated net income
and cash flow of (i) the Parent and its Subsidiaries on a consolidated basis and
(ii) the Paisano Group, (assuming completion of the Transactions) for each of
the fiscal years of the Parent in the period from the Closing Date through
December 31, 2001. Such projections have been prepared by management of the
Parent on the basis of assumptions, set forth in Schedule 4.5C, which such
management reasonably believes as of the Closing Date are fair and reasonable in
light of the historical financial performance of the Credit Parties and of
current and reasonably foreseeable business conditions, and represent such
management's best estimate of the Credit Parties' future financial performance
(after giving effect to the Transactions).
(d) Attached hereto as Schedule 4.5D is a true and complete copy of
a pro forma balance sheet for (i) the Parent and its Subsidiaries on a
consolidated basis and (ii) the Paisano Group, prepared by management of the
Parent on the basis of the historical unaudited balance sheet of the Paisano
Companies as of March 31, 1998, as though the Transactions had been completed
immediately prior to such date. Such pro forma balance sheet fairly presents in
all material respects the consolidated financial position of the (i) Parent and
its Subsidiaries and (ii) the Paisano Group, respectively, on a consolidated
basis as of the close of business on such date on a pro forma basis as if the
Transactions had been completed immediately prior to such date, and contains all
pro forma adjustments necessary in order to fairly reflect such assumption.
(e) Attached as Schedule 4.5E is a true and complete statement of
the sources and uses of all funds to be received or expended by the Credit
Parties in connection with the Transactions, including, without limitation, an
itemized statement of all costs and expenses which, as of the Closing Date, are
expected to be incurred in connection with the Transactions.
Section 4.6. Subsidiaries. Except as set forth on Schedule 4.6, (i) none
of the Credit Parties has any Subsidiaries, or, except as set forth on Schedule
4.10B, owns any shares of Capital Stock of, or has any direct or indirect equity
interest in, any other Person, and (ii) each Credit Party has good title to all
of the shares of Capital Stock it owns of each such Subsidiary, free and clear
of any Lien (except Liens created by the Security Documents).
Section 4.7. Litigation; No Violation of Governmental Orders or Laws.
(a) Except as set forth on Schedule 4.7, there are no judicial,
administrative, arbitral or other actions, suits or proceedings pending, or, to
the knowledge of the Company or the Parent after due inquiry, threatened against
or affecting any Credit Party or any Properties or rights of any of them (i)
which, if adversely determined,
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individually or in the aggregate is reasonably likely to have a Material Adverse
Effect, or (ii) which seek to enjoin, or otherwise prevent the consummation of,
the Transactions or to recover any damages or obtain any relief as a result of
any of the Transactions in any court or before any arbitrator of any kind or
before or by any Governmental Body.
(b) No Credit Party is in default under or in violation of any Order
of any court, arbitrator or Governmental Body, or of any Statute which default
or violation, individually or in the aggregate together with all other such
defaults and violations, has had or is reasonably likely to have a Material
Adverse Effect.
Section 4.8. No Conflicts with Agreements, Statutes, Orders, Etc. Neither
the execution and delivery by any Credit Party of this Agreement, the Notes, the
Warrants or any of the other Transaction Documents to which it is a party, nor
the offering, issuance or sale of the Notes or the Warrants, nor the fulfillment
of or compliance with the terms and provisions hereof or thereof, will conflict
with, or result in a breach or violation of the terms, conditions or provisions
of, or constitute a default under, or result in the creation of any Lien (other
than Liens created pursuant to the Security Documents) on any Properties of any
Credit Party pursuant to, the charter or by-laws of any Credit Party, or any
contract, agreement, mortgage, indenture, lease or instrument to which either of
them is a party or by which either of them is bound or to which either of them
or any of their assets are subject, or any Order or Statute to which either of
them or any of their assets are subject.
Section 4.9. Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any Governmental Body or any
nongovernmental Person (including, without limitation, any creditor or
stockholder of any Credit Party, and also including, without limitation, any
consent, approval, authorization, declaration or filing or the expiration of any
waiting period under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976),
is required in connection with the execution, delivery or performance by any
Credit Party of this Agreement, the Notes, the Warrants or the other Transaction
Documents, or as a condition to the legality, validity or enforceability of this
Agreement, the Notes, the Warrants or any other Transaction Document or to the
consummation of the Transactions, except for (a) filing of financing statements,
filing of assignments of patents, trademarks, copyrights and similar items and
recording of Mortgages and fixture filings, required in each case in order to
perfect the Liens of the Purchaser in the Collateral, and (b) such consents,
approvals, authorizations, declarations, registrations, filings and other
actions as are listed in Schedule 4.9, all of which listed consents, approvals,
authorizations, declarations, registrations, filings and other actions have been
or will on or prior to the Closing Date be obtained and are or will then be in
full force and effect.
Section 4.10. Outstanding Indebtedness; Investments. (a) Schedule 4.10A
sets forth a correct and complete list and brief description as of the Closing
Date of all Indebtedness for borrowed money of each Credit Party and all Liens
securing such Indebtedness (excluding any Indebtedness evidenced by the Notes
and any Liens created by the Security
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Documents) existing on the Closing Date before giving effect to the
Transactions, indicating which such Indebtedness and Liens will be discharged
and paid in full on the Closing Date (the "Non-Continuing Indebtedness") and
which such Indebtedness and Liens will be continuing after giving effect to the
Transactions (the "Continuing Indebtedness"). On the Closing Date after giving
effect to the Transactions, no default or event of default has occurred and is
continuing with respect to any Continuing Indebtedness.
(b) Schedule 4.10B sets forth a correct and complete list and brief
description of all Investments of each Credit Party as of the Closing Date after
giving effect to the Transactions.
Section 4.11. Assets and Properties.
(a) As of the Closing Date after giving effect to the Transactions,
no Credit Party owns any real Property. Schedule 4.11 sets forth a true and
complete list, as of the Closing Date after giving effect to the Transactions,
of all leases of real Property to which any Credit Party is a party, identifying
the parties to each such lease and the Property to which it relates, as of the
Closing Date after giving effect to the Transactions contemplated to occur on
the Closing Date. True and complete copies of all such leases, together with all
amendments, modifications and supplements thereto to the date of this Agreement,
have been delivered to the Purchaser or its representatives. Each Credit Party
has good and marketable title to all of its respective Properties (other than
Properties leased from others), subject to no Lien of any kind except Permitted
Liens.
(b) The Properties owned by, leased to or used by each Credit Party
are in good operating condition and repair, ordinary wear and tear excepted, and
are able to serve the function for which they are currently being used in all
material respects. Neither this Agreement nor any other Transaction Document,
nor any of the Transactions, will materially adversely affect any right, title
or interest of any Credit Party in and to any of the assets or properties owned,
leased or used by Credit Party.
Section 4.12. Taxes. Each Credit Party has filed, or on behalf of each of
them there have been filed, all tax returns and informational returns which are
required to have been filed, and there have been paid all taxes shown to be due
and payable on such returns and all other material taxes and assessments payable
by any of them, except to the extent that any such tax liability is being
diligently contested in good faith and such Credit Party has adequately reserved
against such tax liability on its books and financial statements in accordance
with GAAP. No material tax liens have been filed and no material claims are
being asserted with respect to any such taxes as of the date hereof. No material
tax assessment against any Credit Party has been proposed, and all of their
respective tax liabilities are adequately provided for on their respective books
and financial statements in accordance with GAAP.
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Section 4.13. Disclosure. Neither this Agreement nor any other document,
certificate or statement (including, without limitation, the Registration
Statement, but in any event excluding the Confidential Information Memorandum,
dated March 1998, prepared by Imperial Capital, LLC) furnished to the Purchaser
by or on behalf of any Credit Party in connection herewith contained, as of its
respective date, or now contains, any untrue statement of a material fact or as
of any such date omitted, or now omits, to state a material fact necessary in
order to make the statements contained herein and therein not misleading,
provided that any statement or other disclosure contained in the Registration
Statement (or any amendments thereto which are filed with the SEC prior to the
Closing Date), which provides correct and complete information with respect to
any untrue statement of material fact or omission of material fact otherwise
contained in any document, certificate or statement previously furnished to the
Purchaser, shall be deemed to correct such untrue statement or omission. Except
as set forth on Schedule 4.5B, neither the Parent nor the Company knows of any
facts (other than matters of a general economic or political nature) that
individually or in the aggregate have had a Material Adverse Effect or are
reasonably likely to have a Material Adverse Effect in the future.
Section 4.14. Offering of Securities. No Credit Party nor any
representative thereof has, directly or indirectly, offered any of the Notes or
Warrants or any security similar to any of them for sale to, or solicited any
offers to buy any of the Notes or Warrants or any security similar to any of
them from, or otherwise approached or negotiated with respect thereto with, more
than 80 Persons including the Purchaser, and no Credit Party nor its
representatives has taken or will take any action which would subject the
issuance or sale of any of the Notes or the Warrants to the provisions of
Section 5 of the Securities Act or violate the provisions of any securities or
Blue Sky laws of any applicable jurisdiction.
Section 4.15. Broker's or Finder's Commissions. Except for compensation to
Imperial Capital LLC due on the Closing Date consisting of (x) a cash fee of
approximately $1,485,000 (10% of which shall be paid to Franchise Mortgage
Acceptance Company) plus (y) warrants to purchase up to an aggregate of 2.5% (on
a fully diluted basis) of shares of Common Stock then outstanding at an exercise
price of $4.3125, no broker's or finder's fee or commission will be payable by
any Credit Party with respect to the issuance and sale of the Notes or Warrants
or any of the Transactions. The Company agrees to indemnify the Purchaser and
hold it harmless against any loss, cost, claim or liability (including, without
limitation, reasonable attorneys' fees and disbursements for the investigation
and defense of claims) arising out of or relating to any such actual or alleged
fee or commission.
Section 4.16. Labor Matters. Except as set forth in Schedule 4.16, during
the three years preceding the Closing Date, there has been no strike, work
stoppage, slowdown or other labor dispute or grievance involving any Credit
Party thereof or the employees of any of such Persons, nor to the knowledge of
the Company or the Parent after due inquiry is any such action, dispute or
grievance pending or threatened against any Credit Party thereof as of the
Closing Date. No Credit Party is a party to any collective bargaining agreement
and
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neither the Company nor the Parent has knowledge after due inquiry of any
pending or threatened effort to organize any of their employees. Except as set
forth in Schedule 4.16, there are no pending retaliatory or wrongful discharge
claims or employment discrimination charges or complaints or administrative or
judicial complaints arising therefrom pending against any Credit Party, or
against any employees of any of such Persons, before any Governmental Body,
which have had or could reasonably be expected to have a Material Adverse
Effect, nor to the knowledge of the Company or the Parent after due inquiry are
any such charges or complaints threatened against any Credit Party. Each Credit
Party is in compliance with all applicable Statutes and Orders relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, bonuses, collective bargaining agreements, equal pay,
occupational safety and health, equal employment opportunity and wrongful or
retaliatory termination of employment, except for such noncompliance as in the
aggregate is not reasonably likely to, and will not, result in a Material
Adverse Effect.
Section 4.17. Environmental Matters. Except as set forth in Schedule 4.17:
(a) there is no pending Environmental Matter, and after due inquiry
neither the Company nor the Parent is aware of any facts that could reasonably
be expected to result in any Environmental Matter. No Credit Party has agreed to
assume by contract or otherwise any liability of any other Person for cleanup,
compliance, or required Capital Expenditures in connection with any
Environmental Matter;
(b) the Properties used, owned, leased, operated, managed or
controlled at any time by each Credit Party are free of contamination from
Hazardous Materials, including, without limitation, any contamination of the
associated air, soil, groundwater or surface waters, and are free of any other
potentially harmful chemical or physical conditions that would reasonably be
expected to have a Material Adverse Effect;
(c) each Credit Party is in material compliance with all applicable
Environmental Laws and is not currently in receipt of any notice of violation of
any Environmental Law or of any potential liability for cleanup of Hazardous
Materials. Each Credit Party holds and is in material compliance with all
governmental permits, licenses, and authorizations necessary to operate their
businesses that relate to siting, wetlands, coastal zone management, air
emissions, discharges to surface or ground water, discharges to any sewer or
septic system, noise emissions, solid waste disposal or the generation, use,
transportation or other management of Hazardous Materials. To the best knowledge
of the Company and the Parent after due inquiry, no Credit Party has at any time
generated, manufactured, refined, recycled, discharged, emitted, released,
buried, processed, produced, reclaimed, stored, treated, transported, or
disposed of any Hazardous Materials except in material compliance with all
applicable Statutes and Orders;
(d) no real Property used, owned, leased, operated, managed or
controlled by any Credit Party is (i) listed or proposed for listing on the
National Priorities List under
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CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any Governmental Body;
(e) no Properties of any Credit Party are subject to any Lien or
claim for Lien in favor of any Person as a result of any Environmental Matter or
response thereto; and
(f) no Credit Party has any liabilities, absolute or contingent on
the date hereof with respect to Hazardous Materials, except for such liabilities
as are not in the aggregate reasonably likely to have a Material Adverse Effect.
Section 4.18. Margin Regulations. No Credit Party owns or now intends to
acquire any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System of the United States (12 CFR 221). No part of the
proceeds from the sale of the Notes will be used, and no part of the proceeds of
any loans repaid with the proceeds from the sale of the Notes was used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of such Regulation U, or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve any Credit
Party in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
No Credit Party or any agent acting on behalf of any Credit Party, has taken or
will take any action which might cause this Agreement, the Notes or the other
Note Documents to violate Regulation T, Regulation U, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or as the same may hereafter be
in effect. As used in this Section, the term "purpose of buying or carrying" has
the meaning assigned thereto in the aforesaid Regulation U.
Section 4.19. Compliance with ERISA.
(a) Except as set forth on Schedule 4.l9(a), no Credit Party
maintains or contributes to or has any obligation with respect to, and none of
the employees of any of the Credit Parties is covered by, any bonus, deferred
compensation, severance pay, pension, profit-sharing, retirement, insurance,
stock purchase, stock option, or other fringe benefit plan, arrangement or
practice, written or otherwise, or any other "employee benefit plan," as defined
in Section 3(3) of ERISA, whether formal or informal (collectively, the "Benefit
Plans" ). None of the Benefit Plans is (i) a Multiemployer Plan, (ii) a
"multiple employer plan," as defined in ERISA or the Code, or (iii) a funded
welfare benefit plan, as defined in Section 419 of the Code. No Credit Party has
ever contributed to any Plan subject to Section 412 of the Code, Title I,
Subtitle B, Part 3 of ERISA or Title IV of ERISA other than the Paisano
Publications, Inc. Defined Benefit Pension Plan. No Credit Party has any
agreement or commitment to create any additional Benefit Plan or to modify or
change any existing Benefit Plan. No Credit Party has any other ERISA
Affiliates.
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(b) With respect to each Benefit Plan, the Credit Parties have
heretofore delivered or caused to be delivered to Newriders true, correct and
complete copies of (i) all documents which comprise the most current version of
each of such Benefit Plans, including any related trust agreements, insurance
contracts, or other funding or investment agreements and any amendments thereto,
and (ii) with respect to each Benefit Plan that is a Plan, (A) the three most
recent Annual Reports (Form 5500 Series) and accompanying schedules for each of
the Plans for which such a report is required, (B) the most current summary plan
description (and any summary of material modifications), (C) the three most
recent certified financial statements and actuarial valuations for each of the
Plans for which such a statement or actuarial valuation is required or was
prepared, (D) the Forms PBGC-l filed in each of the three most recent plan
years for the Pension Plan, and (E) for each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code, all the Internal Revenue
Service determination letters issued with respect to such Plan. Except as set
forth on Schedule 4.19(b), since the date of the documents delivered, there has
not been any material change in the assets or liabilities of any of the Benefit
Plans or any change in their terms and operations which could reasonably be
expected to affect or alter the tax status or materially affect the cost of
maintaining such Benefit Plan, and none of the Benefit Plans has been or will be
amended prior to the Closing Date. Each of the Benefit Plans can be amended,
modified or terminated by a Credit Party within a period of thirty (30) days,
without payment of any additional compensation or amount or the additional
vesting or acceleration of any such benefits, except to the extent that such
vesting is required under the Code upon the complete or partial termination of
any Plan intended to be qualified within the meaning of Section 401(a) of the
Code.
(c) Each Credit Party has performed and complied in all respects
with all of its obligations under and with respect to each of the Benefit Plans
and each of the Benefit Plans has, at all times, in form, operation and
administration complied in all material respects with its terms, and, where
applicable, the requirements of the Code, ERISA and all other applicable laws
and regulations. Each Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and nothing has occurred which reasonably
could be expected to adversely affect such qualified status.
(d) There are no unpaid contributions due prior to the date hereof
with respect to any Benefit Plan that are required to have been made under its
terms and provisions, any related insurance contract or any applicable law or
regulation.
(e) (i) With respect to the Pension Plan, there has occurred no
failure to meet the minimum funding standards of Section 412 of the Code
(whether or not waived in accordance with Section 412(d) of the Code) or failure
to make by its due date a required installment under Section 412(m) of the Code,
and (ii) (A) no Credit Party has withdrawn from the Pension Plan during a plan
year in which it was a "substantial employer," as defined in Section 4001(a)(2)
of ERISA, where such withdrawal could result in liability of such
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substantial employer pursuant to Section 4062(e) or 4063 of ERISA, (B) no Credit
Party has filed a notice of intent to terminate the Pension Plan or adopted any
amendment to treat any such Plan as terminated, (C) the PBGC has not instituted
proceedings to terminate the Pension Plan, (D) no other event or condition has
occurred which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, the Pension Plan,
(E) no accumulated funding deficiency, whether or not waived, exists with
respect to the Pension Plan, and no condition has occurred or exists which by
the passage of time would be expected to result in an accumulated funding
deficiency as of the last day of the current plan year of the Pension Plan, (F)
all required premium payments to the PBGC have been paid when due, (G) no
reportable event, as described in Section 4043 of ERISA (whether or not waived),
has occurred with respect to the Pension Plan, (H) no excise taxes are payable
under the Code, (I) no amendment with respect to which security is required
under Section 307 of ERISA or Section 401 (a)(29) of the Code has been made or
is reasonably expected to be made, and (J) there has been no event which could
subject any of the Credit Parties to liability under Section 4064 or 4069 of
ERISA.
(f) With respect to the Pension Plan, (i) the funding method used in
connection with the Pension Plan is acceptable under ERISA and the actuarial
assumptions used in connection with funding such Plan meet the requirements of
Section 302 of ERISA and (ii) the actuarial present value of vested and
nonvested "benefit liabilities," as defined in Section 4001(a)(16) of ERISA,
calculated on a termination basis and taking into account all contingent and
subsidized benefits (the "Benefit Liabilities") of the Pension Plan, determined
as of the date hereof for such Plan, did not, and as of the Closing Date will
not, exceed the fair market value of the assets of such Plan as of such date.
(g) All group health plans covering employees of any of the Credit
Parties have been operated in compliance with the requirements of Section 4980B
of the Code (and any predecessor provisions) and Part 6 of Title I of ERISA
("COBRA").
(h) No Credit Party has any obligation to provide any deferred
compensation, pension or non-pension benefits to retired or other former
employees, except for health benefits as specifically required by COBRA or
pension benefits payable from a Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code.
(i) No Credit Party, nor any other "disqualified person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as defined in Section
4975 of the Code or Section 406 of ERISA, with respect to any Benefit Plan nor
have there been any fiduciary violations under ERISA which could subject any
Credit Party (or any officer, director or employee thereof) to any penalty or
tax under Section 502(i) of ERISA or Section 4971 and 497 of the Code.
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(j) Except as set forth on Schedule 4.19(j), with respect to any
Benefit Plan: (i) no filing, application or other matter is pending with the
Internal Revenue Service, the PBGC, the United States Department of Labor or any
other governmental body, (ii) there is no action, suit or claim pending (nor, to
the knowledge of any of the Credit Parties, any basis for such a claim), other
than routine claims for benefits, and (iii) there are no outstanding liabilities
for taxes, penalties or fees.
(k) No Credit Party has incurred any liability or taken any action,
and no Credit Party has any knowledge of any action or event that could cause
any one of them to incur any liability, (i) under Section 412 of the Code or
Title IV of ERISA with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA), (ii) on account of a partial or complete
withdrawal (as defined in Sections 4203 and 4205 of ERISA, respectively) with
respect to any Multiemployer Plan, or (iii) on account of unpaid contributions
to any Multiemployer Plan.
(l) Neither the execution and delivery of this Agreement nor the
consummation of any or all of the Transactions will: (i) entitle any current or
former employee of a Credit Party to severance pay, unemployment compensation or
any similar payment, (ii) accelerate the time of payment or vesting or increase
the amount of any compensation due from any Credit Party to any such employee or
former employee, or (iii) directly or indirectly result in any payment made or
to be made to or on behalf of any person to constitute a "parachute payment"
within the meaning of Section 280G of the Code.
Section 4.20. Material Contracts. Schedule 4.20 contains a list of all
Material Contracts to which any Credit Party is a party as of the Closing Date
after giving affect to the Transactions contemplated to occur on the Closing
Date. True and complete copies of each of such Material Contracts, with all
amendments, modifications and supplements thereto to the date hereof, have
previously been furnished by the Company to the Purchaser or its
representatives. Each of such Material Contracts is valid, subsisting and in
full force and effect and no Material Contract (and no present or future
interest of any Credit Party, in whole or in part, in, to or under any such
Material Contract) is currently assigned, pledged, hypothecated or otherwise
transferred to any Person. No Credit Party is in breach or violation of any of
the terms, conditions or provisions of any of such Material Contracts and to the
knowledge of the Company and the Parent no third party to any of the Material
Contracts is in breach or violation of any of the terms, conditions or
provisions thereof. No Credit Party is a party to any Material Contract or
subject to any restriction contained in its charter or by-laws which
individually or in the aggregate has had or is reasonably likely to have a
Material Adverse Effect.
Section 4.21. Insurance. Schedule 4.21 sets forth a true and complete list
and brief descriptions of all policies of workers compensation, general
liability, fire, property, casualty, marine, business interruption, errors and
omissions, flood, earthquake and other insurance carried by the Credit Parties,
true and complete copies of which policies have previously been delivered to the
Purchaser. Such policies are in full force and effect, and
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none of the Credit Parties has received notice of cancellation with respect to
any such policy. All premiums payable with respect to such policies have been or
will then have been paid in respect of the coverage periods specified in
Schedule 4.21.
Section 4.22. Possession of Franchises, Licenses, Etc. The Credit Parties
possess all franchises, security clearances, certificates, licenses, permits,
registrations, and other authorizations from Governmental Bodies, free from
burdensome restrictions, that are necessary for the ownership, maintenance and
operation of its Properties and assets, and for the conduct of its businesses as
now conducted, and none of the Company and their Subsidiaries is in violation of
any thereof in any material respect, except for such matters as in the aggregate
are not reasonably likely to, and will not, result in a Material Adverse Effect.
Section 4.23. Use of Proceeds. The proceeds of the issuance and sale of
the Term Notes will be used to repay a portion of the Easyriders Sub II Note
simultaneously with the consummation of the Paisano Merger, to repay the other
Non-Continuing Indebtedness, and to pay related fees and expenses. The proceeds
of the issuance and sale of the Revolving Notes will be used to pay fees and
expenses incurred by the Company in connection with the Reorganization and for
working capital and other corporate purposes of the Credit Parties.
Section 4.24. Intellectual Property.
(a) Schedule 4.24(a) sets forth (i) a complete and correct list of
each Copyright, Copyright application, Mark (including, where applicable, the
registration number and date for each Mark for which a registration has been
issued, or the application number and date for each Mark for which an
application for registration is pending in, the United States Patent and
Trademark Office or other similar office in any foreign jurisdiction) and all
other Intellectual Property or usage rights, including all Intellectual Property
relating to the Publications owned by any Credit Party (collectively, the
"Intangible Personal Property") and the name of the Credit Party which owns it,
and (ii) a complete and correct list of all material License Agreements to which
each Credit Party is a party either as licensee or licensor for each such item
of Intangible Personal Property. The Credit Parties have all right, title and
interest in and to the Intangible Personal Property in the countries listed in
Schedule 4.24(a) (the "Protected Countries") insofar as such Intangible Personal
Property is used in the operation of the business of the Credit Parties and the
Intangible Personal Property consists of all intellectual property which is used
or useful in the operation of the business of the Credit Parties.
(b) Except as set forth on Schedule 4.24(b):
(i) Since January l, 1993, there have been no actions,
judicial or arbitration proceedings or other formal proceedings commenced or
pending involving any Credit Party concerning any item of Intangible Personal
Property, and no such action or
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proceeding is threatened and no claim or other demand has been made by any
Person relating to any item of Intangible Personal Property;
(ii) None of the Credit Parties is subject to any continuing
decree of any court, governmental body or arbitration panel concerning any item
of Intangible Personal Property;
(iii) The Credit Parties have the right and authority to use
each item of Intangible Personal Property in the Protected Countries in
connection with the conduct of its businesses in the manner presently conducted
and to convey such right and authority, and such use does not conflict with,
infringe upon or violate any intellectual property or usage rights of any other
person or entity;
(iv) The conduct by the Credit Parties of their business does
not conflict in any material way with the valid intellectual property or usage
rights of others;
(v) Neither Teresi nor any Credit Party pays any royalty to
anyone for the use of any of the Marks, and neither Teresi nor any Credit Party
pays any royalty outside of the ordinary course of business to anyone for the
use of any other item of Intangible Personal Property;
(vi) Each Credit Party owns all of the Marks necessary to the
conduct of their respective businesses, and each Credit Party owns or licenses
all other Intangible Personal Property necessary to the conduct of their
respective businesses;
(vii) As of the Closing Date, the Credit Parties shall
continue to have the same rights in and to the Intangible Personal Property used
in connection with the business of the Credit Parties as the Credit Parties have
on the date of this Agreement and shall be able to use and exploit the
Intangible Personal Property to the full extent provided by applicable law
without any material restriction on such use or exploitation; and
(viii) None of the Intangible Personal Property used in the
conduct of the business, or the exploitation thereof by any Credit Party, or the
transfer thereof pursuant to the Paisano Stock Contribution Agreement, libels,
defames, infringes, violates the rights of privacy or publicity, or violates any
trademark, trade dress or service mark, common law or other similar right of any
Person. No Credit Party has received any notice or demand letter relating to any
claim thereof.
(c) (i) Except as set forth in Schedule 4.24(c), (A) all
Copyrights that are owned or controlled by a Credit Party are valid, existing,
unexpired and enforceable in the United States and all countries party to the
Universal Copyright Convention or the Berne Convention; and (B) none of the
Copyrights is in the public domain in the United States or any country party to
the Universal Copyright Convention or the Berne Convention.
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No Credit Party has received notice to the effect that the validity of any
Copyright is contested;
(ii) A registration for each Copyright set forth in Schedule
4.24(c) has been properly issued by the United States Copyright Office in the
applicable Credit Party's name (and are owned in each case by such Credit
Party). The application to register each Copyright listed in Schedule 4.24(c)
was duly and properly filed in the United States Copyright Office, and required
materials have been deposited with the Library of Congress and the United States
Copyright Office. Schedule 4.24(c) sets forth the registered title, registration
number and registration date for each such registered Copyright;
(iii) No other Person uses, has the right to use or claims the
right to use the Copyrights; and
(iv) Each Credit Party has taken all necessary steps to
secure, protect and maintain the Copyrights in the United States and has
disclosed in a Schedule herein all infringements or potential infringements,
known to the Credit Parties.
(d) (i) Each Mark that is necessary or useful to the conduct of
the Credit Parties' business is valid, subsisting, unexpired, enforceable and
has not been abandoned. Each application for the federal registration in the
United States of a Mark (including, without limitation, any renewals thereof)
has been duly and properly filed, and each registration has been properly
issued;
(ii) There are no marks held by Persons other than the Credit
Parties that conflict with or infringe on the Marks owned or used by any of the
Credit Parties in the conduct of their business, third party claims against such
Marks, or potential infringements against such Marks;
(iii) No other Person uses, has the right to use or claims the
right to use the Marks or any combination or derivation thereof; and
(iv) Each Credit Party has taken all necessary steps to
secure, protect and maintain the Marks in the United States and has disclosed in
a Schedule herein all infringements or potential infringements, known to the
Credit Parties.
(d) Each Credit Party has the sole and exclusive right to bring
actions for infringement or unauthorized use of the Intellectual Property and
software that is listed on Schedule 4.24 owned by such Credit Party, as the case
may be.
Section 4.25. Depositary Accounts. Schedule 4.25 hereto contains a true
and complete list of all Depositary Accounts maintained as of Closing Date by
any Credit Party, setting forth the name and address of each bank, savings
institution, securities broker or
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dealer, other financial intermediary or other depositary institution at which
each such Depositary Account is maintained, and stating the title and account
number of each such Depositary Account.
Section 4.26. Suppliers; Distributors; Printers. The Company does not know
or have any reason to believe that R.R. Donnelley & Sons Company, Curtis
Circulation Company or any supplier of paper to any Credit Party will cease to
do business with any Credit Party after the consummation of the Reorganization
in the same manner and at the same levels as previously conducted with such
Credit Party. To the best knowledge of each Credit Party, no such Person has
notified such Credit Party of any expected or projected increase in the cost of
goods or services provided by such Person.
Section 4.27. Status under Certain Laws. No Credit Party is an "investment
company" or a "person directly or indirectly controlled by or acting on behalf
of an investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended. No Credit Party is subject to
regulation as a "common carrier" or "contract carrier" or any similar
classification by the Interstate Commerce Commission or under the laws of any
state, or is subject to regulation under any other Statute which limits its
ability to incur Indebtedness.
Section 4.28. Foreign Assets Control Regulations. No Credit Party nor, to
the best of the Company's or Parent's knowledge after due inquiry, any Affiliate
of the Company, is by reason of being a "national" of a "designated foreign
country" or a "specially designated national" within the meaning of the
Regulations of the Office of Foreign Assets Control, United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V), or for any other reason, in
violation of, any United States Federal Statute or Presidential Executive Order
concerning trade or other relations with any foreign country or any citizen or
national thereof or the ownership or operation of any Property.
Section 4.29. Certain Transactions. Except for the Indebtedness
represented by the Subordinated Seller Notes or as set forth on Schedule 4.29
hereto and with respect to salaries and related employee compensation and
expense reimbursement, no Credit Party is indebted, directly or indirectly, to
any of their respective officers, directors or shareholders or to any of the
respective spouses or children of any of such Persons in any amount whatsoever;
and, except as set forth on Schedule 4.29, none of such officers, directors or
shareholders, or any member of their immediate families, is indebted to any
Credit Party in any amount whatsoever. Except as set forth on Schedule 4.29
hereto (or, as to Material Contracts or relationships arising subsequent to the
date of this Agreement which are permitted under this Agreement, as otherwise
promptly disclosed to the Purchaser in writing), no officer, director or
shareholder of any Credit Party, or any member of their immediate families, is,
directly or indirectly, interested in any Material Contract with any Credit
Party.
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Section 4.30. Places of Business. (i) The principal place of business and
the chief executive office of each Credit Party is located at the respective
locations listed in Schedule 4.30, (ii) the books and records (including,
without limitation, all records of Accounts) of the Credit Parties are located
only at the locations set forth in Schedule 4.30 and designated therein as
locations of Accounts, (iii) Inventory of each Credit Party is located only at
the locations set forth in Schedule 4.30 and designated therein as locations of
Inventory, except for Inventory which is currently in transit to such locations
and Consigned Inventory, and (iv) Equipment (as defined in the Security
Agreement) of each Credit Party is located only at the locations set forth in
Schedule 4.30 and designated therein as locations of Equipment. Other than
Consigned Inventory, no Inventory of any Credit Party is in the possession or
control of any warehouseman, bailee or any of such Credit Party's agents or
processors. References in this Section to Schedule 4.30 shall mean such Schedule
as it may be supplemented from time to time by timely notices delivered pursuant
to Section 10.16 hereof.
Section 4.31. Other Names. The business conducted by each Credit Party has
not been conducted under any corporate, trade or fictitious name other than
those names listed on Schedule 4.31 (or, after the Closing Date, in compliance
with the applicable provisions of Section 10.16).
Section 4.32. Reorganization Documents; Transaction Documents. Each
Reorganization Document to which any Credit Party is a party has been duly
executed and delivered by such Credit Party and by the parties thereto other
than Credit Party and is in full force and effect. The Company has delivered to
the Purchaser and its special counsel true and correct copies of each such
Reorganization Document (including all exhibits and schedules thereto),
including all amendments, modifications and supplements thereto, and of each
document, certificate or statement required to be executed or delivered by any
party thereunder (there being no amendments or modifications to such documents,
and no waiver of any rights thereunder by the Company, nor of any condition to
the obligations of such Persons under any thereof, except as heretofore
disclosed to the Purchaser in writing). This Agreement and the other Transaction
Documents constitute the only material agreements relating to the Transactions
to which the Credit Parties are party. The representations and warranties of the
Credit Parties contained in each Transaction Document are true and correct in
all material respects on the date hereof and will be true and correct in all
material respects on the Closing Date, and the Purchaser shall be entitled to
rely upon such representations and warranties with the same force and effect as
if they were incorporated in this Agreement and made to the Purchaser directly.
To the best knowledge of the Company and the Parent, the representations and
warranties of each party (other than the Credit Parties) to each Transaction
Document contained therein are true and correct in all material respects on the
date hereof and on the Closing Date as if made on and as of the date hereof and
the Closing Date. To the best knowledge of Company and Parent, none of the
documents delivered to the Company's shareholders in connection with the
Reorganization contains any untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The offer, issuance and sale of the shares of Capital
Stock of the Company and the Subordinated Seller Notes and any other securities
or Indebtedness issued pursuant to the Reorganization have been registered under
the Securities Act or are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
Section 4.33. Solvency. Each Credit Party is Solvent on the Closing Date
both before and after giving effect to the Transactions to be effected on the
Closing Date and the application of the net proceeds of the issuance and sale of
the Notes to be issued on the Closing Date.
Section 4.34. Ranking of Notes and other Obligations. The Obligations of
each Credit Party pursuant to the Note Documents to which it is a party are
secured by a first priority Lien on the Collateral pledged by such Credit Party
and constitute senior Indebtedness of such Credit Party, as the case may be, and
rank pari passu in right of payment with all unsubordinated Indebtedness of such
Credit Party, and senior in right of payment to any subordinated Indebtedness of
such Credit Party.
Section 4.35. Business of Parent. The Parent has not prior to the date
hereof been engaged in any business other than the negotiation, execution and
delivery of the Reorganization Documents, and the consummation of the
Reorganization and other activities incidental to its organization and
capitalization or contemplated in any of the foregoing documents.
Section 4.36. Licensing Interests; Easyriders Cafe.
(a) The Paisano Companies own all of the licensing interests
relating to the magazine and calendar titles (the "Publications") set forth on
Schedule 4.36 hereto. The Paisano Companies own all of the publishing interests
currently (prior to consummation of the Transaction) owned or controlled by
Teresi.
(b) The Paisano Companies own all interests in and to the Easyriders
Cafe concept.
Section 4.37. Circulation.
(a) Accurate and complete copies of the two most recent six-month
audit reports issued by the Audit Bureau of Circulations ("ABC") with respect to
each Publication, the circulation of which is audited by ABC, are attached to
Schedule 4.37(a) hereto. Except as disclosed on Schedule 4.37(a), from the date
of the latest such ABC audit report, there has
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been no decline in the total circulation revenue (excluding advertising revenue)
of any Publication.
(b) All representations contained in any materials which were
submitted by Teresi or the Credit Parties to the ABC for the periods covered by
such audit reports and which were used by the ABC in connection with the
preparation of such audit reports were true and correct.
(c) Since December 31, 1994, except as disclosed on Schedule 4.37(c)
or with respect to special editions of the Publications, the Credit Parties have
not made any material change in their policies for the pricing of circulation
for the Publications.
(d) Section 4.37(d) sets forth current lists, as of December 31,
1997 or such later date as is specified in such lists, of all of the Credit
Parties' (i) independent contractors which distribute the Publications and (ii)
current dealers of the Publications.
(e) The Credit Parties have not, during the past twelve months, sold
copies of any Publication whose circulation is audited by the ABC at discounts
which, if known to the ABC, would have resulted in the ABC not including such
sales in its reports with respect to the circulation of such Publication during
such period.
Section 4.38. Relationships with Franchisees.
(a) Except as set forth in Section 4.38, (i) since December 31,
1994, no franchisee of any Credit Party has canceled or otherwise modified its
relationship with such Credit Party, (ii) to the best knowledge of the Paisano
Companies, no such franchisee has threatened or has any intention to do so, and
(iii) the consummation of the Transactions will not give any such franchisee the
right to terminate its relationship with such Credit Party or reduce the amount
of royalties payable by such franchisee to such Credit Party. Schedule 4.38
contains a true, complete and accurate list of all franchisees of each Credit
Party as of the date hereof. True and complete copies of the franchise agreement
with each such franchisee have been provided to Purchaser.
(b) Schedule 4.38 sets forth a true and complete list of (i) all
states in which the Credit Parties are, as of the date of this Agreement,
registered to sell franchises; (ii) all states in which the Credit Parties have
received an official notice from the appropriate state officials that the Credit
Parties' offer to sell and the sale of their franchises are exempt from the
registration provisions of such jurisdiction's franchise registration law; and
(iii) all other states in which the Credit Parties have offered to sell or have
sold their franchises based upon a claimed exemption from the registration
provisions of such state's applicable franchise registration laws. True and
correct copies of all notices of registrations and all notices of exemption, as
described in clauses (i) and (ii) above, have been furnished to
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Purchaser, and such registration and exemption notices are in full force and
effect as of the date hereof except as set forth in Schedule 4.38.
(c) The Credit Parties have delivered to Purchaser true and correct
copies of the Credit Parties' Uniform Franchise Offering Circulars ("UFOCs"),
which are currently being used in connection with the offers to sell and the
sales of its franchises. The UFOCs, and all UFOCs heretofore used by the Credit
Parties (i) comply in all material respects with all applicable federal and
state laws and regulations pertaining to offers to sell and the sale of
franchises, including, without limitation the Federal Trade Commission's
Disclosure Rule entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures", 16 C.F.R. Section 436; and (ii)
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 4.39. Customer, Advertiser, Subscriber and Mailing Lists. The
Credit Parties have maintained and currently possesses all rights to subscriber
lists (subject to applicable statutory law or common law decisions regarding the
use of subscriber lists), customer lists, advertiser lists and mailing lists
used in connection with the conduct of its business as currently conducted,
including all such lists necessary to continue the operation of its business
consistent with current practice, and all of such lists are in such condition as
is required in connection with the operation of its business, as currently
conducted.
Section 4.40. Advertising.
(a) Schedule 4.40 sets forth a complete and correct list of the
published rates for advertising lineage for each of the Publications and a
complete and correct list of and the amount of revenues generated by each of the
Publication's largest (by dollar amount) ten advertisers for the past year.
(b) Since December 31, 1995, no Credit Party has had any actual or
threatened cancellation, non-renewal or material modification of any agreements
or relationships with advertisers who, during any 12-month period, accounted for
more than $50,000 in revenues to the Credit Parties, which advertisers are
listed in Schedule 4.40, nor has any Credit Party made any material change in
its written policies for the pricing of advertising for the Publications and no
advertiser listed in Schedule 4.40 has provided written notice of its intent to
(i) cancel previously scheduled or contracted for advertising in the
Publications for the period following the Closing Date, or (ii) terminate or
modify significantly their relationship with any Credit Party.
Section 4.41. Model Releases. Each Credit Party has obtained all necessary
releases from models appearing for commercial purposes in Publications or videos
owned or produced by such Credit Party.
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Section 4A. Representations of the Purchaser. The Purchaser hereby
represents that it is purchasing the Notes and Warrants hereunder for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, except in compliance with applicable
provisions of the Securities Act.
Section 5. Closing Conditions. The Purchaser's obligation to
purchase and pay for the Notes to be purchased by it hereunder on the Closing
Date shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions:
Section 5.1. Proceedings Satisfactory. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated to occur on the Closing Date and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchaser and its
special counsel, and the Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request, including, without limitation:
(a) certificates dated as of a recent date prior to the Closing
Date as to the good standing and payment of taxes of each Credit Party in
each jurisdiction where any of such Person is organized or is authorized
to do business as a foreign corporation;
(b) certified copies of the certificate or articles of
incorporation (or other comparable constituting document) of each Credit
Party with all amendments thereto to the Closing Date;
(c) certified copies of the by-laws (or other comparable
constituting document) of each Credit Party, with all amendments thereto
to the Closing Date;
(d) certified copies of resolutions of the Board of Directors of
each Credit Party authorizing the execution, delivery and performance of
this Agreement, the Notes, the Warrants and the other Note Documents to
which such Credit Party is a party, as applicable; and
(e) certificates as to the incumbency and signatures of each of
the officers of each Credit Party who shall execute this Agreement or any
Note, Warrant or other Note Document on behalf of such respective party.
Section 5.2. Opinion of Purchaser's Special Counsel. The Purchaser
shall have received from Paul, Hastings, Janofsky & Walker LLP, special counsel
for the Purchaser in connection with the Transactions, a favorable legal opinion
dated the Closing Date and addressed to the Purchaser, covering such matters as
the Purchaser may reasonably request.
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Section 5.3. Opinions of Counsel to the Credit Parties; Tax Opinion;
Reliance Letters.
(a) The Purchaser shall have received from (i) Kaye, Scholer,
Fierman, Hays & Handler, LLP, special counsel to the Credit Parties, Newriders,
Easyriders Sub I and Easyriders Sub II in connection with the Reorganization and
special counsel to the Credit Parties in connection with the purchase of the
Notes by, and the issuance of the Warrants to, the Purchaser, (ii) Robert N.
Wilkinson, Esq., special securities law counsel to the Parent, Newriders,
Easyriders Sub I and Easyriders Sub II in connection with the Transactions,
(iii) Bolen, Fransen & Boostrom LLP, corporate counsel to Newriders, (iv)
Fulwider, Patton, Lee and Utecht LLP, intellectual property counsel to the
Paisano Companies, (v) Masters & Ribakoff, corporate counsel to the Paisano
Companies and (vi) Dillingham Cross, corporate counsel to El Paso, favorable
legal opinions, each dated the Closing Date and addressed to the Purchaser,
covering such matters incident to the Transactions as the Purchaser may
reasonably request. The Purchaser shall also have received such favorable legal
opinions of local or special counsel to the Credit Parties as the Purchaser may
request (including, without limitation, as to matters related to the
Reorganization and real estate matters), dated the Closing Date and addressed to
the Purchaser, covering the matters incident to the Transactions as the
Purchaser may reasonably request.
(b) The Purchaser shall have received a reliance letter from
Deloitte & Touche LLP, with respect to its tax opinion, delivered in connection
with the Reorganization, addressed to the Purchaser, covering matters incident
to the Transactions as the Purchaser may reasonably request.
Section 5.4. Representations and Warranties True, Etc.; Certificates. The
representations and warranties of the Parent and the Company contained in
Section 4 and elsewhere in this Agreement and of the Credit Parties in the other
Note Documents shall be true on and as of the Closing Date with the same effect
as if such representations and warranties had been made on and as of the Closing
Date after giving effect to the Transactions. Each of the Credit Parties shall
have performed all agreements on its part required to be performed under this
Agreement on or prior to the Closing Date, and there shall exist no Default or
Event of Default on the Closing Date after giving effect to the Transactions.
The Company shall have delivered to the Purchaser an Officer's Certificate,
dated the Closing Date, to the effect of the matters stated in the foregoing
sentences of this Section 5.4 and in Sections 5.5 and 5.6.
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Section 5.5. Absence of Material Adverse Effect, Etc. Except as set forth
on Schedule 4.5B, since December 31, 1997, no Material Adverse Effect shall have
occurred.
Section 5.6. Consents and Approvals. All necessary consents, waivers,
approvals and authorizations of, and declarations, registrations and filings
with, Governmental Bodies and nongovernmental Persons required in order to issue
and sell the Notes and the Warrants as contemplated hereby and to consummate the
Transactions shall have been obtained or made and shall be in full force and
effect.
Section 5.7. Absence of Litigation, Orders, Etc. Except as disclosed on
Schedule 4.7 attached hereto, there shall not be pending or, to the knowledge of
the Parent or the Company after due inquiry, threatened, any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Credit Party or its Property (and, as to any action, suit, proceeding,
governmental investigation or arbitration so disclosed, there shall not have
occurred since the date of this Agreement any development) which seeks to enjoin
or restrain any of the Transactions or which the Purchaser reasonably believes
is likely to have a Material Adverse Effect. No Order of any court, arbitrator
or Governmental Body shall be in effect which purports to enjoin or restrain any
of the Transactions or which the Purchaser reasonably believes to constitute a
Material Adverse Effect.
Section 5.8. Guarantee. Each Credit Party (other than the Company and the
Restaurant Subsidiaries) shall have executed and delivered the Guarantee.
Section 5.9. Security Documents. The Purchaser shall have received each of
the following documents executed by the parties thereto, which shall be
satisfactory to the Purchaser in form and substance in all respects:
(a) The Security Agreement, duly executed by each Credit Party
(other than the Restaurant Subsidiaries) existing on the Closing Date together
with:
(i) duly executed financing statements in proper form for
filing under the Uniform Commercial Code in all such jurisdictions as the
Purchaser may deem necessary or desirable in order to perfect and protect
the Liens created by the Security Agreement, covering the Collateral
described in the Security Agreement,
(ii) stock certificates representing all of the issued and
outstanding shares of Capital Stock of each such Credit Party's
Subsidiaries existing on the Closing Date, accompanied by stock powers
satisfactory to the Purchaser in form and substance duly executed by the
respective Credit Party in blank, and any intercompany notes held by each
such Credit Party, each accompanied by a bond power satisfactory to the
Purchaser duly executed by such Credit Party in blank,
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(iii) an acknowledgment of the Security Agreement duly executed
by each Subsidiary whose Capital Stock is pledged thereunder pursuant to
preceding clause (ii),
(iv) the promissory note of Martin in favor of the Parent, in
the principal amount of $2,300,000, accompanied by a bond power
satisfactory to the Purchaser duly executed by the Parent in blank, and
(v) such other instruments of assignment and other documents
in respect of the Collateral as the Purchaser may request.
(b) The Intellectual Property Security Agreement duly executed by
each Credit Party (other than the Restaurant Subsidiaries) existing on the
Closing Date, together with duly executed assignments in proper form for filing
with the United States Patent and Trademark Office and any necessary state and
foreign patent or trademark offices (as necessary).
(c) A Blocked Account Agreement with respect to each Depositary
Account listed in Schedule 4.25 hereto (other than Depositary Accounts of the
Restaurant Subsidiaries), in each case executed by the applicable Credit Party
maintaining such Depositary Account and the bank or other depositary institution
at which such Depositary Account is maintained, together with duly executed
financing statements in proper form for filing under the Uniform Commercial Code
and all other documents required thereby or which, in the sole judgment of the
Purchaser, may be necessary or appropriate to grant to the Purchaser valid and
perfected first priority Liens in such Depositary Account.
(d) Such consents, approvals and authorizations of, and
declarations, registrations and filings with, Governmental Bodies, and such
consents, waivers, amendments and Estoppel Letters of bailees, lessors of real
and personal Property owned or used by the Credit Parties, and of other
nongovernmental third parties, as the Purchaser may deem necessary or desirable
in connection with the use, occupancy or the operation of the real Properties
subject to the Mortgages (including without limitation, certificates of
occupancy) or otherwise in order to protect its rights and interests in the
Collateral.
(e) Searches, by a Person satisfactory to the Purchaser, of the
Uniform Commercial Code (or the equivalent thereof in foreign jurisdictions),
and judgment and tax lien filings which may have been filed with respect to the
Collateral confirming that all Collateral constituting personal Property is (or
will be upon release of the Liens securing the Non-Continuing Indebtedness)
subject to no Liens except Permitted Liens.
(f) Evidence satisfactory to the Purchaser that valid policies of
insurance are in full force and effect in accordance with the requirements of
this Agreement and the
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Security Documents, in each case naming the Purchaser as loss payee and
additional insured, as its interests may appear.
(g) Deeds of trust, trust deeds and mortgages, each substantially in
the form of Exhibit G hereto (with appropriate local variations) and covering
all leasehold Property of the Credit Parties located in Agoura Hills, California
(collectively, together with any such documents subsequently executed and
delivered pursuant to Section 9.5, the "Mortgages"), duly executed by the
applicable Credit Party, together with:
(i) certificates, affidavits, questionnaires or returns as
shall be required in connection with the recording or filing of the
Mortgages and evidence that all mortgage recording taxes, filing fees and
recording charges incurred in connection with the filing or recording of
the Mortgages have been paid or provided for;
(ii) extended coverage title insurance policies ("Mortgage
Policies") issued to the Purchaser by Commonwealth Land Title Insurance
Company or such other title insurer or insurers as shall be acceptable to
the Purchaser, in such forms, with such endorsements and in such amounts
as shall be acceptable to the Purchaser, insuring each of the Mortgages to
be valid and perfected first priority Liens on the Property described
therein, free and clear of all defects (including, but not limited to,
mechanics' and materialmen's liens) and encumbrances, dated the Closing
Date, paid for by the applicable Credit Party and providing for such other
affirmative insurance and with such reinsurance with such other title
insurers as the Purchaser may deem necessary or desirable and with such
affidavits, certificates and instruments of indemnification as shall be
reasonably required to induce the title insurers to issue the Mortgage
Policies;
(iii) ALTA surveys, dated not more than 30 days before the
Closing Date, certified to the Purchaser and the issuer of the Mortgage
Policies in a manner satisfactory to the Purchaser by a land surveyor duly
registered and licensed in the states in which the Property described in
such surveys is located and acceptable to the Purchaser, showing all
buildings and other improvements, any off-site improvements, the location
of any easements, parking spaces, rights of way, building set-back lines
and other dimensional regulations and the absence of encroachments, either
by such improvements or on to such Property, and other defects, other than
encroachments and other defects acceptable to the Purchaser;
(iv) an appraisal of such real Property subject to a Mortgage
as the Purchaser may require by an appraiser satisfactory to the
Purchaser;
(v) evidence satisfactory to the Purchaser that there does not
exist any material violation of any law, regulation or order affecting the
real Properties
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subject to the Mortgages, including, without limitation, those laws,
regulations and Orders relating to zoning, subdivision and building
restrictions; and
(vi) evidence that all other action that the Purchaser may
deem necessary or desirable in order to create valid and perfected first
priority Liens on the Property described in the Mortgages has been taken.
Section 5.10. Employee Stock Options. (a) The Purchaser shall have
received satisfactory evidence that (i) the stockholders of Newriders shall have
approved the Parent 1998 Executive Compensation Plan, (ii) the Newriders'
Executive Compensation Plan shall have terminated and (iii) all awards granted
under the Newriders' Executive Compensation Plan shall have been be exchanged
for awards under the Parent 1998 Executive Compensation Plan.
(b) The Purchaser shall have received true and correct copies of the
Parent 1998 Executive Compensation Plan which shall be in form and substance
satisfactory to the Purchaser.
Section 5.11. Assignment of Representations, Warranties, Covenants and
Indemnities. The Purchaser shall have received a duly executed copy of an
Assignment of Representations, Warranties, Covenants, Indemnities and Rights in
the form of Exhibit J hereto (the "Assignment of Representations, Warranties,
Covenants and Indemnities"), in respect of the Parent's and the Company's rights
under the Paisano Stock Contribution Agreement and the El Paso Contribution
Agreement, respectively, which assignments shall be expressly permitted under
the Paisano Stock Contribution Agreement and the El Paso Contribution Agreement
or shall have been consented to in writing by the respective sellers under such
agreements.
Section 5.12. Initial Revolving Note Purchase Request. On or prior to the
Closing Date, the Purchaser shall have received a Revolving Note Purchase
Request with respect to the Revolving Notes to be sold to the Purchaser on the
Closing Date (if any). The aggregate unpaid principal amount of the Revolving
Notes, immediately after giving effect to the purchase of Revolving Notes to be
effected on the Closing Date (if any), shall not exceed $3,500,000.
Section 5.13. Reorganization Transactions. (a) All of the terms,
conditions and provisions of each of the Reorganization Documents shall be
satisfactory to the Purchaser and its counsel in all respects in form and
substance and no term, condition or provision thereof shall have been
supplemented, amended, modified or waived without the Purchaser's prior written
consent. Each of the Reorganization Documents shall have been duly executed and
delivered by the respective parties thereto and shall be in full force and
effect. The Purchaser shall have received a copy of each of the Reorganization
Documents (including all amendments, modifications and supplements thereto to
and including the Closing Date),
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certified by a duly authorized officer of the Company as true, correct and
complete. All conditions to the consummation of the Reorganization shall have
been satisfied (or waived with the written approval of the Purchaser) and such
transactions (other than the Paisano Merger) shall have been consummated (and
the Paisano Merger will be consummated simultaneously with the initial purchase
of Notes hereunder) in accordance with the terms of the Reorganization
Documents.
(b) Martin shall have purchased approximately 4,036,797 shares of
Common Stock from the Parent for $12,300,000 (the "Martin Equity Investment"),
on terms and conditions satisfactory to the Purchaser in all respects, which
amount shall be paid by $5,000,000 in cash and by issuance of two promissory
notes by Martin to the Parent in the aggregate principal amount of $7,300,000
(the "Martin Notes"). The Purchaser shall have received such certificates and
other evidence with respect to the foregoing as it shall request.
Section 5.14. Subordinated Seller Notes; Intercreditor Agreement. (a) The
Parent shall have issued the Subordinated Seller Notes to Teresi on terms
(including without limitation subordination provisions) and conditions
satisfactory to the Purchaser in all respects and in an aggregate original
principal amount of $13,000,000.
(b) The Purchaser shall have received from Teresi, a duly executed
and delivered intercreditor and subordination agreement with respect to the
Subordinated Seller Notes on terms and conditions satisfactory to the Purchaser
in all respects.
Section 5.15. Discharge of Non-Continuing Indebtedness. All principal
amounts, prepayment charge, if any, accrued interest, and fees, charges and
other obligations of the Company and the other Credit Parties in respect of the
Non-Continuing Indebtedness shall have been paid and discharged in full
(including, without limitation, all obligations in respect of outstanding
letters of credit issued in connection therewith), and the Purchaser shall have
received the originals or copies authenticated to its satisfaction of (i) all
promissory notes outstanding in connection therewith, duly cancelled by the
respective payees thereof, (ii) duly executed discharge letters and receipts
evidencing payment in full of all amounts due thereunder, (iii) duly executed
releases and UCC-3 Termination Statements satisfactory in form and substance to
the Purchaser, effectively releasing and discharging all Liens incurred in
connection with such Non-Continuing Indebtedness (including duly cancelled stock
powers), in proper form for filing or recording, as applicable and (iv) such
other documents as the Purchaser may reasonably request in order to evidence the
discharge of such Non-Continuing Indebtedness and obligations and the release of
such Liens.
Section 5.16. Fees. The fees required to be paid on the Closing Date
pursuant to Section 2.6(a) and (b) shall be paid concurrently with the issuance
and sale of Notes to be sold on the Closing Date. The fees and expenses incurred
by Paul, Hastings, Janofsky & Walker LLP and any local or special counsel to the
Purchaser in connection with the preparation of this Agreement, the Notes the
Warrants and the other Note Documents, and
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in connection with the other Transactions contemplated hereby, shall be paid by
the Company on the Closing Date.
Section 5.17. Wire Instructions. The Purchaser shall have received not
less than two Business Days prior to the Closing Date wire instructions prepared
by the Company as to all wire transfers or other payments to be effected on the
Closing Date in connection with the Transactions to be consummated on the
Closing Date pursuant to this Agreement or the other Transaction Documents,
which wire instructions shall identify the payor and payee of each such wire
transfer or payment, shall describe the manner of transfer or payment and shall
otherwise be satisfactory in form and substance to the Purchaser.
Section 5.18. Shareholder Approval. The Purchaser shall have received
evidence satisfactory to it that (i) the Reorganization shall have been approved
by a majority of the outstanding shares of Newriders common stock as of the
record date established for the purpose of determining those stockholders of
Newriders that are entitled to notice of and to vote at the annual meeting of
shareholders at which the Reorganization was considered and (ii) holders of no
more than 5% of such outstanding shares of Newriders common stock have delivered
to Newriders a written notice of intention to demand payment for such holders'
shares pursuant to subsection 1 of Section 92A of the Nevada Revised Statutes
("NRS")
Section 5.19. Mergers. Without limiting any other section of this
Agreement, including Section 5.13, (a) the Purchaser shall have received
evidence satisfactory to it that the Newriders Merger shall have been
consummated in accordance with the relevant provisions of Chapter 92A of the
NRS, including without limitation, by the execution and filing of the articles
of merger in respect thereof, all in form and substance satisfactory to the
Purchaser and (b) the Paisano Merger shall be consummated simultaneously with
the initial purchase of Notes hereunder pursuant to Section 1100 et seq. of the
California General Corporation Law.
Section 5.20. Transaction Costs; Payables. The Purchaser shall have
received satisfactory evidence that the aggregate costs of the Transactions
(including fees, expenses and assumed Indebtedness) shall not exceed
$58,500,000. On the Closing Date, the Credit Parties' trade payables shall be
current and all expenses and liabilities shall have been paid in the ordinary
course of business and without acceleration of sales.
Section 5.21. Solvency Opinion. The Purchaser shall have received a
solvency opinion in form and substance satisfactory to it from Murray, Devine &
Co., Inc. (or another valuation or investment banking firm acceptable to the
Purchaser) to the effect that, as of the Closing Date and before and after
giving effect to the initial purchase of Notes hereunder, and the consummation
of the Transactions, the Credit Parties, on a consolidated basis, are Solvent.
In addition, the Purchaser shall have received an analysis from the Chief
Financial Officer of Paisano Publications to the effect that, as of the Closing
Date and before and after giving effect to the Transactions, including (x) the
assumption by Paisano
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Publications, as the surviving corporation of the Paisano Merger, of all of the
obligations of Easyriders Sub II hereunder and (y) the execution and delivery of
the Guarantee, each Paisano Company is Solvent.
Section 5.22. Insurance. (a) The Purchaser shall have received
certificates of insurance and other evidence satisfactory to the Purchaser that
the insurance required under Section 9.4 is in full force and effect.
(b) The Company shall have obtained key person insurance coverage
for Teresi, in the amount of $2,000,000 from a reputable insurance company
satisfactory to the Purchaser, naming the Purchaser as beneficiary and assignee.
Section 5.23. Certificate As to Use of Proceeds. The Purchaser shall have
received a certificate of the Company's Chief Financial Officer certifying in
reasonable detail the Company's use of the proceeds of the issuance and sale of
the Notes and Warrants.
Section 5.24. Due Diligence Reports. The Purchaser shall have completed
its due diligence review in respect of the Permitted Holders, and the results of
such review shall be satisfactory to the Purchaser, in its sole judgment, and in
all respects.
Section 5.25. Registration Rights Agreement. Each of the parties thereto
shall have executed and delivered the Registration Rights Agreement.
Section 5.26. Employment Agreements; Shareholders' Agreements; Leases. The
Purchaser shall have received true and correct copies of:
(i) all employment agreements entered into by Teresi, Prather,
Martin, Mr. Robert Davis, Mr. Brian Wood, Mr. Rick Busman and Mr. Keith
Ball, in connection with the Reorganization (the "Employment Agreements");
(ii) the shareholders' agreements entered into by Teresi and
Martin in connection with the Reorganization (the "Shareholders'
Agreement");
(iii) all leases of real property entered into by any Credit
Party and effective after giving effect to the Reorganization (the
"Leases");
all of which Employment Agreements, Shareholders' Agreement and Leases shall be
informant substances satisfactory to the Purchaser.
Section 5.27. Registration Statement. The Purchaser shall have received
evidence that the Registration Statement shall have been declared effective by
the SEC.
Section 6. Additional Conditions to Obligations to Purchase Revolving
Notes. The obligations of the Purchaser to purchase Revolving Notes at any time
after the Closing Date
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shall be subject to the satisfaction, at or before the time of such purchase, of
the following additional conditions:
Section 6.1. Note Purchase Request. The Purchaser shall have received a
Revolving Note Purchase Request with respect to the Revolving Notes to be
purchased in accordance with the provisions of Section 2.2 hereof.
Section 6.2. Representations and Warranties True. The representations and
warranties of the Credit Parties contained in Section 4 and elsewhere in this
Agreement and the representations and warranties of the Credit Parties contained
in the other Note Documents shall be true and correct on and as of the date of
such purchase with the same effect as if such representations and warranties had
been made on and as of such date, except that any such representation or
warranty which is expressly made only as of a specified date need be true only
as of such date. Except as set forth on Schedule 4.5B, no Material Adverse
Effect shall have occurred since December 31, 1997. Each request to purchase
Revolving Notes shall constitute, and each Revolving Note Purchase Request shall
contain, a representation and warranty by the Company on the date of such
purchase as to the matters referred to in this Section 6.2 and in Sections 6.3
and 6.4 hereof.
Section 6.3. No Default or Event of Default. On the date of such purchase
of Notes, both immediately before and immediately after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing or would
result from such purchase.
Section 6.4. Credit Limit Not Exceeded. Immediately after giving effect to
such purchase, the aggregate unpaid principal amount of the outstanding
Revolving Notes shall not exceed the Maximum Revolving Commitment as in effect
on the date of such purchase.
Section 6.5. Legal Prohibitions. Such purchase shall not violate any Order
of any court, arbitrator or Governmental Body or any Statute at the time
applicable to the Purchasers.
Section 6.6. Other Requirements. The Purchaser shall have received, in
form and substance satisfactory to it, all certificates, orders, authorizations,
consents, affidavits, schedules, instruments, Security Documents and other
documents which are provided for hereunder, or which the Purchaser may at any
time reasonably request after reasonable notice.
Section 7. Financial Statements and Information. The Company will furnish
to the Purchaser until all of the Obligations have been indefeasibly paid in
full and no Notes are outstanding and the Termination Date has occurred (and,
with respect to the documents and information referred to in subsections (a),
(b)(i), (c)(i), (e), (f) and (g), so long as they shall hold any Warrants or any
shares of Warrant Stock):
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(a) as soon as available and in any event within 30 days after the
end of each month, copies of the consolidated and consolidating balance sheets
of each of (i) the Parent and its Subsidiaries and (ii) the Parent and its
Subsidiaries (other than the Restaurant Subsidiaries), in each case as of the
end of such month and the related consolidated and consolidating statements of
income for such month and for the portion of the fiscal year ended with the last
day of such month, and stating in comparative form the corresponding figures
from the consolidated budget for such period and the prior year, all Certified
by the Chief Financial Officer of the Parent;
(b) as soon as available and in any event within 45 days after the
end of each quarterly accounting period (other than the fourth quarterly
accounting period) in each fiscal year of the Parent,
(i) copies of the consolidated and consolidating balance
sheets of each of (i) the Parent and its Subsidiaries and (ii) the Parent
and its Subsidiaries (other than the Restaurant Subsidiaries), in each
case as of the end of such accounting period, together with, in each case,
the related consolidated and consolidating statements of income,
shareholders' equity and cash flows for such accounting period and for the
portion of the fiscal year ended with the last day of such accounting
period, all in reasonable detail and stating in comparative form (i) the
consolidated and consolidating figures as of the end of and for the
corresponding date and period in the previous fiscal year and (ii) the
corresponding figures from the consolidated budget for such period, all
Certified by the Chief Financial Officer of the Parent, and
(ii) a written statement of the Chief Financial Officer of the
Parent setting forth computations in reasonable detail showing whether or
not as at the end of such fiscal quarter there existed any Default or
Event of Default resulting from a breach or violation of any of Sections
10.1, 10.7, 10.10, 10.11 and 10.18 hereof;
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of the Parent,
(i) copies of the audited consolidated and unaudited
consolidating balance sheets of each of (i) the Parent and its
Subsidiaries and (ii) the Parent and its Subsidiaries (other than the
Restaurant Subsidiaries), in each case as of the end of such fiscal year,
together with, in each case, the related audited consolidated and
unaudited consolidating statements of income, shareholders' equity and
cash flows for such fiscal year, and the notes thereto, all in reasonable
detail and stating in comparative form (i) the respective audited
consolidated and unaudited consolidating figures as of the end of and for
the previous fiscal year or part thereof and (ii) the corresponding
figures from the consolidated budget for such fiscal year, (x) in the case
of each of such audited consolidated financial statements, accompanied by
a report thereon of Deloitte & Touche LLP, or other independent public
accountants
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of recognized national standing selected by the Parent and reasonably
acceptable to the Purchaser (the "Accountants"), which report shall be
unqualified as to going concern and scope of audit and shall state that
such consolidated financial statements present fairly, in all material
respects, the consolidated financial position of such Credit Parties as at
the end of such fiscal year and the consolidated results of operations and
cash flows for such fiscal year in conformity with GAAP and that the
examination by the Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards, and (y) in the case of such unaudited consolidating
financial statements, Certified by the Chief Financial Officer of the
Parent; and
(ii) a written statement of the Accountants (x) setting forth
computations in reasonable detail showing whether or not as at the end of
such fiscal year there existed any Default or Event of Default resulting
from a breach or violation of any of Sections 10.1, 10.7, 10.10, 10.11 and
10.18 hereof, and (y) stating that in making the examination necessary for
their report on such financial statements they obtained no knowledge of
any default by any Credit Party in the fulfillment of any of the terms,
covenants, provisions or conditions of this Agreement or any of the other
Note Documents, or if such Accountants shall have obtained knowledge of
any such default, specifying the nature and status thereof;
(d) concurrently with the financial statements furnished pursuant to
subsections (b) and (c) of this Section 7, an Officer's Certificate of the
Company stating that, based upon such examination or investigation and review of
this Agreement as in the opinion of the signer is necessary to enable the signer
to express an informed opinion with respect thereto, no Default or Event of
Default exists or has existed during such period or, if such a Default or Event
of Default shall exist or have existed, the nature and period of existence
thereof and what action the applicable Credit Party has taken, is taking or
proposes to take with respect thereto;
(e) concurrently with the financial statements furnished pursuant to
subsections (b) and (c) of this Section 7, a brief management discussion and
analysis of the financial condition and results of operations of the Credit
Parties, as of the end of and for the period covered by such financial
statements (including a comparison thereof with the financial condition and
results of operations of the Credit Parties, as of the end of and for the
comparable period in the prior fiscal year), and describing any significant
events relating to the Credit Parties occurring during such period;
(f) promptly after the same are available and in any event within 10
days thereof, copies of all such proxy statements, financial statements, notices
and reports as any Credit Party shall send or make available generally to their
security holders, and copies of all regular and periodic reports and of all
registration statements (other than on Form S-8 or a similar form) which any
Credit Party may file with the SEC or with any securities exchange;
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(g) promptly after the receipt thereof by any Credit Party, and in
any event within 10 days thereof, copies of any management letters and any
reports as to material inadequacies in accounting controls (including reports as
to the absence of any such inadequacies) submitted to any such corporation by
the Accountants in connection with any audit of such corporation made by the
Accountants;
(h) promptly (and in any event within 5 days) after becoming aware
of (1) the existence of any Default or Event of Default on the part of any
Credit Party, an Officer's Certificate of the Company specifying the nature and
period of existence thereof and what action the applicable Credit Party is
taking or proposes to take with respect thereto; or (2) any Indebtedness of any
Credit Party being declared due and payable before its expressed maturity, or
any holder of such Indebtedness having the right to declare such Indebtedness
due and payable before its expressed maturity, because of the occurrence of any
default (or any event which, with notice and/or the lapse of time, shall
constitute any such default) under such Indebtedness, an Officer's Certificate
of the Company describing the nature and status of such matters and what action
the applicable Credit Party is taking or proposes to take with respect thereto;
(i) promptly and in any event within 10 days after any Credit Party
or any ERISA Affiliate knows or, in the case of a Pension Plan has reason to
know, that any event or condition described in Section 4.19 hereof has occurred
or exists, or is reasonably likely to occur or exist, an Officer's Certificate
of the Company setting forth information as to such occurrence and what action,
if any, the applicable Credit Party or such ERISA Affiliate is required or
proposes to take with respect thereto, together with any notices concerning such
occurrences which are (i) required to be filed by any Credit Party or any ERISA
Affiliate or the plan administrator of any Pension Plan controlled by any Credit
Party, or any ERISA Affiliate with the Internal Revenue Service or the PBGC,
(ii) received by any Credit Party, or any ERISA Affiliate from any plan
administrator of a Pension Plan not under their control or from a Multiemployer
Plan, or (iii) proposed to be given;
(j) within five Business Days after the annual report (Form 5500) of
each Plan or Pension Plan is filed with the Internal Revenue Service, a complete
copy thereof (including schedules and attachments) to the Purchaser;
(k) promptly after becoming aware of any Material Adverse Effect
with respect to which notice is not otherwise required to be given pursuant to
this Section 7, an Officer's Certificate of the Company setting forth the
details of such Material Adverse Effect and stating what action the applicable
Credit Party has taken or proposes to take with respect thereto;
(l) promptly (and in any event within 10 days) after the Parent or
the Company knows of (i) the institution of, or threat of, any action, suit,
proceeding,
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governmental investigation or arbitration against or affecting any Credit Party
or any Property of any of them, or (ii) any material development in any such
action, suit, proceeding, governmental investigation or arbitration, which, in
either case, if adversely determined, is likely to have a Material Adverse
Effect, an Officer's Certificate of the Company describing the nature and status
of such matter in reasonable detail;
(m) as soon as available (and in any event not later than 30 days
after the beginning of each fiscal year of the Company), a copy of a
consolidated and consolidating budget of the Credit Parties, in each case
prepared by the Company for such fiscal year, and all amendments thereto which
may be in effect from time to time;
(n) at least once in each fiscal year, a report of a reputable
insurance broker with respect to all insurance maintained by the Credit Parties,
together with a certificate of insurance evidencing the effectiveness of the
policies of insurance required to be maintained by the provisions of Section
9.4(a);
(o) together with each delivery of financial statements pursuant to
subsection (b) or (c) of this Section 7, a report as to any new trademark,
patent and copyright registrations or applications, license agreements or other
matters referred to in Section 5.2 of the Intellectual Property Security
Agreement, together with any instruments of assignment with respect thereto
required thereunder;
(p) promptly following, and in any event within ten Business Days of
any Casualty or Taking involving Property of any Credit Party with a value equal
to or greater than the Material Loss Amount, an Officer's Certificate of the
Company describing the nature and status of such occurrence;
(q) promptly (and in any event within 10 days) after the Parent or
the Company knows of the institution of any action, suit or proceeding against
any Credit Party pursuant to Section 1300 et seq. of the California General
Corporation Law or otherwise relating to the Transactions;
(r) to the extent not otherwise provided for in Section 14.7, as
soon as available, any press release or other public announcement or statement
by any Credit Party; and
(s) any other information, including financial statements and
computations, relating to the performance of obligations arising under this
Agreement and/or the affairs of the Credit Parties that the Purchaser may from
time to time reasonably request and which is capable of being obtained, produced
or generated by such Credit Party or of which any of them has knowledge.
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It is further understood and agreed that, for the purpose of effecting
compliance with Rule 144A promulgated by the SEC in connection with any resales
of Notes and Warrants that may hereafter be effected pursuant to the provisions
of such Rule, (a) each prospective purchaser of Notes or Warrants designated by
a holder thereof shall have the right to obtain from the Parent, upon the
written request of such holder, copies of (i) the consolidated balance sheet of
the Credit Parties as of the end of then most recently completed fiscal year of
the Company (or, if such fiscal year shall have ended within the preceding 90
days, as of the end of the next preceding fiscal year), together with the
related consolidated statements of income, shareholders' equity and cash flows
for the fiscal year then ended, (ii) similar financial statements for such part
of the two preceding fiscal years of the Parent (which financial statements, and
the financial statements referred to in clause (i) of this paragraph, shall be
audited to the extent reasonably available), (iii) a consolidated balance sheet
of the Credit Parties as of the end of then most recently completed fiscal
quarter of the Parent (or, if such fiscal quarter shall have ended within the
preceding 60 days, as of the end of the next preceding fiscal quarter), together
with the related consolidated statements of income, shareholders' equity and
cash flows for the portion of the current fiscal year then ended, and (iv) any
other information that is necessary to comply with such Rule, and (b) each such
holder and each such prospective purchaser shall have the right to obtain from
the Parent, upon the written request of such holder, a very brief statement of
the nature of the business of the Credit Parties and the products and services
it offers, dated as of a date within 12 months prior to the date of resale of
such Notes or Warrants (as the case may be).
The Company and the Parent will keep at its principal executive office a
true copy of this Agreement, and cause the same to be available for inspection
at said office during normal business hours by any holder of Notes or Warrants
or by any prospective purchaser of Notes or Warrants designated in writing by
the holder thereof.
Section 8. Inspection of Properties and Books. The Purchaser, until all of
the Obligations have been indefeasibly paid in full and no Notes are outstanding
and the Termination Date has occurred, shall have the right to visit and inspect
any of the Properties of the Credit Parties, to examine their books of account
and records, to make copies and extracts therefrom at their expense, and to
discuss their affairs, finances and accounts with, and to be advised as to the
same by, their officers and employees and their independent public accountants
(whose fees and expenses shall be paid by the Parent, and by this provision the
Parent authorizes the Accountants to discuss its affairs, finances and accounts
and those of its Subsidiaries, and agrees to make such Accountants available to
the Purchaser for such discussions, whether or not any of such officers or
employees is present, it being understood that nothing contained in this Section
8 is intended to confer any right to exclude any such officers or employees from
such discussions), during the Parent's normal business hours with reasonable
frequency and (except upon the occurrence and during the continuance of an Event
of Default) upon reasonable prior notice to the Parent. The Parent and the
Company agree jointly and severally to pay all reasonable out-of-pocket expenses
incurred by the Purchaser in connection with the Purchaser's exercise of their
rights under this Section
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8 at any time when a Default or Event of Default shall have occurred and be
continuing. The Purchaser, through their representatives, shall be entitled to
meet with the senior management of the Parent at least once during each fiscal
quarter of the Parent to discuss the Parent's, and its Subsidiaries' financial
statements, business, assets, operations and prospects.
Section 9. Affirmative Covenants. The Parent and the Company jointly and
severally covenant and agree that, until all of the Obligations have been
indefeasibly paid in full and no Notes are outstanding and the Termination Date
has occurred it shall and shall cause each of it Subsidiaries to comply with the
following covenants:
Section 9.1. Payment of Principal and Interest. The Company will duly and
punctually pay the principal of and interest on the Notes, and will timely pay
and perform all of its other Obligations, in accordance with the terms of such
Notes, this Agreement and the other Note Documents. The Credit Parties will
comply with all of the covenants, agreements and conditions contained in this
Agreement and the other Note Documents.
Section 9.2. Payment of Taxes and Claims. Each Credit Party will pay
before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon such Credit Party (or any other Subsidiaries of any Credit Party
which are part of any affiliated group, within the meaning of Section 1504(a)(1)
of the Code, with any Credit Party) or their income or profits or upon their
Property, real, personal or mixed, or upon any part thereof;
(b) all claims for labor, materials and supplies which, if unpaid,
would result in the creation of a Lien upon Property of any Credit Party; and
(c) all claims, assessments, or levies required to be paid by such
Credit Party or any ERISA Affiliates pursuant to any Pension Plan, Multiemployer
Plan or other Plan, or any agreement, contract, Statute or Order governing or
relating to any thereof;
provided, that the taxes, assessments, claims, charges and levies described in
Section 9.2(a) and (b) need not be paid while being diligently contested in good
faith and by appropriate proceedings so long as (i) adequate book reserves have
been established with respect thereto in accordance with GAAP and (ii) such
Credit Party's title to and right to use its Property is not materially
adversely affected by such non-payment. Each Credit Party will timely file all
tax returns required to be filed in connection with the payment of taxes
required by this Section 9.2. If an Event of Default shall have occurred and be
continuing and any such contested items shall have resulted in a Lien or claim
upon any Credit Party's Property, the Purchaser may, at its election (but shall
not be obligated to), (a) procure the release and discharge of any such Lien or
claim and any judgment or decree thereon, without inquiring into or
investigating the amount, validity or enforceability of such Lien or claim and
(b) effect any settlement or compromise of the same, and any amounts expended by
the
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Purchaser in connection therewith including premiums paid or security furnished
in connection with the issuance of any surety company bonds, shall be reimbursed
by the Company within five Business Days of demand therefor by the Purchaser.
Section 9.3. Maintenance of Properties, Records and Corporate Existence.
Each Credit Party will:
(a) maintain its Properties in good condition, reasonable wear and
tear excepted, and make all necessary renewals, repairs, replacements,
additions, betterments, and improvements thereto;
(b) keep books of records and accounts in which full and correct
entries will be made of all their respective business transactions and will
reflect in their financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP at the time in effect and consistently
applied;
(c) maintain the same fiscal year during and after the current
fiscal year ending December 31, 1998;
(d) do or cause to be done all things necessary to preserve and keep
in full force and effect their respective corporate existence, and material
rights, powers and franchises including, without limitation, any necessary
qualification or licensing in any foreign jurisdiction;
(e) comply with all applicable Statutes, Orders, franchises,
authorizations, licenses and permits of, and all applicable restrictions imposed
by, any Governmental Body, in respect of the conduct of its business and the
ownership of its Properties (including, without limitation, all applicable
Statutes and Orders relating to Environmental Laws, the violation of which would
have a Material Adverse Effect on the Credit Parties taken as a whole); and
(f) keep any Property owned or operated by it free of contamination
from Hazardous Materials and any other potentially materially harmful chemical
or physical conditions. If any Credit Party receives notice or becomes aware of
any Environmental Matter or contamination with Hazardous Materials that relates
to any of them or their respective Properties, then the Company shall promptly
provide written notice thereof to the Purchaser and, upon written request from
the Purchaser, shall provide the Purchaser with such reports, certificates,
engineering studies or other written material or data as the Purchaser may
request so as to satisfy the Purchaser that the Credit Parties are in compliance
with their obligations under this subsection (f) and subsection (e) of this
Section 9.3. The Purchaser shall also have the right, at any time and from time
to time after receipt of notice or knowledge of any such Environmental Matter or
contamination, to require the Company at its expense to employ a qualified
environmental consultant acceptable to the Purchaser to conduct an environmental
review, audit, assessment or report with respect thereto concerning
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the Credit Parties' operations and Property. The Credit Parties agree to
cooperate fully with such consultant in connection with any such review, audit,
assessment or report, including, without limitation, by providing such access to
the Credit Parties' books, records, Properties, employees and agents and by
furnishing such written and oral information as such consultant may reasonably
request in connection with any such review, audit, assessment or report.
Section 9.4. Insurance.
(a) The Credit Parties will carry and maintain in full force and
effect at all times, with financially sound and reputable insurance companies or
associations rated A (Class XI) or better (or with such lower rating as shall be
acceptable to the Purchaser) by A.M. Best & Co. (or, as to workers' compensation
or similar insurance, in an insurance fund or by self-insurance authorized by
the jurisdiction in which its operations are carried on): (i) insurance against
loss or damage to the tangible real and personal Property of the Credit Parties
by fire, theft, explosion, spoilage, flood and other perils covered by a
"special form" insurance policy and all other hazards and risks ordinarily
insured against by other owners or users of such Property in similar businesses,
(ii) all workers' compensation or similar insurance as may be required under the
laws of any jurisdiction, (iii) public liability insurance against claims for
libel and slander and for personal injury, death or property damage suffered
upon, in or about any premises occupied by any of them or occurring as a result
of the ownership, maintenance or operation by any of them of any automobile,
truck or other vehicle or as a result of the use of products manufactured,
constructed or sold by any of them, or services rendered by any of them, (iv)
business interruption insurance covering risk of loss as a result of the
cessation of any substantial part of the business conducted by any of them, (v)
key person insurance coverage for Teresi in the amount of no less than
$2,000,000, naming the Purchaser as beneficiary and assignee and (vi) insurance
against such other risks as are usually insured against by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. In addition, should any Credit Party maintain any key person insurance
coverage on any of its officers or directors, the Purchaser shall be named as
beneficiary thereunder and assignee thereof.
(b) Insurance specified in clause (a)(i) of this Section 9.4 shall
(i) be maintained in such form and amounts and having such coverage as may be
reasonably satisfactory to the Purchaser, and in any event in an amount not less
than the full insurable value of the Property covered thereby, (ii) provide that
no cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the Purchaser
of written notice thereof, (iii) name the Purchaser as loss payee, (iv) provide
for waivers of subrogation by the respective issuers in favor of the Purchaser
and (v) be reasonably satisfactory to the Purchaser in all other respects. Each
Credit Party hereby directs all insurers under such policies of insurance, and
all Persons making any payment with respect to any Taking of Property of the
Credit Parties, to pay all proceeds of such insurance policies arising out of
any Casualty, and all amounts payable in respect of any such Taking, to any of
the Collateral, directly to the Purchaser (and if any Credit Party shall
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receive any such proceeds or amounts such Credit Party will hold, such proceeds
and amounts in trust for the benefit of the Purchaser and immediately pay the
same to the Purchaser); provided that, if the amount of such loss or damage is
less than the Material Loss Amount, such proceeds may be paid by such insurers
directly to such Credit Party. The Purchaser shall release such insurance
proceeds to the applicable Credit Party upon the written request of the Company
when and as necessary to pay for the repair, replacement or reconstruction of
the Properties subject to such Casualty, provided that:
(i) at the time of any requested release of funds, no Default or
Event of Default shall have occurred and be continuing);
(ii) the repair, replacement or reconstruction of such assets shall
be substantially completed within 180 days of such Casualty; and
(iii) each release of funds shall be conditioned upon receipt by the
Purchaser of architect's certificates, completion certificates, waivers of
mechanics liens and such other documentation as the Purchaser or the
Purchaser may reasonably request.
In the event the conditions set forth above are not met, the Purchaser may elect
to apply the proceeds of casualty insurance policies to the prepayment of the
outstanding principal amount of the Term Notes, pro rata in accordance with the
outstanding principal amounts thereof, together with accrued interest on the
amount so paid, and thereafter to the outstanding principal amount of the
Revolving Notes, pro rata in accordance with the outstanding principal amounts
thereof, together with accrued interest on the amount so paid (and to the extent
of such prepayment of principal, the Maximum Revolving Commitment shall be
permanently reduced).
(c) In the event of a Casualty (or a Taking) with respect to any
Collateral which is equal to or greater than the Material Loss Amount, the
Purchaser shall have the right, but not the obligation to settle insurance
claims (and condemnation proceeds or awards, as the case may be), with respect
to such Property; provided, however, the Purchaser shall have the right, but not
the obligation, to settle all such claims (and proceedings) with respect to any
Property of the Credit Parties following the occurrence and during the
continuance of an Event of Default. If the Purchaser elects not to settle such
claim or proceeding, the Company shall do so; provided, however, any settlement
of any such claim or proceeding reached by the Company shall be subject to the
Purchaser's prior written approval. The Purchaser will endeavor to consult with
the Company in connection with the Purchaser's exercise of any such right;
provided that the failure of the Purchaser to so consult with the Company after
the occurrence and during the continuance of a Default or Event of Default shall
not subject the Purchaser to any liability hereunder.
(d) Insurance specified in clauses (a)(iii), (a)(iv) and (a)(vi) of
this Section 9.4 shall be maintained in such amounts (and with co-insurance,
deductibles and
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self-insured retention, if any) as such insurance is usually carried by
corporations of established reputation engaged in the same or similar businesses
and similarly situated. Insurance specified in clause (a)(v) shall be maintained
in an amount no less than that existing on the Closing Date. All such insurance
shall name the Purchaser as additional insured, as their interests may appear.
(e) If any Credit Party shall fail to obtain, maintain or renew any
insurance required pursuant to this Section 9.4, or to pay the premiums
therefor, or to deliver to the Purchaser proper evidence thereof beyond any
applicable notice and cure period, if any, for the performance of such actions,
the Purchaser, at its sole option and without any obligation to do so, may
procure and pay for such insurance, and any sums expended by it to procure any
such insurance shall be repaid by the Company, together with any late charge
imposed by any such insurer, if applicable, within five Business Days after
receipt of bills therefor from the Purchaser.
(f) All proceeds of any key person insurance covering any Permitted
Holder or any other officer of a Credit Party shall, upon receipt by the
Purchaser, be applied to the prepayment of the outstanding principal amount of
the Term Notes, pro rata in accordance with the outstanding principal amounts
thereof, together with accrued interest on the amount so paid, and thereafter to
the outstanding principal amount of the Revolving Notes, pro rata in accordance
with the outstanding principal amounts thereof, together with accrued interest
on the amount so paid (and to the extent of such prepayment of principal, the
Maximum Revolving Commitment shall be permanently reduced).
Section 9.5. After Acquired Real Property. Without affecting the
obligations of any of the Company or any of its Subsidiaries under any of the
Security Documents, in the event that any Credit Party at any time after the
date hereof acquires (whether as an owner, a lessee or otherwise) any interest
in any real Property (each such interest, an "After Acquired Real Property"),
such Credit Party shall immediately provide written notice thereof to the
Purchaser, setting forth with specificity a description of the interest
acquired, the identity of the acquirer, the location of the After Acquired Real
Property, any structures or improvements thereon and the Fair Market Value of
such real property. As soon as practicable thereafter, such Credit Party shall
cause the acquirer with respect to such After Acquired Real Property to execute
and deliver to the Purchaser a Mortgage substantially in the form of the
document set forth as Exhibit G hereto (with appropriate local variations and
appropriate variations if the After Acquired Real Property covered thereby is a
fee interest), together with (x) such of the other documents and instruments
described in Section 5.9(g) and (y) an environmental review and audit report as
described in Section 9.13, all as the Purchaser shall reasonably require. In no
event shall any title insurance policy covering such After Acquired Real
Property obtained pursuant to the requirements set forth herein be in an amount
which is less than the Fair Market Value of such After Acquired Real Property.
Such Credit Party shall also deliver to the Purchaser one or more opinions of
counsel for the Company or such Subsidiary (including opinions of local counsel)
covering such legal
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matters with respect to such mortgages, trust deeds and other instruments and
documents as the Purchaser may reasonably request. The applicable Credit Party
shall pay all reasonable fees and expenses, including, without limitation,
attorneys' fees and expenses of counsel for the Purchaser, and all title
insurance charges and premiums, in connection with its obligations under this
Section 9.5.
Section 9.6. Future Guarantors and Securing Subsidiaries. Promptly upon
any Person becoming a direct or indirect Subsidiary of the Parent (other than
the Restaurant Subsidiaries), such Subsidiary shall immediately provide written
notice thereof to the Purchaser, setting forth with specificity a description of
such Subsidiary and of all material real and personal Property owned or leased
by it. In the event that such Subsidiary shall own or lease any interest in real
Property, such interest shall be deemed to be After Acquired Property and the
Parent shall promptly cause such Subsidiary to comply with all of the provisions
of Section 9.5 with respect thereto. The Parent shall also promptly cause such
Subsidiary to execute and deliver to the Purchaser the Guarantee, the Security
Agreement and the Intellectual Property Security Agreement, together with such
additional security agreements and other documents as may be required or
appropriate under the law of the jurisdiction in which such Subsidiary or its
Property is located, and such assignments, financing statements and other
documents as shall in the sole opinion of the Purchaser be necessary or
advisable in order that such Subsidiary grant to the Purchaser valid and
perfected first priority Liens in all of the personal Property of such
Subsidiary. The Parent shall also deliver (or caused to be delivered) to the
Purchaser pursuant to the Security Agreement(and the Parent hereby agrees to
make any modifications thereto necessary to effectuate such delivery), as
applicable, stock certificates representing all of the Capital Stock of such
Subsidiary held by the Parent or by any Subsidiary thereof, accompanied by stock
powers duly executed in blank. The Parent shall also identify all Depositary
Accounts maintained by such Subsidiary and shall deliver to the Purchaser a
Blocked Account Agreement with respect to each such Depositary Account duly
executed by such Subsidiary and by the bank or other depositary institution at
which such Depositary Account is maintained. The Parent or such Subsidiary shall
also deliver one or more opinions of counsel to the Parent or such Subsidiary
(including opinions of local counsel) covering such legal matters with respect
to such agreements and other instruments and documents as the Purchaser may
reasonably request. All of such agreements, instruments, opinions and documents
shall be reasonably satisfactory in form and substance in all respects to
counsel to the Purchaser.
Section 9.7. New Depositary Accounts. Immediately following the
establishment by any Credit Party of any new Depositary Account not in existence
on the Closing Date, such Credit Party shall deliver to the Purchaser (a) a
written notice stating the name and address of the bank or depositary
institution at which such Depositary Account is maintained, and identifying the
type and number of such Depositary Account, and (b) a Blocked Account Agreement
with respect to that Depositary Account duly executed by the applicable Credit
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Party (as the case may be) and the bank or depositary institution at which such
Depositary Account is maintained.
Section 9.8. ERISA Covenants. Each Credit Party and each ERISA Affiliate
will (i) continue to meet the representations and warranties set forth under
Section 4.19 of this Agreement, (ii) not establish or adopt any new Pension Plan
or modify any existing Pension Plan so as to increase its obligations thereunder
(except in the ordinary course of business, consistent with past practice)
which, in the opinion of the Purchaser, could have a Material Adverse Effect and
(iii) not establish or adopt an employee welfare benefit plan as defined in
Section 3(1) of ERISA that provides for employer-provided benefits for employees
after they leave the employment of the Credit Parties or ERISA Affiliates (other
than any such benefits required to be provided by the Consolidated Omnibus
Budget Reconciliation Act of 1985 or other similar federal or state law).
Section 9.9. Further Assurances. Promptly following the Purchaser's
request, each Credit Party from time to time execute, acknowledge, notarize,
deliver, record, register and file any and all further financing statements,
security agreements, pledge agreements, mortgages, hypothecs, deeds of trust,
deeds of pledge, intellectual property assignments and security agreements, and
other agreements, instruments and documents (including, without limitation, the
substantial equivalents of any of the foregoing in any foreign jurisdiction),
and take all further actions (including, without limitation, the payment of all
filing, recording, registration, notary and other fees and charges which may be
incurred in connection with any of the foregoing), which may in any such case be
required under applicable law, or which the Purchaser otherwise may reasonably
request, in order to effectuate the transactions contemplated by this Agreement
and in order to grant, preserve, protect and perfect the validity and first
priority of the Liens and security interests created by the Security Documents.
Section 9.10. Year 2000. Each Credit Party has made an assessment of the
microchip and computer-based systems and the software used in its business and
based upon such assessment believes that the Credit Parties will be "Year 2000
Compliant" by January 1, 2000. For purposes of this paragraph, "Year 2000
Compliant" means that all software, embedded microchips and other processing
capabilities utilized by, and material to the business operations or financial
condition of, the Credit Parties are able to interpret, store, transmit, receive
and manipulate data on and involving all calendar dates in and after the Year
2000. From time to time, at the request of the Purchaser, the Company shall
provide to the Purchaser such updated information as is requested regarding the
status of its efforts to become Year 2000 Compliant.
Section 9.11. Early Refinancing. The Parent and the Company understand and
agree that the Notes are intended to serve as a temporary financing arrangement
until the Company is able to undertake a permanent refinancing of its
Indebtedness, which it anticipates completing prior to the Maturity Date.
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Section 9.12. Consummation of Paisano Merger. The Parent will, immediately
upon consummation of the Reorganization and in any event prior to 5 p.m. (New
York time) on the Closing Date, cause (a) Easyriders Sub II and Paisano
Publications to consummate the Paisano Merger, and (b) Easyriders Sub II to
execute and deliver the Assumption Agreement attached at the end of this
Agreement and all other documents to be executed and delivered by the Company
under Section 5, and to take all other actions and deliver all instruments,
documents and agreements which the Purchaser requires in furtherance thereof.
Section 9.13. Environmental Reports. Promptly following the Purchaser's
request, the Credit Parties shall from time to time deliver (x) Phase I
Environmental Site Assessment Reports, consistent with American Society of
Testing and Materials (ASTM) Standard E1527-94, and applicable state
requirements, on any of the real Property of the Credit Parties encumbered, or
to be encumbered, by a Mortgage, dated no more than 6 months prior to the date
of delivery to the Purchaser, prepared by environmental engineers satisfactory
to the Purchaser, all of which shall be in form and substance satisfactory to
the Purchaser in its sole discretion, (y) such environmental review and audit
reports, including Phase II reports, with respect to the real Property of any
Credit Party as the Purchaser may from time to time request, all of which shall
be in form and substance satisfactory to the Purchaser in its sole discretion
and (z) letters executed by the environmental firms preparing any such
environmental reports, in form and substance satisfactory to the Purchaser,
authorizing the Purchaser to rely on such reports.
Section 10. Negative and Maintenance Covenants. The Parent and the Company
jointly and severally covenant and agree that, until all of the Obligations have
been indefeasibly paid in full and no Notes are outstanding and the Termination
Date has occurred, it shall and shall cause each of its Subsidiaries to comply
with the following covenants:
Section 10.1. Restrictions on Indebtedness. No Credit Party will incur,
create, assume, guarantee or in any way become liable for, or permit to exist,
Indebtedness other than:
(a) Indebtedness incurred pursuant to this Agreement, the Notes and
the other Note Documents;
(b) Indebtedness of the Credit Parties existing on the Closing Date
and described on Schedule 4.10A hereto (in each case after giving effect to the
Transactions, including the Subordinated Seller Notes but excluding in any event
the Non-Continuing Indebtedness);
(c) Indebtedness of any Wholly-owned Subsidiary of the Parent (other
than the Restaurant Subsidiaries and Easyriders of Columbus) to the Parent or to
another
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Wholly-owned Subsidiary of the Parent (other than the Restaurant Subsidiaries),
provided that such Indebtedness is evidenced by a subordinated demand note, in
form and substance (including the terms of subordination provisions)
satisfactory to the Purchaser, which note shall be pledged and delivered to the
Purchaser pursuant to the Security Agreement as additional collateral for the
Obligations;
(d) Indebtedness consisting of Liens permitted by subsections (a)
through (e), inclusive, of Section 10.2;
(e) Indebtedness secured by Liens permitted by Section 10.2(g)
hereof, provided that the aggregate outstanding principal amount of Indebtedness
incurred pursuant to this subsection (e) shall not at any time exceed $500,000;
(f) so long as no Event of Default has occurred and is continuing,
Indebtedness consisting of intercompany loans by the Company to the Parent in a
principal amount per fiscal month, which when added to the dividends made by the
Company to the Parent during such fiscal month pursuant to clause (a)(ii) of the
definition of Restricted Payment in Section 1 hereof, is not in excess of the
lesser of (x) 35% of Excess Cash Flow for the preceding fiscal month and (y)
$100,000, provided that such Indebtedness is evidenced by a subordinated demand
note, in form and substance (including the terms of subordination provisions)
satisfactory to the Purchaser, which note shall be pledged and delivered to the
Purchaser pursuant to the Security Agreement as additional collateral for the
Obligations;
(g) Indebtedness evidenced by the Newriders Subordinated Note; and
(h) so long as no Event of Default has occurred and is continuing,
unsecured Indebtedness of the Parent in an aggregate principal amount not to
exceed the Permitted Subordinated Indebtedness Amount at any time outstanding
so long as (x) such Indebtedness is on terms (including subordination
provisions thereof) satisfactory to the Purchaser, (y) such Indebtedness shall
require no cash interest and no payments in respect of principal, in each case
prior to the first anniversary of the Maturity Date and (z) the Net Cash
Proceeds of such Indebtedness are used only for the purposes described in the
last sentence of Section 3.1(d).
Section 10.2. Restrictions on Liens. No Credit Party will directly or
indirectly, create, assume or suffer to exist any Lien upon any of their
respective Properties whether now owned or hereafter acquired, except for:
(a) Liens for taxes, assessments or governmental charges or claims
the payment of which is not at the time required by Section 9.2;
(b) statutory Liens of landlords, if any, Liens of carriers,
warehousemen, mechanics, materialmen, if any, and other Liens imposed by law
incurred in the ordinary course of business, in each case for sums the payment
of which is not at the time required by Section 9.2;
(c) Liens (other than any Lien imposed by ERISA, and other than any
Lien securing an obligation for the payment of borrowed money) incurred or
deposits made in the ordinary course of business in connection with obligations
not due or delinquent with respect to workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations; provided, that no such Lien shall be permitted to the extent it
encumbers any real Property of any Credit Party;
(d) any attachment or judgment Lien (including judgment or appeal
bonds) which shall, within 30 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or which shall have been discharged
within 30 days after the
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expiration of any such stay or which is being diligently contested in good faith
so long as a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; provided that such Liens shall
not in any event exceed $100,000 in the aggregate at any time outstanding;
(e) zoning restrictions, easements, licenses, reservations,
restrictions on the use of real Property or minor irregularities incident
thereto (and, with respect to leasehold interests, Liens and other encumbrances
that are incurred, created, assumed or permitted to exist on or with respect to
the leased Property and arise by, through or under or are asserted by a landlord
or owner of the leased Property, with or without consent of the lessee) which
(i) in the case of any such Lien encumbering real Property of a Credit Party
which is not also encumbered by a Mortgage, were not incurred in connection with
the borrowing of money and which do not in the aggregate materially detract from
the value of the Property of any Credit Party or impair the use of such Property
for the purposes for which such Property is held by such Credit Party, or (ii)
in the case of any such Lien encumbering real Property which is also encumbered
by a Mortgage, constitute Permitted Exceptions (as defined in such Mortgage);
(f) Liens (including Liens created pursuant to Capitalized Leases)
existing on the Closing Date and described in Schedule 4.10A hereto (in each
case after giving effect to the Transactions contemplated to occur on the
Closing Date, but excluding in any event Liens securing Non-Continuing
Indebtedness which Liens shall be fully terminated and released on the Closing
Date);
(g) Liens (including Liens created pursuant to Capitalized Leases)
in respect of personal Property acquired by any Credit Party after the Closing
Date, which Liens exist or are created at the time of acquisition of such
Property or within six months thereafter, to secure Indebtedness permitted by
Section 10.1(e) which is assumed or incurred to finance all or any part of the
purchase price of acquisition of such Property, but any such Lien shall cover
only the Property so acquired and any improvements thereto, and may not exceed
the lesser of (x) 100% of the Fair Market Value of such Property or (y) the
purchase price of such acquisition; and
(h) the Liens created by the Security Documents.
Section 10.3. Limitation on Sale and Leasebacks. No Credit Party will
enter into any arrangement whereby any such Credit Party shall sell or transfer
any Property owned by such Credit Party to any Person and thereupon such Credit
Party shall lease or intend to lease, as lessee, the same Property.
Section 10.4. Consolidation, Merger or Disposition of Assets;
Acquisitions. No Credit Party will enter into any transaction of merger,
amalgamation or consolidation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell,
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lease, license, transfer or otherwise dispose of, in one transaction or a series
of transactions, all or any part of the business or Property (tangible or
intangible, including, without limitation, any Intellectual Property or License
Agreement) of any Credit Party whether now owned or hereafter acquired, or
acquire by purchase or otherwise any of the outstanding Capital Stock of, or all
or any substantial part of the business, operating assets and Property of, any
Person, except that (i) any Credit Party may in the ordinary course of business
sell Inventory owned by them, (ii) any Credit Party may sell or otherwise
dispose of Property (other than Intellectual Property) having a net book value
at the time of such sale or disposition of not more than $100,000 in any fiscal
year, provided that the aggregate net book value of all such Property sold or
disposed of after the closing date pursuant to this clause (ii) shall not exceed
$175,000, (iii) after giving effect to the Reorganization, the Capital Stock of
El Paso may be transferred to Newriders, and (iv) the Credit Parties may acquire
the Capital Stock or assets of any Person so long as the aggregate consideration
paid by the Credit Parties for such acquisition in any fiscal year does not
exceed $250,000 and the Purchaser shall be satisfied in its discretion with the
nature and extent of any Indebtedness and other liabilities (including without
limitation contingent liabilities) assumed (by contract, operation of law or
otherwise) by the Credit Parties in connection with such acquisition.
Section 10.5. Sale or Discount of Receivables. No Credit Party will,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of their respective Accounts or notes
receivable , except that the Company may discount its Accounts or notes
receivable in the ordinary course of business and consistent with past
practices.
Section 10.6. Conduct of Business. The Parent will not engage in a
business other than the ownership, directly or indirectly, of the Capital Stock
of its Subsidiaries. No member of the Paisano Group will, engage in any business
other than the Permitted Business. Easyriders of Columbus will not engage in any
business other than the operation of its store, cafe and tatoo studio located in
Columbus, Ohio, the sale of Easyriders apparel, and the businesses of motorcycle
customization, custom and pre-owned motorcycle sales, motorcycle parts and
accessory sales, motorcycle servicing, and custom leather embroidery, and any
businesses that are reasonably related thereto.
Section 10.7. Restricted Payments and Restricted Investments.
(a) No Credit Party will, directly or indirectly, make any
Restricted Payment.
(b) No Credit Party will make any Restricted Investment.
Section 10.8. Issuance of Capital Stock. No Credit Party will issue or
have outstanding any shares of Capital Stock (or any warrants, options,
conversion rights, or other rights to subscribe for, purchase or acquire such
Capital Stock), except (i) Capital Stock,
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warrants, options, conversion rights or other such rights outstanding on the
Closing Date and listed on Schedule 4.4, (ii) Common Stock issued under the
Parent 1998 Executive Compensation Plan, and (iii) Common Stock issued by the
Parent after the Closing Date.
Section 10.9. Transactions with Affiliates. Subject to the immediately
succeeding sentence, no Credit Party will, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any Property or the rendering of any service), with
any Affiliate of such Credit Party unless such transaction is otherwise not
prohibited under this Agreement, is in the ordinary course of such Credit
Party's business, is on fair and reasonable terms that are not less favorable to
such Credit Party, as the case may be, than those that would be obtainable at
the time in an arms' length transaction with a Person who is not such an
Affiliate and such transaction has been approved by the disinterested directors
of the Parent, provided that Restricted Payments as described in clauses (iv),
(v) and (vii) of paragraph (e) of the definition thereof shall be permitted.
Notwithstanding the foregoing and other than the transactions described on
Schedule 10.9, no Credit Party will, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any Property or the rendering of any service) with
(i) any Restaurant Subsidiary, (ii) Easyriders of Columbus (other than
transactions with respect to magazine sales and which satisfy the conditions of
the immediately preceding sentence) or (iii) any Permitted Holder.
Section 10.10. Capital Expenditures. No Credit Party will make any Capital
Expenditure or incur such any contractual commitment with respect thereto,
except that so long as no Event of Default has occurred and is continuing the
Paisano Group may make Capital Expenditures and incur commitments therefor to
the extent that, after giving effect thereto, the aggregate amount of all
Capital Expenditures by the Paisano Group shall not exceed, for each fiscal year
of the Paisano Group set forth below, the corresponding amount set forth
opposite such fiscal year:
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<TABLE>
<CAPTION>
Fiscal Year Ended
December 31, Permitted Amount
------------ ----------------
<S> <C>
1998 $550,000
1999 $550,000
2000 $550,000
2001 $550,000
</TABLE>
Section 10.11. Operating Leases. No Credit Party will enter into (as
lessee) any Operating Lease if, after giving effect thereto, the aggregate
amount of rentals and other payments required to be made by such Credit Parties
under all Operating Leases during any fiscal year shall be greater than
$600,000.
Section 10.12. Certain Contracts. No Credit Party will enter into or
be a party to:
(a) any contract providing for the making of loans, advances or
capital contributions to any Person other than the Credit Parties, or for the
purchase of any Property from any Person, in each case primarily in order to
enable such Person to maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses, or
(b) any contract for the purchase of materials, supplies or other
Property or services if such contract (or any Reorganization Document) requires
that payment for such materials, supplies or other Property or services shall be
made regardless of whether or not delivery of such materials, supplies or other
Property or services is ever made or tendered, or
(c) any contract to rent or lease (as lessee) any real or personal
Property if such contract (or any Reorganization Document) provides that the
obligation to make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general use or
requires that the lessee purchase or otherwise acquire securities or obligations
of the lessor (provided, that this subsection (c) shall not be construed to
prevent any Credit Party from being a party to or complying with any provision
of any lease to which any of them is a party on the date hereof), or
(d) any contract for the sale or use of materials, supplies or other
Property, or the rendering of services, if such contract (or any Reorganization
Document) requires that payment for such materials, supplies or other Property,
or the use thereof, or payment for such services, shall be subordinated to any
Indebtedness (of the purchaser or
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user of such materials, supplies or other Property or the Person entitled to the
benefit of such services) owed or to be owed to any Person, or
(e) except as permitted by Section 10.1, and except for Investments
which are not Restricted Investments, any other contract which, in economic
effect, is substantially equivalent to a Contingent Obligation.
Section 10.13. Limitation on Dividend Restrictions Affecting Subsidiaries.
Except pursuant to this Agreement, no Credit Party will permit any of its
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction which by its
terms restricts the ability of any such Subsidiary to (a) pay dividends or make
any other distributions on such Subsidiary's Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Credit Party, (c) make any loans
or advances to the Company or any other Credit Party or (d) transfer any of its
Property or assets to the Company or any other Credit Party.
Section 10.14. No Amendment of Charter, By-Laws. No Credit Party will
effect any amendment to or modification of its charter documents or by-laws,
except in each case with the prior written consent of the Purchaser.
Section 10.15. Acquisition of Margin Securities. No Credit Party will own,
purchase or acquire (or enter into any contract to purchase or acquire) any
"margin security" as defined by any regulation of the Board of Governors of the
United States Federal Reserve System as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, the Purchaser shall have received an opinion of
counsel satisfactory to the Purchaser to the effect that such purchase or
acquisition will not cause this Agreement or the Notes to be in violation of
Regulation T or Regulation U or any other regulation of such Board then in
effect.
Section 10.16. Collateral Locations; Other Names. Except with respect to
locations of Consigned Inventory or otherwise with the express prior written
approval of the Purchaser, neither the location of the principal place of
business and chief executive office of any Credit Party, nor the locations of
Collateral respectively granted or pledged by them as set forth on Schedule 4.30
hereto, shall be changed nor shall there be established additional places of
business or additional locations at which any such Collateral is stored, kept or
processed, nor shall any Credit Party conduct business under any corporate,
trade or fictitious name other than the names listed on Schedule 4.30, unless
(i) the Company shall give to the Purchaser at least 30 days prior notice of any
such changed chief executive office or changed or additional places of business
or locations of Collateral or change of corporate, trade or fictitious name, and
(ii) prior to making any such change of location, place of business, chief
executive office or corporate, trade or fictitious name or establishing such new
place of business or location of Collateral, the Company shall execute and file,
and shall cause each other Credit Party to execute and file, any additional
financing statements or other documents or notices reasonably required by the
Purchaser in order to preserve the
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perfection of security interests in such Collateral and, if such location is not
owned by such Credit Party, the Company shall obtain, and shall cause such
Credit Party to obtain, and deliver to the Purchaser such duly executed Estoppel
Letters in respect of such location as may be reasonably required by the
Purchaser. Following the occurrence of an Event of Default, the Company shall,
upon the request of the Purchaser, notify any such warehouseman, bailee or
processor which has not already delivered an Estoppel Letter to the Purchaser of
the Liens created in favor of the Purchaser, and shall instruct such Person to
hold all Collateral located on premises owned or operated by such Person for the
Purchaser's account subject to the Purchaser's instructions.
Section 10.17. Amendments to Certain Documents. Without the prior written
consent of the Purchaser, no Credit Party will (i) consent to or request any
amendment, modification or supplement to any provision of any Reorganization
Document or (ii) amend, modify or supplement in any material respect, any
Material Contract which has a face amount or otherwise involves aggregate
payments or obligations in excess of $250,000.
Section 10.18. Financial Covenants.
(a) Consolidated Working Capital. The Company shall not permit
Consolidated Working Capital of the Paisano Group, measured as at the end of
each fiscal quarter of the Paisano Group, to be less than $4,250,000.
(b) Minimum Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth of the Parent as of the end of any fiscal quarter to be
less than the sum of (i) $22,500,000 plus (ii) 100% of the aggregate amount of
the Consolidated Net Income of the Parent and its Subsidiaries for each fiscal
quarter of the Parent ending on or after December 31, 1998 with respect to which
the Consolidated Net Income of the Parent and its Subsidiaries was greater than
zero.
(c) Maintenance of Leverage Ratio. The Company shall not permit the
ratio of (i) Consolidated Total Indebtedness (other than the Subordinated Seller
Notes) as of each date set forth below to (ii) Consolidated EBITDA, of the
Paisano Group for the four consecutive fiscal quarters of the Paisano Group
ended on such date (or, in the case of any such date which is earlier than
September 30, 1999, for the period from the Closing Date to and including such
date), to exceed the corresponding amount set forth opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended: Ratio
- ----------------- --------
<S> <C>
December 31, 1998 11.75:1.00
March 31, 1999 6.75:1.00
</TABLE>
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<TABLE>
<S> <C>
June 30, 1999 4.6:1.00
September 30, 1999 3.25:1.00
December 31, 1999 3.5:1.00
March 31, 2000 3.4:1.00
June 30, 2000 3.3:1.00
September 30, 2000 3.2:1.00
December 31, 2000 3.1:1.00
March 31, 2001 3.1:1.00
June 30, 2001 3.0:1.00
September 30, 2001 3.0:1.00
</TABLE>
(d) Minimum Consolidated EBITDA. The Company shall not permit the
Consolidated EBITDA of the Paisano Group, measured as of each date set forth
below for the period of four consecutive full fiscal quarters of the Paisano
Group ended on such date, to be less than the corresponding amount set forth
opposite such date; provided, however, that in the case of any such measuring
date which is earlier than September 30, 1999, the applicable measuring period
shall be the period from the Closing Date to and including such measuring date:
<TABLE>
<CAPTION>
Measuring Date Amount
-------------- ------
<S> <C>
December 31, 1998 $1,650,000
March 31, 1999 $3,160,000
June 30, 1999 $4,620,000
September 30, 1999 $6,350,000
December 31, 1999 $6,000,000
March 31, 2000 $6,175,000
June 30, 2000 $6,400,000
September 30, 2000 $6,600,000
December 31, 2000 $6,800,000
March 31, 2001 $7,000,000
June 30, 2001 $7,400,000
September 30, 2001 $7,800,000
</TABLE>
(e) Maintenance of Interest Coverage Ratio. The Company will not
permit the ratio of (i) Consolidated EBITDA less Capital Expenditures made
during any period of determination, in each case, of the Paisano Group to (ii)
Consolidated Interest Expenses of the Paisano Group, measured as of each date
set forth below for the period of four consecutive full fiscal quarters of the
Paisano Group ended on such date, to be less than the ratio set forth opposite
such date; provided, however, that in the case of any such
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measuring date which is earlier than September 30, 1999, the applicable
measuring period shall be the period from the Closing Date to and including such
measuring date:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
December 31, 1998 3.4:1.00
March 31, 1999 2.9:1.00
June 30, 1999 2.8:1.00
September 30, 1999 2.9:1.00
December 31, 1999 3.2:1.00
March 31, 2000 3.1:1.00
June 30, 2000 3.3:1.00
September 30, 2000 3.3:1.00
December 31, 2000 3.4:1.00
March 31, 2001 3.5:1.00
June 30, 2001 3.5:1.00
September 30, 2001 3.5:1.00
</TABLE>
Section 10.19. Board Observer Rights. The Parent will give to the
Purchaser notice of all regular meetings and all special meetings of the
Parent's Board of Directors at the time notice is given to the directors, and
will permit an employee of the Purchaser or any Affiliate of the Purchaser
designated by the Purchaser to attend such meetings as an observer (but with no
voting rights), and will provide such designee with all information provided to
directors of the Parent at the time such information is provided to the
directors.
Section 11. Events of Default.
Section 11.1. Events of Default; Remedies. If any of the following events
(herein called "Events of Default") shall have occurred and be continuing
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or by operation of law or otherwise and such Event of Default
shall be deemed to be continuing until waived by the Purchaser in accordance
with the terms hereof):
(a) the Company shall default in the due and punctual payment or
prepayment of all or any part of the principal of any Note when and as the same
shall become due and payable, whether at stated maturity, by acceleration, by
notice of prepayment or otherwise;
(b) any Credit Party shall default in the due and punctual payment
or prepayment of any interest or fees on any Note or any other Obligations
(other than principal
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of any Note) when and as such interest, fees or other Obligations, shall become
due and payable, and such default shall continue for a period of five days;
(c) any Credit Party shall default in the performance or observance
of any of the covenants, agreements or conditions contained in Section 10 of
this Agreement;
(d) any Credit Party shall default in the performance or observance
of any of the covenants, agreements or conditions contained in this Agreement
(other than those referred to in any subsection of this Section 11.1 other than
this subsection (d)), or any Credit Party shall default in the performance or
observance of any of the covenants, agreements or conditions contained in any of
the other Note Documents, and such default shall continue for a period of 30
days;
(e) (i) any Credit Party shall fail to pay any principal of, premium
or interest on or any other amount payable in respect of Indebtedness of such
Person that is outstanding in a principal amount of at least $100,000 in the
aggregate (excluding Indebtedness represented by the Notes) when the same
becomes due and payable (whether at scheduled maturity, or by required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating to any such
Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to permit the acceleration of the maturity of such Indebtedness
(whether or not such acceleration occurs); or (iii) any such Indebtedness shall
be declared to be due and payable or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Indebtedness shall be required
to be made, in each case prior to the stated maturity thereof;
(f) any Credit Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii) be
generally unable to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Bankruptcy Code or the foreign equivalent thereof, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) fail to controvert in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or the foreign equivalent thereof, (vii) admit in writing its
inability to pay its debts generally as such debts become due, (viii) take any
action under the laws of its jurisdiction of organization analogous to any of
the foregoing, or (ix) take any requisite action for the purpose of effecting
any of the foregoing;
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(g) a proceeding or case shall be commenced, without the application
or consent of any Credit Party in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, dissolution, winding up of any Credit Party
or composition or readjustment of the Indebtedness of any of them, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of any
Credit Party or of all or any substantial part of the assets of any of them, or
(iii) similar relief in respect of any Credit Party under any law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 30 days; or an order for relief shall
be entered in an involuntary case under the Bankruptcy Code, against any Credit
Party; or action under the laws of the jurisdiction of organization of any
Credit Party analogous to any of the foregoing shall be taken with respect to
any Credit Party and shall continue undismissed, or unstayed and in effect, for
a period of 30 days;
(h) final judgment for the payment of money shall be rendered by a
court of competent jurisdiction against any Credit Party and such Credit Party
shall not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, within 30 days from the date of
entry thereof and within said period of 30 days, or such longer period during
which execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal, and such judgment
together with all other such judgments shall exceed in the aggregate $125,000;
(i) any representation, warranty or statement made by or on behalf
of any Credit Party or any officer of any Credit Party in this Agreement, or any
representation, warranty or statement made by or on behalf of such Credit Party
or any officer of such Credit Party in any of the Transaction Documents or in
any financial statement, Officer's Certificate or other instrument or document
now or hereafter delivered pursuant to or in connection with any provision of
this Agreement or the Transaction Documents, shall prove to be false or
incorrect or breached in any material respect on the date as of which made;
(j) any event or condition described in Section 4.19 hereof shall
occur or exist and, as a result of such event or condition, together with all
other such events or conditions, any Credit Party or any ERISA Affiliate shall
incur, or in the opinion of the Purchaser is reasonably likely to incur, a
liability of any kind under ERISA or otherwise that, in the opinion of the
Purchaser, could have a Material Adverse Effect;
(k) any provision of any of this Agreement, the Notes or the other
Note Documents shall, for any reason, not be or shall cease to be in full force
and effect, or not be, or be asserted in writing by any Credit Party not to be,
valid, binding and enforceable against any Person purported to be bound by it;
(l) any of the Security Documents shall not give or shall cease to
give the Purchaser the Liens and the rights, powers and privileges purported to
be created thereby, including, without limitation, a valid, enforceable and
perfected first priority security interest in, and Lien on, all of the
Collateral subject thereto in favor of the Purchaser, superior and
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prior to the rights of all third Persons (except as otherwise expressly
permitted by this Agreement or the Security Documents); or
(m) any Change of Control shall occur;
then (i) upon the occurrence of any Event of Default described in subsection (f)
or (g), the unpaid principal amount of all Notes, together with the interest
accrued thereon and all fees, costs, expenses, indemnities and other amounts
payable hereunder or under the other Note Documents shall automatically become
immediately due and payable, and all obligations of the Purchaser to purchase
Revolving Notes hereunder shall terminate, without presentment, demand, notice,
declaration, protest or other requirements of any kind, all of which are hereby
expressly waived, or (ii) upon the occurrence of any other Event of Default, the
Purchaser may, by written notice to the Company, declare the unpaid principal
amount of all Notes to be, and the same shall forthwith become, immediately due
and payable, together with the interest accrued thereon and all fees, costs,
expenses, indemnities and other amounts payable hereunder or under the other
Note Documents, and/or terminate all obligations of the Purchaser to purchase
Revolving Notes hereunder, all without presentment, demand, notice, protest or
other requirements of any kind, all of which are hereby expressly waived.
Section 11.2. Suits for Enforcement; Remedies Against Collateral. If any
Event of Default shall have occurred and be continuing, the Purchaser may,
proceed to protect and enforce its rights, either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement, and may proceed to enforce the payment of all sums
due upon such respective Notes, and such further amounts as shall be sufficient
to cover the costs and expenses of collection (including, without limitation,
reasonable counsel fees and disbursements), or to enforce any other legal or
equitable right of the Purchaser. In addition, the Purchaser shall have all of
the rights and remedies of a secured creditor under the applicable provisions of
the Uniform Commercial Code or the foreign equivalent thereof, and all rights
and remedies provided for in the Security Documents or at law or in equity or
otherwise.
Section 11.3. Remedies Cumulative. No remedy conferred in this Agreement
or in the other Note Documents upon the Purchaser, the holder of any Note or the
Purchaser is intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Section 11.4. Remedies Not Waived. No course of dealing between any Credit
Party and the Purchaser, and no delay or failure in exercising any rights
hereunder or under such Note or the Note Documents in respect thereof, shall
operate as a waiver of any of the rights of the Purchaser.
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Section 12. Registration; Exchange; and Transfer of Notes. The Company
will keep at its principal executive office a register, in which, subject to
such reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company will provide for the registration and
transfer of Notes. Whenever any Note or Notes shall be surrendered either at the
principal executive office of the Company, or at the place of payment named in
the Note, for transfer or exchange, accompanied (if so required by the Company)
by a written instrument of transfer in form reasonably satisfactory to the
Company duly executed by the holder thereof or by such holder's attorney duly
authorized in writing, the Company will execute and deliver in exchange therefor
a new Note or Notes of the same class in such denominations as may be requested
by such holder, of like tenor and in the same aggregate unpaid principal amount
as the aggregate unpaid principal amount of the Note or Notes so surrendered.
Any Note issued in exchange for any other Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, and neither gain nor loss of interest
shall result from any such transfer or exchange. Any transfer tax or
governmental charge relating to such transaction shall be paid by the holder
requesting the exchange. The Company and any of its agents may treat the Person
in whose name any Note is registered as the sole and exclusive record and
beneficial holder and owner of such Note for the purpose of receiving payment of
the principal of, and interest and other amounts on such Note and for all other
purposes whatsoever, whether or not such Note be overdue.
Section 13. Lost, Stolen, Damaged and Destroyed Notes. At the request of
any holder of any Note, the Company will issue and deliver at its expense, in
replacement of any Note or Notes lost, stolen, damaged or destroyed, upon
surrender thereof, if mutilated, a new Note or Notes in the same aggregate
unpaid principal amount, and otherwise of the same tenor, as the Note or Notes
so lost, stolen, damaged or destroyed, duly executed by the Company. The Company
may condition the replacement of a Note or Notes reported by the holder thereof
as lost, stolen, damaged or destroyed, upon the receipt from such holder of an
indemnity and/or security reasonably satisfactory to the Company; provided that
if such holder shall be the Purchaser or its nominee, such Purchaser's unsecured
agreement of indemnity shall be sufficient for purposes of this Section.
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Section 14. Miscellaneous.
Section 14.1. Amendment and Waiver.
(a) No amendment or waiver of any provision of this Agreement, the
Notes or (except as otherwise expressly provided therein) any other Note
Document, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Purchaser and the Parent.
(b) Any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Neither any failure nor
any delay on the part of the Purchaser in exercising any right, power or
privilege hereunder or under the Notes or any of the other Note Documents shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. Except as otherwise provided herein or in the Notes
or any other Note Document, no notice to or demand on any Credit Party in any
case shall entitle such Credit Party to any other or further notice or demand in
the same, similar or other circumstances.
Section 14.2. Expenses. The Parent and the Company, jointly and severally
agree, whether or not the transactions hereby contemplated shall be consummated,
to pay and save the Purchaser harmless against any and all liability for the
payment of all reasonable out-of-pocket expenses arising in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Notes,
the other Note Documents and the other instruments and documents hereby and
thereby contemplated and the closing of the transactions contemplated hereby,
all such expenses incurred with respect to the enforcement of any provision of
any such agreement or instrument, all reasonable expenses incurred in connection
with the copying and compilation of such agreements and instruments and all
stamp and other similar taxes (together in each case with interest and
penalties, if any, to the extent permitted by applicable law) which may be
payable in respect of the execution and delivery of such agreement or
instruments, all fees, taxes and other charges incurred in connection with the
filing or recording of any Security Documents and in connection with any Lien,
tax and judgment searches, including appraisal, survey and other title costs,
the reasonable fees and disbursements of Paul, Hastings, Janofsky & Walker LLP
and of any special, local or foreign counsel in connection with the preparation
of such agreements and instruments and the transactions hereby and thereby
contemplated, and the fees and disbursements of the Accountants, and the
reasonable out-of-pocket expenses incurred by the Purchaser in the
administration of the provisions of this Agreement and the other Note Documents,
including, without limitation, expenses incurred in connection with the exercise
of the Purchaser's rights of visitation and inspection pursuant to Section 8 and
attendance at meetings of the Board of Directors of the Parent and committees
thereof pursuant to Section 10.19. The Credit Parties, jointly and severally,
also agree to pay all reasonable expenses incurred by the Purchaser (including
counsel fees and disbursements) in connection
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with any amendment or requested amendment of, or waiver or consent or requested
waiver or consent under or with respect to, this Agreement, the Notes or any of
the other Note Documents, whether or not the same shall become effective, and
all reasonable expenses incurred by Purchaser (including counsel fees and
disbursements) following the occurrence and during the continuance of any
Default or Event of Default or incident to the negotiation of any workout,
restructuring or similar arrangement relating to any Credit Party. The
obligations of the Parent and the Company under this Section 14.2 shall survive
the payment or prepayment in full or transfer of any Note, the termination of
the Purchaser's obligations to purchase Revolving Notes, the enforcement of any
provision hereof or thereof, any such amendments, waivers or consents, any such
Default or Event of Default, and any such workout, restructuring or similar
arrangement.
Section 14.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement or otherwise in connection herewith, shall
(i) survive the execution and delivery of this Agreement and the delivery of the
Notes to the Purchaser and shall continue in effect, until all of the
Obligations have been indefeasibly paid in full and no Notes are outstanding and
the Termination Date has occurred and thereafter as provided in Sections 14.2
and 14.6, and (ii) be deemed to be material and to have been relied upon by the
Purchaser, regardless of any investigation made by such Purchaser or on its
behalf.
Section 14.4. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
the Parent, the Company, the Purchaser and their respective successors and
assigns; provided, however, that neither the Parent nor the Company shall have
the right to assign its rights hereunder or any interest herein or to delegate
any of its duties or obligations hereunder without the prior written consent of
the Purchaser.
(b) The Purchaser may at any time sell or assign to any Person (each
an "Assignee") all or any part of its interests in the Notes, this Agreement and
the Note Documents and in the obligations of the Credit Parties under this
Agreement, the Notes and the Note Documents, and each such Assignee shall assume
the obligations of the Purchaser hereunder and thereunder (including, without
limitation, the obligation of the Purchaser to purchase Revolving Notes), to the
extent provided in such assignment, and to the extent of such assumption the
Purchaser shall be released from its obligations hereunder and thereunder. Upon
execution and delivery of such an instrument, such Assignee shall be a party to
this Agreement and shall have the rights and obligations of a Purchaser
(including, without limitation, its rights under this Section 14.4(b)), to the
extent of such assignment, and the Purchaser shall be released from its
obligations hereunder to a corresponding extent. Upon the consummation of any
assignment pursuant to this Section 14.4(b), the Purchaser and the Company shall
make appropriate arrangements so that, if required, new Notes shall be issued to
the Purchaser and the Assignee. The Purchaser shall give the Company prior
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written notice of the date that any such assignment shall become effective,
which date shall be no less than ten days after the date such notice is given.
From and after the date of such assignment, the term "Purchaser" as used in this
Agreement shall be deemed to refer collectively to the holders of Notes at the
time outstanding.
Section 14.5. Notices. All notices hereunder shall be in writing and shall
be conclusively deemed to have been received and shall be effective (a) on the
day on which delivered if delivered personally or transmitted by telex or
telegram or telecopier, or (b) one Business Day after the date on which the same
is delivered to a nationally recognized overnight courier service, and shall be
addressed:
(i) in the case of the Parent or the Company, to:
Paisano Publications, Inc.
28210 Dorothy Drive
Agoura Hills, CA 91301
Attention: Mr. Joseph Teresi
Telecopy No.: (818) 889-4726
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Suite 1600
Los Angeles, CA 90067
Attention: Barry L. Dastin
Telecopy No.: (310) 788-1200
(ii) in the case of the Purchaser to:
Nomura Holding America Inc.
2 World Financial Center, Building B
New York, NY 10281-1198
Attention: Howard Gellis, or his authorized representative
Telecopy No.: (212) 667-1029
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with a copy to:
Nomura Holding America Inc.
2 World Financial Center, Building B
New York, NY 10281-1198
Attn: Legal Department
Telecopy No.: (212) 667-1024; and
or at such other address and/or telecopy number and/or to the attention of such
other Person as any of such Persons shall have advised the others by notice in
the manner herein specified.
Section 14.6. Indemnification. In consideration of the execution and
delivery of this Agreement by the Purchaser, the Parent and the Company hereby,
jointly and severally, agree to defend, indemnify, exonerate and hold harmless
the Purchaser and its officers, directors, stockholders, affiliates, trustees,
employees and agents, and each other Person, if any, controlling any the
Purchaser or any of its Affiliates (herein collectively called the
"Indemnitees") from and against any and all actions, causes of action, suits,
losses, liabilities and damages, and expenses in connection therewith,
including, without limitation, reasonable counsel fees and disbursements
incurred in the investigation and defense of claims and actions (herein
collectively called the "Indemnified Liabilities"), incurred by the Indemnitees
or any of them as a result of, or arising out of or relating to:
(i) the execution, delivery and performance of the
Reorganization Documents and the consummation of the Reorganization
contemplated thereby,
(ii) the execution, delivery, performance or enforcement of
this Agreement, the Notes, the Warrants, any other Note Document, or any
instrument or document contemplated hereby or thereby by any of the
Indemnitees, or any act, event or transaction related or attendant thereto
or contemplated hereby or thereby, or any action or inaction by any
Indemnitee under or in connection therewith, or
(iii) any Environmental Matter, any Environmental Law or the
actual or alleged existence or release of any Hazardous Material,
except for any such Indemnified Liabilities that are finally judicially
determined to have resulted from the respective Indemnitee's gross negligence,
bad faith or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Parent and the Company
hereby, jointly and severally, agree to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The obligations of the Parent and the Company
under this Section 14.6 shall be in addition to any liability that the Parent
and the Company may otherwise have and shall survive the payment or prepayment
in full or transfer of any Note,
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the termination of any Purchaser's obligations to purchase Revolving Notes and
the enforcement of any provision hereof or thereof.
Section 14.7. Public Announcements. The Parent and the Company agree that
neither of them nor any other Credit Party will issue any press release or make
any other public announcement, statement or filing with regard to this
Agreement, the Notes, the Warrants or the other Note Documents or the
Transactions without the prior approval of the Purchaser, which approval shall
not be unreasonably withheld and shall in no event be withheld in any case where
such press release, public announcement, statement or filing is required by
applicable law (including applicable rules and regulations of the SEC).
Section 14.8. No Fiduciary Relationship. The relationship between the
Purchaser, on the one hand, and the Credit Parties on the other hand, is solely
that of creditor and debtor, and the Purchaser shall not be deemed to have any
fiduciary or other special relationship with any Credit Party. No provision of
this Agreement, the Notes or any of the other Note Documents shall be construed
to create a fiduciary duty on the part of the Purchaser or any trustee or agent
therefor in favor of any Credit Party or their Affiliates, or their respective
director, officers, employees, agents, stockholders or creditors.
Section 14.9. Integration and Severability. This Agreement, the Notes and
the other Note Documents (including the schedules and exhibits thereto) embody
the entire agreement and understanding among the Purchaser and the Credit
Parties, and supersede all prior agreements and understandings relating to the
subject matter hereof. In case any one or more of the provisions contained in
this Agreement, the Notes or any other Note Document, or any application
thereof, shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
Section 14.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
SECTION 14.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14.12. SUBMISSION TO JURISDICTION: WAIVER OF SERVICE AND VENUE.
(a) EACH OF THE PARENT AND THE COMPANY CONSENTS AND AGREES TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON
CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES
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THAT, EXCEPT WITH THE WRITTEN CONSENT OF THE PURCHASER, ANY DISPUTE CONCERNING
THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE ONE HAND, AND THE PARENT AND THE
COMPANY, ON THE OTHER HAND, OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS
AGREEMENT OR OTHERWISE, SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
(b) EACH OF THE PARENT AND THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY HAND DELIVERY TO THE COMPANY AT ITS ADDRESS SET FORTH
BELOW, OR, AT THE OPTION OF THE PURCHASER, BY SERVICE UPON CT CORPORATION, WHICH
EACH OF THE PARENT AND THE COMPANY IRREVOCABLY APPOINTS AS ITS AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF NEW YORK. IN
ADDITION, THE PURCHASER AGREES TO PROMPTLY FORWARD BY REGISTERED MAIL ANY
PROCESS SO SERVED UPON SAID AGENT TO THE COMPANY AT ITS ADDRESS SET FORTH ABOVE
IN SECTION 14.5. THE COMPANY HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
(c) NOTHING IN THIS SECTION 14.12 SHALL AFFECT THE RIGHT OF THE
PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST THE PARENT
OR THE COMPANY OR THEIR PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
SECTION 14.13. WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE PARENT, THE
COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH
OF THE PARENT, THE COMPANY AND THE PURCHASER HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
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THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 14.14. Dating. Although this Agreement is dated as of the date
first written above for convenience, this Agreement shall be effective on
September 23, 1998.
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IN WITNESS WHEREOF, the Company, the Parent and the Purchaser have
executed this Agreement by their duly authorized officers.
EASYRIDERS, INC.
By: /s/ William R. Nordstrom
-------------------------------
Its: Secretary
EASYRIDERS SUB II, INC.
(to be merged with and into
PAISANO PUBLICATIONS, INC.)
By: /s/ William R. Nordstrom
-------------------------------
Its: Vice President
NOMURA HOLDING AMERICA INC.
By: /s/ Salvatore Gentile
-------------------------------
Its: Attorney-In-Fact
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Assumption Agreement
PAISANO PUBLICATIONS, INC., successor to Easyriders Sub II, Inc. by
merger, hereby assumes all obligations and liabilities of Easyriders Sub II,
Inc. under the foregoing Note and Warrant Purchase Agreement, dated as of
September 23, 1998 between Easyriders, Inc., Easyriders Sub II, Inc. and Nomura
Holding America Inc., and all the Notes and Note Documents referred to therein
to which Easyriders Sub II, Inc. is a party and joins in the foregoing Note and
Warrant Purchase Agreement and such Notes and Note Documents for the purpose of
agreeing to be bound by all covenants and agreements attributable to it in said
Note and Warrant Purchase Agreement and such Notes and Note Documents.
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
-------------------------------
Name:
Title:
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TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
1. Definitions...........................................................................................2
1.1. Defined Terms................................................................................2
1.2. Accounting Terms............................................................................23
1.3. Rules of Construction.......................................................................23
2. Sale and Purchase of Notes and Warrants..............................................................24
2.1. Authorization of Notes and Warrants.........................................................24
2.2. Sale and Purchase of Revolving Notes........................................................25
2.3. Sale and Purchase of Term Notes and Warrants................................................26
2.4. Closing.....................................................................................26
2.5. Payments....................................................................................26
2.6. Fees........................................................................................27
2.7. Interest Rate Limitation....................................................................27
2.8. Allocation of Purchase Price................................................................28
3. Prepayments of Notes.................................................................................28
3.1. Mandatory Payments and Prepayments..........................................................28
3.2. Optional Prepayments of the Notes...........................................................30
3.3. Application of Principal Payments...........................................................30
3.4. Reductions of Commitments...................................................................31
3.5. Purchase of Notes...........................................................................31
3.6. Taxes.......................................................................................32
4. Representations and Warranties of the Parent and the Company.........................................34
4.1. Corporate Existence and Power...............................................................34
4.2. Corporate Authority.........................................................................34
4.3. Binding Effect..............................................................................34
4.4. Capital Stock...............................................................................34
4.5. Business Operations and Other Information: Financial Condition..............................35
4.6. Subsidiaries................................................................................36
4.7. Litigation; No Violation of Governmental Orders or Laws.....................................36
4.8. No Conflicts with Agreements, Statutes, Orders, Etc.........................................37
4.9. Consents, Etc...............................................................................37
4.10. Outstanding Indebtedness; Investments.......................................................37
4.11. Assets and Properties.......................................................................38
4.12. Taxes.......................................................................................38
4.13. Disclosure..................................................................................39
4.14. Offering of Securities......................................................................39
4.15. Broker's or Finder's Commissions............................................................39
4.16. Labor Matters...............................................................................39
</TABLE>
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<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
4.17. Environmental Matters.......................................................................40
4.18. Margin Regulations..........................................................................41
4.19. Compliance with ERISA.......................................................................41
4.20. Material Contracts..........................................................................44
4.21. Insurance...................................................................................44
4.22. Possession of Franchises, Licenses, Etc.....................................................45
4.23. Use of Proceeds.............................................................................45
4.24. Intellectual Property.......................................................................45
4.25. Depositary Accounts.........................................................................47
4.26. Suppliers; Distributors; Printers...........................................................48
4.27. Status under Certain Laws...................................................................48
4.28. Foreign Assets Control Regulations..........................................................48
4.29. Certain Transactions........................................................................48
4.30. Places of Business..........................................................................49
4.31. Other Names.................................................................................49
4.32. Reorganization Documents; Transaction Documents.............................................49
4.33. Solvency....................................................................................50
4.34. Ranking of Notes and other Obligations......................................................50
4.35. Business of Parent..........................................................................50
4.36. Licensing Interests; Easyriders Cafe........................................................50
4.37. Circulation.................................................................................50
4.38. Relationships with Franchisees..............................................................51
4.39. Customer, Advertiser, Subscriber and Mailing Lists..........................................52
4.40. Advertising.................................................................................52
4.41. Model Releases..............................................................................52
4A. Representations of the Purchaser.....................................................................53
5. Closing Conditions...................................................................................53
5.1. Proceedings Satisfactory....................................................................53
5.2. Opinion of Purchaser's Special Counsel......................................................53
5.3. Opinions of Counsel to the Credit Parties; Tax Opinion; Reliance Letters....................54
5.4. Representations and Warranties True, Etc.; Certificates.....................................54
5.5. Absence of Material Adverse Effect, Etc.....................................................55
5.6. Consents and Approvals......................................................................55
5.7. Absence of Litigation, Orders, Etc..........................................................55
5.8. Guarantee...................................................................................55
5.9. Security Documents..........................................................................55
5.10. Employee Stock Options......................................................................58
5.11. Assignment of Representations, Warranties, Covenants and Indemnities........................58
5.12. Initial Revolving Note Purchase Request.....................................................58
5.13. Reorganization Transactions.................................................................58
5.14. Subordinated Seller Notes; Intercreditor Agreement..........................................59
5.15. Discharge of Non-Continuing Indebtedness....................................................59
</TABLE>
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<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
5.16. Fees........................................................................................59
5.17. Wire Instructions...........................................................................60
5.18. Shareholder Approval........................................................................60
5.19. Merger......................................................................................60
5.20. Transaction Costs; Payables.................................................................60
5.21. Solvency Opinion............................................................................60
5.22. Insurance...................................................................................61
5.23. Certificate As to Use of Proceeds...........................................................61
5.24. Due Diligence Reports.......................................................................61
5.25. Registration Rights Agreement...............................................................61
5.26. Employment Agreements; Shareholders' Agreements; Leases.....................................61
5.27. Registration Statement......................................................................61
6. Additional Conditions to Obligations to Purchase Revolving Notes.....................................61
6.1. Note Purchase Request.......................................................................62
6.2. Representations and Warranties True.........................................................62
6.3. No Default or Event of Default..............................................................62
6.4. Credit Limit Not Exceeded...................................................................62
6.5. Legal Prohibitions..........................................................................62
6.6. Other Requirements..........................................................................62
7. Financial Statements and Information.................................................................62
8. Inspection of Properties and Books...................................................................67
9. Affirmative Covenants................................................................................68
9.1. Payment of Principal and Interest...........................................................68
9.2. Payment of Taxes and Claims.................................................................68
9.3. Maintenance of Properties, Records and Corporate Existence..................................69
9.4. Insurance...................................................................................70
9.5. After Acquired Real Property................................................................72
9.6. Future Guarantors and Securing Subsidiaries.................................................73
9.7. New Depositary Accounts.....................................................................73
9.8. ERISA Covenants.............................................................................74
9.9. Further Assurances..........................................................................74
9.10. Year 2000...................................................................................74
9.11. Early Refinancing...........................................................................74
9.12. Consummation of Paisano Merger..............................................................75
9.13. Environmental Reports.......................................................................75
10. Negative and Maintenance Covenants..................................................................75
10.1. Restrictions on Indebtedness................................................................75
10.2. Restrictions on Liens.......................................................................76
10.3. Limitation on Sale and Leasebacks...........................................................77
10.4. Consolidation, Merger or Disposition of Assets; Acquisitions................................77
10.5. Sale or Discount of Receivables.............................................................78
10.6. Conduct of Business.........................................................................78
</TABLE>
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<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
10.7. Restricted Payments and Restricted Investments.............................................78
10.8. Issuance of Capital Stock..................................................................78
10.9. Transactions with Affiliates...............................................................79
10.10. Capital Expenditures.......................................................................79
10.11. Operating Leases...........................................................................80
10.12. Certain Contracts..........................................................................80
10.13. Limitation on Dividend Restrictions Affecting Subsidiaries.................................81
10.14. No Amendment of Charter, ByLaws............................................................81
10.15. Acquisition of Margin Securities...........................................................81
10.16. Collateral Locations; Other Names..........................................................81
10.17. Amendments to Certain Documents............................................................82
10.18. Financial Covenants........................................................................82
10.19. Board Observer Rights......................................................................84
11. Events of Default...................................................................................84
11.1. Events of Default; Remedies................................................................84
11.2. Suits for Enforcement; Remedies Against Collateral.........................................87
11.3. Remedies Cumulative........................................................................87
11.4. Remedies Not Waived........................................................................87
12. Registration; Exchange; and Transfer of Notes.......................................................88
13. Lost, Stolen, Damaged and Destroyed Notes...........................................................88
14. Miscellaneous.......................................................................................89
14.1. Amendment and Waiver.......................................................................89
14.2. Expenses...................................................................................89
14.3. Survival of Representations and Warranties.................................................90
14.4. Successors and Assigns.....................................................................90
14.5. Notices....................................................................................91
14.6. Indemnification............................................................................92
14.7. Public Announcements.......................................................................93
14.8. No Fiduciary Relationship..................................................................93
14.9. Integration and Severability...............................................................93
14.10. Counterparts...............................................................................93
14.11. Governing Law..............................................................................93
14.12. Submission to Jurisdiction: Waiver of Service and Venue....................................93
14.13. Waiver of Right to Trial by Jury...........................................................94
14.14. Dating.....................................................................................95
</TABLE>
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EXHIBIT 10.5.2
EXHIBIT C TO THE NOTE AND WARRANT PURCHASE AGREEMENT
(Form of Guarantee)
GUARANTEE
THIS GUARANTEE, dated as of September 23, 1998 (as from time to
time amended, modified or supplemented in accordance with the terms hereof, this
"Guarantee"), is made and entered by EACH SIGNATORY HERETO (each individually,
together with its successors and assigns, a "Guarantor", and collectively, the
Guarantors"), in favor of NOMURA HOLDING AMERICA INC. (together with its
successors, assigns and transferees, the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to and subject to the terms and conditions of
that certain Note and Warrant Purchase Agreement dated as of September 23,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Note Purchase Agreement"), by and among Easyriders, Inc., a Delaware
corporation (the "Parent"), Easyriders Sub II, Inc. (to be merged with and into
Paisano Publications, Inc.), a California corporation (the "Company"), and the
Purchaser, the Company issued and the Purchaser purchased the Notes (as defined
in the Note Purchase Agreement; capitalized terms used herein but not otherwise
defined in this Guarantee shall have the respective meanings given to such terms
in the Note Purchase Agreement);
WHEREAS, the Company is a member of an affiliated group of
companies that include each Guarantor;
WHEREAS, proceeds of the Notes shall confer, directly or
indirectly, an economic benefit on the Guarantors; and
WHEREAS, pursuant to the terms of the Note Purchase Agreement, each
Guarantor is required to enter into this Guarantee in favor of the Purchaser;
NOW, THEREFORE, in consideration of the premises, the Guarantors
hereby agree with the Purchaser as follows:
SECTION 1. THE GUARANTEE. The guarantee of each Guarantor hereunder
is as follows:
SECTION 1.1 Guarantee of Obligations. Each Guarantor hereby,
jointly and severally, unconditionally and irrevocably guarantees to the
Purchaser and its successors, endorsees, transferees and assigns, the prompt and
complete payment when
<PAGE> 2
due (whether at stated maturity, by acceleration or otherwise) and performance
of all of the Company's Obligations under, and as defined in, the Note Purchase
Agreement (the "Company Obligations"). Each Guarantor agrees that this Guarantee
is a guarantee of payment and performance and not of collection, and that its
obligations under this Guarantee shall be joint and several with any other
Persons which may at any time or from time to time be or become directly or
indirectly financially responsible to the Purchaser with respect to the Company
Obligations and shall be under all circumstances primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guarantee, the Note Purchase Agreement,
any other Note Document or other agreement, document or instrument to which any
Credit Party or any Guarantor is or may become a party;
(b) the absence of any action to enforce this Guarantee, the Note
Purchase Agreement, any other Note Document or the waiver or consent by the
Purchaser with respect to any of the provisions hereof or thereof;
(c) the existence, value or condition of, or failure of the
Purchaser to perfect its Lien against, any security, if any, for the Company
Obligations or any action, or the absence of any action, by the Purchaser in
respect thereof (including, without limitation, the release of any such
security);
(d) any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, liquidation or the like of any Credit Party or any
Guarantor, including, but not limited to, (i) the Purchaser's election, in any
proceeding instituted under Title 11 of the United States Code (11 U.S.C. 101 et
seq.), as amended, or any replacement or supplemental federal statutes dealing
with the bankruptcy of debtors (the "Bankruptcy Code"), of the application of
Section 1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or grant of a
security interest by any Credit Party or any Guarantor as debtor-in-possession,
under Section 364 of the Bankruptcy Code, or (iii) the disallowance of all or
any portion of the claim(s) of the Purchaser for repayment of the Company
Obligations under Section 502 of the Bankruptcy Code;
(e) any merger or consolidation of any Credit Party or any
Guarantor into or with any other Person, or any sale, lease or transfer of any
or all of the assets of any Credit Party or any Guarantor to any other Person;
(f) any circumstance which might constitute a defense available to,
or a discharge of, any Credit Party or any Guarantor;
(g) absence of any notice to, or knowledge by, any Guarantor of the
existence or occurrence of any of the matters or events set forth in the
foregoing subdivisions (a) through (f);
(h) any sale, transfer or other disposition by any stockholder of
(or holder of an ownership interest in) any Guarantor of any stock of (or
ownership interest in) any Guarantor; or
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(i) any other fact or circumstance;
it being agreed by each Guarantor that its obligations under this Guarantee
shall not be discharged until the Company Obligations, including without
limitation, each class of Notes, have been indefeasibly paid in full and the
Purchaser has no obligation to purchase Notes under the Note Purchase Agreement
(the "Termination Date") or release in writing of such Guarantor by the
Purchaser of the Guarantor's obligations hereunder, whichever shall occur first.
Each Guarantor shall be regarded, and shall be in the same position, as
principal debtor with respect to the Company Obligations and specifically agrees
that, notwithstanding any discharge of any Credit Party or any other Person or
the operation of any other provision of the Bankruptcy Code with respect to the
Company Obligations or any such Persons, each Guarantor shall be fully
responsible for paying all interest and costs of enforcement which may at any
time accrue with respect to the Company Obligations or which would accrue but
for the operation of any provision of or doctrine with respect to the Bankruptcy
Code. Each Guarantor expressly waives all rights it may have now or in the
future under any Statute, Order, or at common law, or at law or in equity, or
otherwise, to compel the Purchaser to proceed in respect of the Company
Obligations against any Credit Party or any other Person or against any security
for the payment and performance of the Company Obligations before proceeding
against, or as a condition to proceeding against, such Guarantor. The Guarantors
agree that any notice or directive given at any time to the Purchaser which is
inconsistent with the waiver in the immediately preceding sentence shall be null
and void and may be ignored thereby, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guarantee for the
reason that such pleading or introduction would be at variance with the written
terms of this Guarantee unless the Purchaser has specifically agreed otherwise
in writing. It is agreed between the Guarantors and the Purchaser that the
foregoing waivers are of the essence of the transaction contemplated by the Note
Purchase Agreement and the other Note Documents and that, but for this Guarantee
and such waivers, the Purchaser would not extend or continue to extend credit
under the Note Purchase Agreement or the Notes.
SECTION 1.2 Maximum Guaranteed Amount. Notwithstanding any other
provision of this Guarantee to the contrary, the obligations of each Guarantor
other than the Parent (each a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors") under this Guarantor shall be limited to an amount not
to exceed as of any date of determination the greater of:
(a) the net amount of all proceeds of any Notes and other
extensions of credit under the Note Purchase Agreement and directly or
indirectly re-loaned or otherwise transferred to, or incurred for the benefit
of, such Subsidiary Guarantor, plus interest thereon at the applicable rate
specified in the Note Purchase Agreement;
(b) the amount of which could be claimed by the Purchaser from such
Subsidiary Guarantor under this Guarantee without rendering such claim voidable
or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such
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Subsidiary Guarantor's right of contribution and indemnification from each other
Subsidiary Guarantor under Section 1.3 hereof.
SECTION 1.3 Contribution Rights.
(a) To the extent that any payment is made under this Guarantee (a
"Guarantor Payment"), by a Subsidiary Guarantor, which Guarantor Payment, taking
into account all other Guarantor Payments then previously or concurrently made
by all other Subsidiary Guarantors, exceeds the amount which such Subsidiary
Guarantor would otherwise have paid if each Subsidiary Guarantor had paid the
aggregate Company Obligations satisfied by such Guarantor Payment in the same
proportion that such Subsidiary Guarantor's Allocable Amount (as defined below)
(in effect immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of all of the Subsidiary Guarantors in effect immediately
prior to the making of such Guarantor Payment, then, following the Termination
Date, such Subsidiary Guarantor shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each of the other
Subsidiary Guarantors for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately prior to such Guarantor
Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Subsidiary Guarantor shall be equal to the maximum amount of the claim which
could then be recovered from such Subsidiary Guarantor under this Guarantee
without rendering such claim voidable or avoidable under Section 548 of Chapter
11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent
Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common
law.
(c) This Section 1.3 is intended only to define the relative rights
of the Subsidiary Guarantors and nothing set forth in this Section 1.3 is
intended to or shall impair the obligations of the Subsidiary Guarantors,
jointly and severally, to pay any amounts as and when the same shall become due
and payable in accordance with the terms of this Guarantee.
(d) The rights of the parties under this Section 1.3 shall be
exercisable upon the Termination Date.
(e) The parties hereto acknowledge that the right of contribution
and indemnification hereunder shall constitute assets of any Subsidiary
Guarantor to which such contribution and indemnification is owing.
SECTION 1.4 Demand by the Purchaser. In addition to the terms of
this Guarantee set forth in Section 1.1 hereof, it is expressly understood and
agreed that, if the then outstanding principal amount of the Company Obligations
(together with all accrued interest thereon) becomes due and payable, then the
Guarantors shall, upon demand in writing therefor by the Purchaser to the
Guarantors, pay to the Purchaser the outstanding Company Obligations due and
owing thereto. Payment by the Guarantors shall be made to the Purchaser, to be
credited and applied against the Company Obligations, in Dollars by wire
transfer or other immediately available funds to an account designated thereby
or
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<PAGE> 5
at the Principal Office or at any other address that may be specified in writing
from time to time by the Purchaser.
SECTION 1.5 Enforcement of Guarantee. In no event shall the
Purchaser have any obligation (although it is entitled, at the option of the
Purchaser) to proceed against the Company or any other Person or any real or
personal property, if any, pledged to secure the Company Obligations before
seeking satisfaction from the Guarantors, and the Purchaser may proceed, prior
or subsequent to, or simultaneously with, the enforcement of any rights
hereunder of the Purchaser, to exercise any right or remedy which they or any of
them may have against any property, real or personal, as a result of any Lien
the Purchaser may have as security for all or any portion of the Company
Obligations.
SECTION 1.6 Waiver. In addition to the waivers contained in Section
1.1 hereof, the Guarantors waive, and agree that they shall not at any time
insist upon, plead or in any manner whatsoever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Guarantors
of their obligations under, or the enforcement by the Purchaser of, this
Guarantee. The Guarantors hereby waive diligence, presentment and demand
(whether for nonpayment or protest or of acceptance, maturity, extension of
time, change in nature or form of the Company Obligations, acceptance of further
security, release of further security, composition or agreement arrived at as to
the amount of, or the terms of, the Company Obligations, notice of adverse
change in the Company's financial condition or any other fact which might
materially increase the risk to the Guarantors) with respect to any of the
Company Obligations or all other demands whatsoever and waive the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guarantee. The Guarantors hereby waive any requirement on the part of the
Purchaser to mitigate the damages resulting from any default with respect to
such Company Obligations. The Guarantors, jointly and severally, represent,
warrant and agree that, as of the date of this Guarantee, their obligations
under this Guarantee are not subject to any offsets or defenses of any kind
against the Purchaser, the Company or any other Person that executes a Note
Document. The Guarantors further jointly and severally agree that their
obligations under this Guarantee shall not be subject to any counterclaims,
offsets or defenses of any kind which may arise in the future against the
Purchaser, the Company or any other Person that executes a Note Document.
SECTION 1.7 Benefit of Guarantee. The provisions of this Guarantee
are for the benefit of the Purchaser and its successors, transferees, endorsees
and assigns. In the event all or any part of the Company Obligations are
transferred, endorsed or assigned by the Purchaser, as the case may be, to any
Person or Persons in accordance with the terms of the Note Purchase Agreement,
any reference to the "Purchaser" herein, as the case may be, shall be deemed to
refer equally to such Person or Persons.
SECTION 1.8 Modification of Company Obligations. If the Purchaser
shall at any time or from time to time, with or without the consent of, or
notice to, the Guarantors:
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<PAGE> 6
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Company Obligations;
(b) take any action under or in respect of the Note Purchase
Agreement or any other Note Document in the exercise of any remedy, power or
privilege contained therein or available to it at law, equity or otherwise, or
waive or refrain from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Note Purchase
Agreement or any other Note Document;
(d) extend or waive the time for and of any Guarantor's or any
other Person's performance of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under the Note Purchase
Agreement or any other Note Document, or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment of the
Company Obligations, or sell, exchange, release, dispose of, or otherwise deal
with, any property pledged, mortgaged or conveyed, or in which the Purchaser has
been granted a Lien, to secure any indebtedness of any Guarantor or any Credit
Party to the Purchaser;
(f) release or limit the liability of any Person who may be liable
in any manner for the payment of any amounts owed by any Guarantor or any Credit
Party to the Purchaser;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors against any
Guarantor or any Credit Party are subordinated to the claims of the Purchaser;
and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by any Guarantor or any Credit Party to the Purchaser in such
manner as the Purchaser shall determine in its discretion;
then the Purchaser shall not incur any liability to the Guarantors pursuant
hereto as a result thereof and no such action shall impair or otherwise affect
or release the obligations of the Guarantors or any of them under this
Guarantee.
SECTION 1.9 Reinstatement. This Guarantee shall remain in full
force and effect and continue to be effective in the event any petition is filed
by or against the Company, any Guarantor or any of the Company's other
Affiliates for liquidation or reorganization, in the event that any of them
becomes insolvent or makes an assignment for the benefit of creditors or in the
event a receiver or trustee is appointed for all or any significant part of any
of their assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Company Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by the Purchaser, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had
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<PAGE> 7
not been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Company Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
SECTION 1.10 No Subrogation Prior to Termination Date.
Notwithstanding any payment or payments made by any Guarantor hereunder, or any
set-off or application of funds of any Guarantor by the Purchaser, the
Guarantors shall not be entitled to be subrogated to any of the rights of the
Purchaser against the Company or against any collateral security or guaranty or
right of offset held by the Purchaser for the payment of the Company
Obligations, nor shall any Guarantor seek any reimbursement from the Company in
respect of payments made by such Guarantor hereunder, until the Termination
Date. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time prior to the Termination Date, such amount shall
be held by such Guarantor in trust for the Purchaser, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Purchaser in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Purchaser or as otherwise directed thereby, if
required), to be applied against the Company Obligations, whether matured or
unmatured, in the manner provided in the Note Purchase Agreement.
SECTION 1.11 Continuing Guarantee. This Guarantee is a continuing
guaranty and shall (i) remain in full force and effect until the Termination
Date, (ii) be binding upon the Guarantors and their successors and permitted
assigns, and (iii) inure, together with the rights and remedies of the Purchaser
hereunder, to the benefit thereof and their successors, transferees and assigns.
SECTION 2. DELIVERIES. In a form satisfactory to the Purchaser,
each Guarantor shall deliver to the Purchaser, concurrently with the execution
of this Guarantee, such Note Documents, if any, and other instruments,
certificates and documents as are required to be delivered by the Guarantors to
the Purchaser under the Note Purchase Agreement and the other Note Documents.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) Each
Guarantor, jointly and severally, hereby makes all representations and
warranties, and agrees to comply with all of the obligations, requirements and
restrictions in the representations, warranties and covenants contained in the
Note Purchase Agreement and the other Note Documents, to the extent such
obligations, requirements and restrictions are applicable to such Guarantor.
(b) Each Guarantor, jointly and severally, further represents and
warrants to the Purchaser that: (i) such Guarantor is a corporation, partnership
and/or limited liability company duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; (ii) the execution,
delivery and performance by such Guarantor of this Guarantee are within such
Guarantor's organizational powers, have been duly authorized by all necessary
organizational action, require no action by or in respect of, or filing with,
any Governmental Body, do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the organization or internal
governance documents of such Guarantor or of any agreement, judgment,
injunction,
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<PAGE> 8
order, decree or other instrument binding upon the Guarantor and will not result
in the creation or imposition of any Lien on any asset of such Guarantor; and
(iii) this Guarantee has been duly authorized, executed and delivered by such
Guarantor and constitutes a legal, valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms,
except as such enforceability may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general principles of equity.
SECTION 4. FURTHER ASSURANCES; ADDITIONAL GUARANTORS. (a) Each
Guarantor agrees, upon the request of the Purchaser, and at the Guarantor's
expense, to execute and deliver to the Purchaser, from time to time, any
additional instruments or documents considered necessary by the Purchaser to
cause this Guarantee to be, become or remain valid and effective in accordance
with its terms.
(b) The initial Guarantors hereunder shall be the Parent and those
Subsidiaries of the Parent (other than the Company) as are signatories hereto on
the date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of the Parent may become parties hereto, as additional Guarantors
(each, an "Additional Guarantor"), by executing a counterpart of this Agreement
substantially in the form of Appendix I attached hereto. Upon delivery of any
such counterpart to the Purchaser, notice of which is hereby waived by the
Guarantors, each Additional Guarantor shall be a Guarantor and shall be as fully
a party hereto as if such Additional Guarantor were an original signatory
hereto. Each Guarantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Guarantor hereunder nor by any election of the Purchaser not to cause any
Subsidiary of the Parent to become an Additional Guarantor hereunder. This
Agreement shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Guarantor hereunder.
SECTION 5. PAYMENTS FREE AND CLEAR OF TAXES. Any and all payments
by the Guarantors to or for the benefit of the Purchaser shall be made free and
clear of and without deduction or withholding for or on account of any present
or future Taxes to the same extent as provided for payments under the Note
Purchase Agreement or the Notes pursuant to Section 3.6 of the Note Purchase
Agreement.
SECTION 6. MISCELLANEOUS PROVISIONS.
SECTION 6.1 Amendments. Any amendment or waiver of any provision of
this Guarantee and any consent to any departure by any Guarantor from any
provision of this Guarantee, shall be effective only if made pursuant to a
written instrument executed by each Guarantor and the Purchaser (or, if a waiver
or a consent, a written letter or agreement executed thereby).
SECTION 6.2 Headings. The headings in this Guarantee are for
purposes of reference only and shall not otherwise affect the meaning or
construction or any provision of this Guarantee.
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<PAGE> 9
SECTION 6.3 Severability. The provisions of this Guarantee are
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Guarantee in any jurisdiction.
SECTION 6.4 Notices. All notices hereunder shall be in writing and
shall be conclusively deemed to have been received and shall be effective (a) on
the day on which delivered if delivered personally or transmitted by telecopier,
(b) one Business Day after the date on which the same is delivered to a
nationally recognized overnight courier service, or (c) three Business Days
after being sent by registered or certified United States mail, return receipt
requested, and shall be addressed, in the case of the Guarantors, to c/o Paisano
Publications, Inc., 28210 Dorothy Drive, Agoura Hills, California 91301,
attention: President, telecopier no.: (818) 889-4726 or, in the case of the
Purchaser, to its address set forth in Section 14.5 of the Note Purchase
Agreement or as otherwise indicated in writing by the Purchaser.
SECTION 6.5 Remedies Cumulative. Each right, power and remedy of
the Purchaser provided in this Guarantee or now or hereafter existing at law or
in equity or by Statute, Order or otherwise shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Guarantee or now or hereafter existing at law or in equity or by Statute,
Order or otherwise. The exercise or partial exercise by the Purchaser of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise thereby of all such other rights, powers or remedies, and no
failure or delay on the part of the Purchaser to exercise any such right, power
or remedy shall operate as a waiver thereof.
SECTION 6.6 Statute of Limitations. To the full extent permitted by
applicable law, each Guarantor hereby waives the right to plead any statute of
limitations as a defense to performance of its obligations under, or enforcement
of, this Guarantee.
SECTION 6.7 Final Expression. This Guarantee, together with any
other agreement executed in connection herewith, is intended by the parties as a
final expression of this Guarantee and is intended as a complete and exclusive
statement of the terms and conditions hereof. Acceptance of or acquiescence in a
course of performance rendered under this Guarantee shall not be relevant to
determine the meaning of this Guarantee even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
SECTION 6.8 Financial Status. Each Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Company and any and all endorsers and/or other Guarantors of any instrument or
document evidencing all or any part of the Company Obligations and of all other
circumstances bearing upon the risk of nonpayment or nonperformance of the
Company Obligations or any part thereof that diligent inquiry would reveal, and
each Guarantor, jointly and severally, hereby agrees that the Purchaser shall
not have any duty to advise the Guarantors of information known thereto
regarding such condition or any such circumstances. In the
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event the Purchaser, in its sole discretion, undertakes at any time or from time
to time to provide any such information to the undersigned, it shall be under no
obligation to (i) undertake any investigation not a part of its regular business
routine, (ii) disclose any information which, pursuant to accepted or reasonable
commercial lending practices, the Purchaser wishes to maintain confidential, or
(iii) make any other or future disclosures of such information or any other
information to the Guarantors.
SECTION 6.9 Assignability. This Guarantee shall be binding on each
Guarantor and its successors and permitted assigns and shall inure to the
benefit of the successors, transferees and assigns of the Purchaser. No
Guarantor may assign this Guarantee without the prior written consent of the
Purchaser.
SECTION 6.10 Non-Waiver. The failure of the Purchaser to enforce
any right or remedy hereunder, or promptly to enforce any such right or remedy,
shall not constitute a waiver thereof, nor give rise to any estoppel against the
Purchaser, nor excuse any Guarantor from its obligations hereunder.
SECTION 6.11 GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.12 SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE. (a) EACH GUARANTOR CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, WAIVES
ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN, AND AGREES THAT, EXCEPT UPON THE WRITTEN CONSENT OF THE
PURCHASER, ANY DISPUTE CONCERNING THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE
ONE HAND, AND ANY GUARANTOR, ON THE OTHER HAND, OR THE CONDUCT OF ANY PARTY IN
CONNECTION WITH THIS GUARANTEE, ANY OTHER NOTE DOCUMENT OR OTHERWISE, SHALL BE
HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
(b) EACH GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
HAND DELIVERY TO THE GUARANTOR AT THE ADDRESS SET FORTH ABOVE, OR, AT THE OPTION
OF THE PURCHASER, BY SERVICE UPON CT CORPORATION, WHICH EACH GUARANTOR
IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS WITHIN THE STATE OF NEW YORK. IN ADDITION, THE PURCHASER, BY ITS
ACCEPTANCE OF THIS GUARANTEE, AGREES THAT IT SHALL PROMPTLY FORWARD BY
REGISTERED MAIL ANY PROCESS SO SERVED UPON SAID AGENT TO THE GUARANTOR AT THE
ADDRESS SET FORTH ABOVE. EACH GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.
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(c) NOTHING IN THIS SECTION 6.12 SHALL AFFECT THE RIGHT OF THE
PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY
GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 6.13 WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE
GUARANTORS AND THE PURCHASER BY ITS ACCEPTANCE OF THIS GUARANTEE HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS GUARANTEE, ANY NOTE, ANY OTHER NOTE DOCUMENT, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS GUARANTEE, ANY
NOTE, ANY OTHER NOTE DOCUMENT, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE GUARANTORS AND THE
PURCHASER BY ACCEPTANCE OF THIS GUARANTEE HEREBY AGREE AND CONSENT THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
GUARANTEE WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.
SECTION 6.14 ACKNOWLEDGMENTS. EACH GUARANTOR HEREBY ACKNOWLEDGES
THAT:
(a) IT HAS BEEN ADVISED BY COUNSEL IN THE NEGOTIATION, EXECUTION
AND DELIVERY OF THIS GUARANTEE;
(b) THE PURCHASER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP TO THE
GUARANTORS, AND THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE ONE HAND, AND THE
GUARANTORS, ON THE OTHER HAND, IS SOLELY THAT OF CREDITOR AND DEBTOR,
RESPECTIVELY; AND
(c) NO JOINT VENTURE EXISTS AMONG THE GUARANTORS AND THE PURCHASER.
SECTION 6.15 DATING. Although this Guarantee is dated as of the
date first written above for convenience this Agreement shall be effective on
September 23, 1998.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 13
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be
duly executed and delivered by its authorized officer as of the date first above
written.
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
<PAGE> 14
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS SUB II, INC.
By: /s/ William R. Nordstrom
---------------------------------
Name: William R. Nordstrom
Title: Secretary
<PAGE> 15
APPENDIX I
TO
GUARANTEE
COUNTERPART TO GUARANTEE
This counterpart, dated September 23, 1998, is delivered pursuant
to Section 4(b) of that certain Guarantee dated as of September 23, 1998 (as
from time to time amended, modified or supplemented, the "Guarantee"; the terms
defined therein and not otherwise defined herein being used as therein defined),
made by Easyriders, Inc. and certain of its Subsidiaries party thereto in favor
of Nomura Holding America Inc. The undersigned hereby agrees (i) that this
counterpart may be attached to the Guarantee, and (ii) that the undersigned
shall be a Guarantor under the Guarantee and shall fully comply with all the
terms and conditions of the Guarantee as if it were an original signatory
thereto.
[NAME OF ADDITIONAL GUARANTOR]
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.5.3.
EXHIBIT D TO NOTE AND WARRANT PURCHASE AGREEMENT
(Form of Security Agreement)
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of September
23, 1998 (as from time to time amended, modified or supplemented in accordance
with the terms hereof, this "Agreement"), is made and entered into by and among
EACH SIGNATORY HERETO (together with their successors and assigns, collectively,
the "Grantors" and individually, a "Grantor"), as debtors, and NOMURA HOLDING
AMERICA INC. (together with its successors, assigns and transferees, the
"Purchaser"), as secured party.
W I T N E S S E T H
WHEREAS, pursuant to the Note and Warrant Purchase Agreement
dated as of the date hereof (as from time to time amended, modified or
supplemented in accordance with the terms thereof, the "Note Purchase
Agreement"), by and among Easyriders, Inc., a Delaware corporation (the
"Parent"), Easyriders Sub II, Inc. (to be merged with and into Paisano
Publications, Inc.), a California corporation (the "Company"), and the
Purchaser, the Purchaser has agreed to purchase the Notes of the Company
referred to in the Note Purchase Agreement upon the terms and subject to the
conditions set forth therein;
WHEREAS, the Grantors (other than the Company) have executed
and delivered to the Purchaser a Guarantee dated as of the date hereof (as from
time to time amended, modified or supplemented in accordance with the terms
thereof, the "Guarantee"), pursuant to which such Grantors have guaranteed the
Obligations of the Company under, and as defined in, the Note Purchase
Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Purchaser to purchase, and to continue to purchase, the Notes and to extend
credit under the Note Purchase Agreement that the Grantors shall have executed
and delivered this Agreement to pledge and grant to the Purchaser a security
interest in all of the Grantors' personal property (other than the Grantors'
intellectual property) as collateral security for the Secured Obligations (as
defined below);
NOW, THEREFORE, in consideration of the premises set forth
above and to induce the Purchaser to purchase, and to continue to purchase, the
Notes and to extend credit thereunder and under the Note Purchase Agreement, the
Grantors hereby agree with the Purchaser as follows:
<PAGE> 2
Section 1. Defined Terms.
1.1 Note Purchase Agreement Definitions. Unless otherwise
defined herein, terms defined (or defined by reference) in the Note Purchase
Agreement, as applicable, and used herein shall have the meanings given to them
in such other agreement, including, without limitation, the terms "Accounts,"
"Inventory", "Obligations" and "Permitted Liens".
1.2 UCC Definitions. The following terms which are defined in
the Uniform Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: "Chattel Paper", "Documents", "Equipment",
"Farm Products", "General Intangibles" and "Instruments".
1.3 Other Definitions. The following terms shall have the
following meanings:
"Agreement" has the meaning specified in the Preamble.
"Code" means the Uniform Commercial Code as from time to time
in effect in the State of New York.
"Collateral" has the meaning specified in Section 2 of this
Agreement.
"Collateral Account" has the meaning specified in Section
5.3(a) of this Agreement.
"Contracts" means all the contracts (including without
limitation the Material Contracts), undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Grantor may now or hereafter have any right, title or interest, including
without limitation, (a) all rights of the Grantors to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights of the
Grantors to damages arising out of or for breach or default in respect thereof
and (c) all rights of the Grantors to exercise all remedies thereunder.
"Grantor" and "Grantors" have the meanings specified in the
Preamble.
"Indebtedness Collateral" means:
(a) the Pledged Indebtedness and all Proceeds thereof; and
(b) whether or not otherwise constituting Proceeds, all rights
and privileges of the Grantors with respect to the Pledged Indebtedness, all
securities, moneys or property representing a payment or distribution upon or in
respect of the Pledged Indebtedness, or received in exchange therefor.
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<PAGE> 3
"Investment Property" has the meaning ascribed thereto in
Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Grantor, including
the rights of any Grantor to any securities account and the financial assets
held by a securities intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with respect to that
account; (iii) all securities accounts held by any Grantor; (iv) all commodity
contracts held by any Grantor; and (v) all commodity accounts held by any
Grantor.
"Issuers" means the issuers of the Pledged Stock or Pledged
Indebtedness.
"Material Contract" means the contracts and agreements listed
in Annex A attached hereto, as the same may be amended, modified or otherwise
supplemented from time to time.
"Pledged Indebtedness" means the Indebtedness evidenced by
promissory notes and Instruments in which any Grantor holds an interest from
time to time, as listed in Annex B hereto (as the same may be amended, modified
or supplemented in accordance with Section 7.2(c) of this Agreement).
"Pledged Stock" means the shares of, or interests,
participations or other equivalents of or interests in, Capital Stock in which
any Grantor holds an interest from time to time, as listed in Annex B hereto (as
the same may be amended, modified or supplemented in accordance with Section
7.2(c) of this Agreement).
"Proceeds" means all "proceeds" and "products" as defined in
the Code and includes, without limitation and whether or not the following
constitute proceeds under the Code, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Grantor from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to any Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Body (or any
Person acting under color of Governmental Body), (iii) all dividends and
distributions from the Pledged Stock and all principal, interest and other
income from any Instruments pledged hereunder, and (iv) any and all other
amounts from time to time paid or payable to any Grantor upon the sale,
exchange, collection or other disposition of, or under or in connection with,
any part of the Collateral.
"Secured Obligations" means, collectively, (i) in the case of
the Company, all of its Obligations under the Note Purchase Agreement and (ii)
in the case of the other Grantors, all of their obligations under the Guarantee.
"Stock Collateral" means:
(a) the Pledged Stock and all Proceeds thereof;
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<PAGE> 4
(b) whether or not otherwise constituting Proceeds, all rights
and privileges of the Grantors with respect to the Pledged Stock, all shares,
securities, moneys or property representing a distribution or return of capital
upon or in respect of the Pledged Stock, or resulting from a split-up, revision,
reclassification or other like change of the Pledged Stock or otherwise received
in exchange therefor, and any subscription warrants, rights or options issued to
the holders of, or otherwise in respect of, the Pledged Stock; and
(c) without affecting the obligations of the Grantors under
any provision prohibiting such action hereunder or in any other documents, in
the event of any consolidation or merger of an Issuer in which such Issuer is
not the surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such consolidation or
merger.
1.4 Miscellaneous Definitional Provisions. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and section and paragraph references are to this Agreement
unless otherwise specified.
1.5 Singular and Plural Form. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.
1.6 Annexes. All references to Annexes to this Agreement
include such Annexes as amended, modified or supplemented pursuant to the terms
of this Agreement.
Section 2. Grant of Security Interest.
2.1 Collateral. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, the Grantors hereby
jointly and severally pledge and grant to the Purchaser a security interest in
all of the following property now owned or at any time hereafter acquired or
created by any Grantor or in which any Grantor now has or at any time in the
future may acquire or create any right, title or interest (collectively, the
"Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
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<PAGE> 5
(g) all Instruments;
(h) all Inventory;
(i) all Investment Property and other Stock Collateral;
(j) all Pledged Indebtedness and other Indebtedness
Collateral;
(k) all bank accounts (and all checks, drafts and other orders
of payments and all funds on deposit therein) and all investment accounts (and
all shares, participations, interests, obligations or other securities, whether
certificated or uncertificated, and all other investments maintained therein);
(l) cash, other moneys, and all other tangible and intangible
Property of the Grantors;
(m) all books and records pertaining to the foregoing,
including, without limitation, all diskettes and other magnetic media,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of any Grantor or any computer
bureau or service company from time to time acting for any Grantor; and
(n) to the extent not otherwise included, all Proceeds of any
and all of the foregoing.
Notwithstanding anything to the contrary set forth above, the types or items of
Collateral described above shall not include any rights or interests in any
Contract, if under the terms of such Contract, the valid grant of a security
interest or Lien therein to the Purchaser is prohibited and such prohibition has
not been or is not waived or the consent of the other party to such Contract has
not been or is not otherwise obtained; provided that (i) the foregoing exclusion
shall in no way be construed so as to limit, impair or otherwise affect the
Purchaser's unconditional continuing security interests in and Liens upon any
rights or interests of any Grantor in or to moneys due or to become due under
any such Contract, (ii) the foregoing exclusion shall not apply with respect to
any such Contract once any such applicable prohibition is no longer in effect
and (iii) no Grantor shall on or after the Closing Date enter into any Contract
containing any such prohibition, which are, either individually or in the
aggregate, material to the operation of such Grantor's business.
Section 3. Representations and Warranties. Each Grantor,
jointly and severally, hereby represents and warrants that:
3.1 Title; No Other Liens. Except for the security interest
granted to the Purchaser pursuant to this Agreement and the other Liens
permitted to exist on the Collateral pursuant to the Note Purchase Agreement,
each Grantor owns each item of the Collateral upon which it purports to grant a
Lien hereunder, free and clear of any and all
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<PAGE> 6
Liens or claims of others. No security agreement, financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the
Purchaser pursuant to this Agreement or as are permitted pursuant to the Note
Purchase Agreement.
3.2 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) upon completion of the filings and other
actions specified on Annex C attached hereto will constitute a first priority,
perfected security interests in the Collateral in favor of the Purchaser,
subject to no Liens other than Permitted Liens, (b) are prior to all other Liens
on the Collateral in existence on the date of this Agreement except for
Permitted Liens which are specifically noted on Schedule 4.10A to the Note
Purchase Agreement as being prior to the Liens created hereunder and (c) are
enforceable as such against all creditors of and purchasers from the Grantors,
except purchasers of Inventory in the ordinary course of business, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
3.3 Inventory and Equipment. The Inventory and the Equipment
of the Grantors are kept at the Inventory and Equipment locations identified
pursuant to Sections 4.30 and 10.16 of the Note Purchase Agreement.
3.4 Chief Executive Office. Each Grantor's chief executive
office and chief place of business, and the place where each Grantor keeps its
records concerning its Accounts, is located at the office identified pursuant to
Sections 4.30 and 10.16 of the Note Purchase Agreement.
3.5 Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
Section 4. Covenants. Each Grantor, jointly and severally,
covenants and agrees with the Purchaser that from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
4.1 Delivery of Instruments and Chattel Paper. If any amount
payable to a Grantor by any other Person, whether under or in connection with
any of the Collateral, pursuant to Section 4.10 hereof, or otherwise, shall be
or become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be immediately delivered to the Purchaser, duly endorsed in
a manner satisfactory to the Purchaser, to be held as Collateral pursuant to
this Agreement; provided, that so long as no Event of Default shall have
occurred and be continuing, a Grantor may retain for collection in the ordinary
course any Instruments received by such Grantor in the ordinary course of
business in satisfaction of trade payables evidencing loans to employees, and
the Purchaser shall, promptly upon the request of such Grantor, make appropriate
arrangements for making any other Instrument pledged by such Grantor available
to such Grantor for purposes of presentation, collection or renewal (any such
arrangement to be
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<PAGE> 7
effected, to the extent deemed appropriate by the Purchaser, against trust
receipt or like document).
4.2 Marking of Records. Each Grantor will mark its books and
records pertaining to the Collateral to evidence this Agreement and the security
interests created hereby.
4.3 Maintenance of Insurance. Each Grantor will maintain
insurance policies (i) insuring the Inventory, Equipment and other Collateral of
such Grantor, and (ii) insuring such Grantor and the Purchaser against liability
for personal injury and property damage relating to such Inventory, Equipment
and other Collateral, in each case, as and to the extent provided in Section 9.4
of the Note Purchase Agreement.
4.4 Payment of Taxes, etc. The Grantors will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral as and to the extent provided in Section 9.2 of the
Note Purchase Agreement.
4.5 Maintenance of Perfected Security Interest; Further
Assurances; Additional Grantors.
(a) The Grantors shall maintain the security interest created
by this Agreement as a first priority, perfected security interest subject only
to Permitted Liens and shall defend such security interest against claims and
demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written
request of the Purchaser and at the sole expense of the Grantors, the Grantors
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Purchaser may reasonably request
for the purpose of effectuating the transactions contemplated by the Note
Purchase Agreement and obtaining and preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the recording, filing and registration of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests created hereby. The Grantors
shall furnish reasonably satisfactory evidence to the Purchaser of every such
recording, filing and registration filed by the Grantors.
(c) Pursuant to Section 9-402 of the Code, the Grantors
authorize the Purchaser to file financing statements with respect to the
Collateral without the signature of the Grantors in such form and in such filing
offices as the Purchaser reasonably determines appropriate to perfect the
security interest of the Purchaser under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. The Purchaser will provide the
Grantors with a copy of each such filing filed by the Purchaser; provided that
the failure to furnish the Grantors with any such copy shall not relieve the
Grantors of any of their obligations hereunder or subject the Purchaser to any
liability.
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<PAGE> 8
(d) The initial Grantors hereunder shall be the Parent and
those Subsidiaries of the Parent as are signatories hereto on the date hereof.
From time to time subsequent to the date hereof, additional Subsidiaries of the
Parent may become parties hereto, as additional Grantors (each, an "Additional
Grantor"), by executing a counterpart of this Agreement substantially in the
form of Appendix II attached hereto. Upon delivery of any such counterpart to
the Purchaser, notice of which is hereby waived by the Grantors, each Additional
Grantor shall be a Grantor and shall be as fully a party hereto as if such
Additional Grantor were an original signatory hereto. Each Grantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Grantor hereunder nor by any
election of the Purchaser not to cause any Subsidiary of the Parent to become an
Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder. Each Additional
Grantor shall execute and file such financing statements and such other
instruments or notices or as the Purchaser may reasonably request, in order to
perfect the security interests granted or purported to granted hereunder.
4.6 Changes in Locations, Name, etc. No Grantor will:
(a) permit any of the Inventory or Equipment to be kept at a
location other than those identified pursuant to Sections 4.30 and 10.16 of the
Note Purchase Agreement; or
(b) change the location of its chief executive office and
chief place of business, or remove its books and records concerning the
Accounts, from that identified pursuant to Sections 4.30 and 10.16 of the Note
Purchase Agreement; or
(c) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Purchaser in connection with
this Agreement would become seriously misleading, unless it shall have given the
Purchaser prior written notice of such change pursuant to Section 10.16 of the
Note Purchase Agreement.
4.7 Further Identification of Collateral. The Grantors will
furnish to the Purchaser from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Purchaser may reasonably request, all in reasonable
detail.
4.8 Notices. The Grantors will advise the Purchaser promptly,
in reasonable detail, of:
(a) any Lien (other than Permitted Liens) on, or claim
asserted against, any of the Collateral; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interest created hereby.
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<PAGE> 9
4.9 Indemnification. The Grantors, jointly and severally,
agree to pay, and to save the Purchaser harmless from, any and all liabilities,
costs and reasonable expenses (including, without limitation, legal fees and
expenses) (a) with respect to, or resulting from any failure or delay in paying,
any and all excise, sales, stamp or other taxes which may be payable or
determined to be payable with respect to any of the Collateral and (b) with
respect to, or resulting from, any failure or delay in complying with any
Statute or Order of any Governmental Body, applicable to any of the Collateral.
4.10 Intercompany Advances. At the request of the Purchaser
and without limiting any provision of the Note Purchase Agreement or any other
provision hereof, each Grantor shall cause all outstanding loans and advances
made by such Grantor to any Subsidiary or Affiliate of such Grantor to be
evidenced by an Instrument and all such Instruments to be pledged and delivered
to the Purchaser not later than ten (10) Business Days following any such
request.
4.11 Provisions Relating to Inventory. The Grantors, jointly
and severally, agree that all Inventory manufactured or processed by the
Grantors will be manufactured and processed in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder.
Section 5. Provisions Relating to Accounts.
5.1 The Grantor to Remain Liable under Accounts. Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Accounts now owned or hereafter acquired by it to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. The Purchaser shall have no obligation or liability under any
such Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Purchaser of any payment relating to
such Account pursuant hereto, nor shall the Purchaser be obligated in any manner
to perform any of the obligations of any Grantor under or pursuant to any such
Account (or any agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
5.2 Analysis of Accounts. The Purchaser shall have the right
after consultation with a Grantor but with or without such Grantor's consent to
make test verifications of the Accounts now owned and hereafter acquired by such
Grantor in any manner and through any medium that it reasonably considers
advisable, and such Grantor shall furnish all such assistance and information as
the Purchaser may reasonably require in connection with such test verifications.
At any time and from time to time, upon the Purchaser's request and at the
expense of such Grantor, such Grantor shall cause independent public accountants
or others satisfactory to the Purchaser to furnish to the Purchaser reports
showing reconciliations, aging and test verifications of, and trial
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<PAGE> 10
balances for, such Accounts. After consultation with a Grantor but with or
without such Grantor's consent, the Purchaser in its own name or in the name of
others may communicate with account debtors on the Accounts to verify with them,
to the Purchaser's satisfaction, the existence, amount and terms of any such
Accounts.
5.3 Collections on Accounts. (a) The Purchaser hereby
authorizes each Grantor to collect the Accounts now owned and hereafter acquired
by such Grantor, and the Purchaser may curtail or terminate said authority or
direct and control collections by such Grantor at any time after the occurrence
and during the continuance of a Default or Event of Default. If required by the
Purchaser at any time after the occurrence and during the continuance of a
Default or Event of Default, any payments of such Accounts, when collected by
such Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by the Grantor in the exact form received, duly endorsed by the
Grantor to the Purchaser if required, in an account of the Purchaser maintained
by the Purchaser in a depositary institution selected by the Purchaser and under
the Purchaser's sole dominion and control (each a "Collateral Account"), and
(ii) until so turned over, shall be held by the Grantor in trust for the
Purchaser, segregated from other funds of the Grantor.
(b) Each such deposit of Proceeds of Accounts shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.
(c) At the Purchaser's request, the Grantors shall deliver to
the Purchaser all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Accounts, including, without
limitation, all original orders, invoices and shipping receipts.
5.4 Representations and Warranties. No amount payable to any
Grantor under or in connection with any Account is evidenced by any Instrument
or Chattel Paper which has not been delivered to the Purchaser.
5.5 Covenants. (a) The amount represented by each Grantor to
the Purchaser as owing by each account debtor or by all account debtors in
respect of the Accounts as of any date shall be the correct amount actually
owing by such account debtor or debtors thereunder as of such date.
(b) Other than in the ordinary course of business as generally
conducted by each Grantor consistent with past and commercially reasonable
practices, each Grantor will not grant any extension of the time of payment of
any of the Accounts, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
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<PAGE> 11
Section 6. Provisions Relating to Contracts.
6.1 Each Grantor to Remain Liable under Contracts. Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Contracts to which it is a party to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with and pursuant to the terms and provisions of each such Contract.
The Purchaser shall have no obligation or liability under any Contract by reason
of or arising out of this Agreement or the receipt by the Purchaser of any
payment relating to such Contract pursuant hereto, nor shall the Purchaser be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Contract, to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by it or as to the sufficiency
of any performance by any party under any Contract, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
6.2 Communication With Contracting Parties. After consultation
with the Grantors but with or without the Grantors' consent, the Purchaser in
its own name or in the name of others may communicate with parties to the
Contracts to verify with them to the Purchaser's satisfaction the existence,
amount and terms of any Contracts.
6.3 Representations and Warranties. (a) Except for the
consents listed on Schedule 4.9 of the Note Purchase Agreement:
(i) no consent of any party (other than the Grantors) to
any Material Contract is required, or purports to be required, in
connection with the execution, delivery and performance of this
Agreement;
(ii) each Material Contract is in full force and effect
and constitutes a valid and legally enforceable obligation of each
Grantor which is a party thereto and, to the Grantors' knowledge, of the
other party(s) thereto, except as enforceability may be affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, and general equitable principles (whether considered
in a proceeding in equity or at law);
(iii) no Grantor, nor to the best of the Grantors'
knowledge, any other party to any Material Contract is in default in the
performance or observance of any of the terms thereof;
(iv) each Grantor has fully performed, in all material
respects, all its obligations under each Material Contract to which it
is a party; and
(v) the right, title and interest of each Grantor in, to
and under each Material Contract to which it is a party are not subject
to any defense, offset, counterclaim or claim which would materially
adversely affect the value of such
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Material Contract as Collateral, nor have any of the foregoing been
asserted or alleged in writing against any Grantor as to any Material
Contract.
(b) The Grantors have delivered to the Purchaser a complete and
correct copy of each Material Contract.
(c) No amount payable to any Grantor under or in connection with
any Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Purchaser.
6.4 Covenants. (a) Each Grantor will perform and comply in all
material respects with all its contractual obligations relating to the
Collateral and all its other material obligations under the Contracts.
(b) Each Grantor shall promptly and diligently exercise each and
every material right which it may have under each Material Contract (other than
any right of termination).
(c) No Grantor will fail to deliver to the Purchaser a copy of
each material demand, notice or document received by it relating in any way to
any Contract.
Section 7. Provisions Relating To Stock Collateral.
7.1 Representations and Warranties. (a) The shares of Pledged
Stock listed on Annex B (as such Annex may be supplemented pursuant to Section
7.2) constitute all of the issued and outstanding shares of Capital Stock of the
Subsidiaries that are directly owned (in whole or in part) by the Grantors and
all other shares of, or interests, participations or other equivalents of or
interests in, Capital Stock directly owned by the Grantors. Notes and other
Instruments representing the Pledged Indebtedness listed on Annex B (as such
Annex may be supplemented pursuant to Section 7.2) constitute all of the
Instruments that are directly owned (in whole or in part) by the Grantors.
(b) All of the shares of, or interests, participations or other
equivalents of or interests in, the Pledged Stock have been duly authorized and
validly issued and are fully paid and nonassessable and none of such Pledged
Stock is subject to any contractual restriction pursuant to any shareholders or
partners agreement, voting trust agreement or any other agreement in respect of
the rights of shareholders, partners or participants, or any restriction under
the charter or by-laws or organization agreement of any of the Issuers, upon the
transfer of such Pledged Stock (except for any such restriction contained herein
or in the other Note Documents or any such restriction imposed by any state or
federal securities laws). There are no existing options, warrants, calls, or
commitments of any character whatsoever relating to any of the Pledged Stock of
any Grantor. The Pledged Indebtedness has been duly authorized, authenticated or
issued and delivered by, and is the legal, valid and binding obligations of, the
Issuer, and no such Issuer is in default thereunder. Except as disclosed on
Annex B none of the Pledged Indebtedness is
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subordinated in right of payment to other Indebtedness (except for the Secured
Obligations) or subject to the terms of an indenture.
(c) The Grantors are the record and beneficial owner of, and have
good and marketable title to, the Pledged Stock and Pledged Indebtedness, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement.
(d) Annex B correctly identifies, as at the date of this
Agreement, (i) with respect to Pledged Stock, each Issuer, the respective class
and par value of the shares or the nature and extent of each Grantor's interest
comprising such Pledged Stock and the respective number of shares or
proportionate interest (and registered owners thereof) evidenced by each such
certificate or other evidence of interest in such Issuer, and (ii) with respect
to Pledged Indebtedness, the initial principal amount, issue date, maturity date
and interest rate of such Pledged Indebtedness.
(e) There are no restrictions upon the voting rights associated
with, or upon the transfer of, any of the Pledged Stock or Pledged Indebtedness.
(f) The stock powers accompanying the Pledged Stock and the
allonges accompanying the Pledged Indebtedness are duly authorized and executed
in blank.
7.2 Affirmative Covenant. (a) Each Grantor covenants and agrees
with the Purchaser that, from and after the date of this Agreement until this
Agreement is terminated and the security interests created hereby are released
if such Grantor shall, as a result of its ownership of the Pledged Stock or
Pledged Indebtedness or otherwise become entitled to receive or shall receive
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights, whether in addition to,
in substitution of, as a conversion of, or in exchange for any shares of or
other interests in the Pledged Stock, or otherwise in respect thereof or any
note or Instrument of any Issuer or promissory notes or Instruments required to
be pledged to the Purchaser pursuant to Section 4.1 hereof or any other Note
Document, such Grantor shall accept the same as the agent of the Purchaser, hold
the same in trust for the Purchaser and deliver the same forthwith to the
Purchaser in the exact form received, together with in the case of Pledged Stock
an undated stock power or other suitable transfer document covering such
certificate duly executed in blank by such Grantor and with, if the Purchaser so
requests, signature guaranteed and together with in the case of any Pledged
Indebtedness an allonge or other endorsement duly executed in blank by such
Grantor, to be held by the Purchaser, subject to the terms hereof, as additional
collateral security for the Secured Obligations. Any sums paid upon or in
respect of the Pledged Stock or Pledged Indebtedness upon the liquidation or
dissolution of any Issuer shall be paid over to the Purchaser to be held by it
hereunder as additional collateral security for the Secured Obligations, and in
case any distribution of capital shall be made on or in respect of the Pledged
Stock or any property shall be distributed upon or with respect to the Pledged
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Stock or Pledged Indebtedness pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof or otherwise, the property so distributed shall be delivered to the
Purchaser to be held by it hereunder as additional collateral security for the
Secured Obligations. If any sums of money or property so paid or distributed in
respect of the Pledged Stock shall be received by any Grantor, such Grantor
shall, until such money or property is paid or delivered to the Purchaser, hold
such money or property in trust for the Purchaser, segregated from other funds
of such Grantor, as additional collateral security for the Secured Obligations.
If requested by the Purchaser, to evidence any of the foregoing such Grantor
shall promptly enter into a Pledge Supplement substantially in the form of
Appendix I hereof (a "Pledge Supplement"). The Grantors hereby authorize the
Purchaser to attach each executed Stock Collateral Pledge Supplement to this
Agreement and agree that all Capital Stock covered thereby delivered to the
Purchaser shall for all purposes hereunder constitute Pledged Stock and Stock
Collateral and all notes and Instruments covered thereby delivered to the
Purchaser shall for all purposes hereunder constitute Pledged Indebtedness and
Indebtedness Collateral.
(b) The Grantors agree to deliver to the Purchaser a supplement
to Annex B updating Annex B at the time of each delivery of additional Pledged
Stock and Pledged Indebtedness and, if requested by the Purchaser, a Pledge
Supplement pursuant to Section 7.2(a) hereof. By delivery of such Pledge
Supplement by a Grantor, such Grantor shall be deemed to have represented and
warranted to Purchaser that the representations and warranties in Section 7.1
shall be true and correct as to any such Pledged Stock and Pledged Indebtedness
as of the date of such Pledge Supplement.
7.3 Negative Covenants. Without the prior written consent of the
Purchaser, no Grantor will (a) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer except in connection with the issuance of directors' qualifying
shares to directors, or stock or equity securities to such Grantor or any of its
Subsidiaries, (b) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Stock Collateral, (c) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Stock Collateral or Indebtedness Collateral, or any
interest therein, except for Permitted Liens, or (d) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the Purchaser to
sell, assign or transfer any of the Stock Collateral.
7.4 Cash Dividends; Voting Rights. Unless an Event of Default
shall have occurred and be continuing and the Purchaser shall have given notice
to the Grantors of the Purchaser's intent to exercise its corresponding rights
pursuant to Section 8.6 below, the Grantors shall be permitted to receive all
cash dividends paid out of legal surplus of the Issuers in respect of the
Pledged Stock and to exercise all voting and corporate rights with respect to
the Pledged Stock; provided, however, that no vote shall be cast or corporate
right exercised or other action taken which would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of this
Agreement, the Note Purchase Agreement, the Notes or any other Note Document.
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7.5 Irrevocable Authorization and Instruction to Issuers. Each
Grantor hereby authorizes and instructs the Issuers to comply with any
instruction received by any of them from the Purchaser in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
such Grantor, and each Grantor agrees that the Issuers shall be fully protected
in so complying.
Section 8. Remedies.
8.1 Notice to Account Debtors and Contract Parties. Upon the
request of the Purchaser at any time after the occurrence and during the
continuance of a Default or Event of Default, each Grantor shall notify its
respective account debtors on the Accounts and parties to the Contracts that the
Accounts and the Contracts have been assigned to the Purchaser and that payments
in respect thereof shall be made directly to the Purchaser.
8.2 Proceeds to be Turned Over To the Purchaser. In addition to
the rights of the Purchaser specified in Section 5.3 with respect to payments of
Accounts, if a Default or Event of Default shall occur and be continuing all
Proceeds received by any Grantor consisting of cash, checks and other near-cash
items shall be held by such Grantor in trust for the Purchaser, segregated from
other funds of such Grantor, and shall, if requested by the Purchaser forthwith
upon receipt by such Grantor, be turned over to the Purchaser in the exact form
received by such Grantor (duly endorsed by such Grantor to the Purchaser, if
required) and held by the Purchaser in a Collateral Account. All Proceeds while
held by the Purchaser in a Collateral Account (or by such Grantor in trust for
the Purchaser) shall continue to be held as collateral security for all the
Secured Obligations and shall not constitute payment thereof until applied as
provided in Section 8.3.
8.3 Application of Proceeds. At such intervals as may be agreed
upon by the Grantors and the Purchaser, or, if an Event of Default shall have
occurred and be continuing, at any time at the Purchaser's election, the
Purchaser may apply all or any part of Proceeds held in any Collateral Account
in payment of the Secured Obligations in such order as the Purchaser may elect
consistent with the terms of the Note Purchase Agreement, and any part of such
funds which the Purchaser elects not so to apply and deems not required as
collateral security for the Secured Obligations shall be paid over from time to
time by the Purchaser to the Grantors or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the Secured
Obligations shall have been paid in full on (or after) the Termination Date
shall be paid over to the Grantors or to whomsoever may be lawfully entitled to
receive the same. Without limiting the foregoing or any other provision of this
Agreement, the Grantors and the Purchaser agree that, if an Event of Default has
occurred, it shall be commercially reasonable for the Purchaser to dispose of
all or any part of the Proceeds held in the Collateral Account or any cash or
other moneys or securities held in any Depositary Account, by applying the same
in payment of the Secured Obligations in such order as the Purchaser may elect
consistent with the terms of the Note Purchase Agreement and this Agreement and
that in connection therewith no public or private sale is necessary.
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8.4 Code Remedies. If an Event of Default shall occur and be
continuing, the Purchaser may exercise, in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Code and such additional rights
and remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted to
exercise all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Purchaser was the sole and absolute owner thereof (and each
Grantor agrees to take all such action as may be necessary or appropriate to
give effect to such right). Without limiting the generality of the foregoing,
the Purchaser, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon any Grantor or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived to the
extent allowed by law), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Purchaser or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Purchaser shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in any Grantor, which right or equity is hereby waived
or released. Each Grantor further agrees, at the Purchaser's request, to
assemble the Collateral and make it available to the Purchaser at places which
the Purchaser shall reasonably select, whether at such Grantor's premises or
elsewhere. The Purchaser shall apply the net Proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Purchaser hereunder, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Secured Obligations, in such order as the Purchaser may
elect consistent with the terms of the Note Purchase Agreement, and only after
such application and after the payment by the Purchaser of any other amount
required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Purchaser account for the surplus, if any, to
the Grantors. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Purchaser arising out of
the exercise by it of any rights hereunder. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other
disposition.
8.5 Irrevocable Proxy. Each Grantor hereby grants to the
Purchaser an irrevocable proxy to vote the Pledged Stock and other Collateral
with voting rights, which proxy shall be effective immediately upon the
occurrence of, and during the continuance of, an Event of Default.
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8.6 Additional Remedies in Respect of Pledged Stock. If an Event
of Default shall occur and be continuing and the Purchaser shall give notice of
its intent to exercise such rights to the Grantors, (a) the Purchaser shall have
the right to receive any and all cash dividends or distributions paid in respect
of the Pledged Stock and make application thereof to the Secured Obligations in
such order as the Purchaser may determine consistent with the terms of the Note
Purchase Agreement, and (b) all shares of or other interests in the Pledged
Stock shall be registered in the name of the Purchaser or its nominee, and the
Purchaser or its nominee may thereafter exercise (i) all voting, corporate,
partnership and other rights pertaining to such shares of or other interests in
the Pledged Stock at any meeting of shareholders of any Issuer or otherwise and
(ii) any and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to such shares of or other interests in
the Pledged Stock as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate or organizational structure of any
Issuer, or upon the exercise by any Grantor or the Purchaser of any right,
privilege or option pertaining to any of the Collateral, and in connection
therewith, the right to deposit and deliver any and all of the Collateral with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Purchaser may determine), all without
liability except to account for Property actually received by it, but the
Purchaser shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.
8.7 Registration Rights; Private Sales. (a) If the Purchaser
shall determine to exercise its right to sell any or all of the Pledged Stock
pursuant to this Section 8, and if in the opinion of the Purchaser it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the Grantors will
cause the Issuer thereof (i) to execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Purchaser, necessary or advisable to register the Pledged Stock,
or that portion thereof to be sold, under the provisions of the Securities Act,
(ii) to use their best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged Stock, or that portion
thereof to be sold, and (iii) to make all amendments thereto and/or to the
related prospectus which, in the opinion of the Purchaser, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto. The Grantors agree to cause such Issuer to comply with the provisions
of the securities or "Blue Sky" laws of any and all jurisdictions which the
Purchaser shall designate and to make available to its security holders, as soon
as practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Grantors recognize that the Purchaser may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be
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compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. The Grantors acknowledge and agree that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. The Purchaser shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) The Grantors further agree to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 8.7
valid and binding and in compliance with any and all applicable Statutes,
Orders, writs, injunctions, decrees or awards of any and all Governmental
Bodies, having jurisdiction over any such sale or sales. The Grantors further
agree that a breach of any of the covenants contained in this Section 8.7 will
cause irreparable injury to the Purchaser, that they will have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 8.7 shall be specifically enforceable
against the Grantors, and the Grantors hereby waive and agree not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred and is then continuing under the
Note Purchase Agreement.
8.8 Deficiency. The Grantors shall remain jointly and severally
liable for any deficiency if the Proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Secured Obligations, including
without limitation, the reasonable fees and disbursements of any attorneys
employed by the Purchaser to collect such deficiency.
Section 9. Purchaser's Appointment as Attorney-in-Fact;
Purchaser's Performance of the Secured Obligations.
9.1 Powers. Effective upon and during the continuance of an Event
of Default, each Grantor hereby irrevocably constitutes and appoints the
Purchaser and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Grantor and in the name of such Grantor or in its
own name, from time to time in the Purchaser's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, each Grantor hereby gives the Purchaser the
power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do the following:
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(a) in the case of any Account, in the name of such Grantor or
its own name, or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account, Instrument, General Intangible or Contract or with
respect to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Purchaser for the purpose of collecting any and all such
moneys due under any Account, Instrument, General Intangible or Contract or with
respect to any other Collateral whenever payable;
(b) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance called
for by the terms of this Agreement or the Note Purchase Agreement and to pay all
or any part of the premiums therefor and the costs thereof;
(c) to execute, in connection with the sale provided for in
Section 8.4 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(d) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Purchaser or as the Purchaser shall direct;
(e) to ask or demand for, collect, receive payment of and receipt
for, any and all moneys, cash and non-cash Proceeds, claims and other amounts
due or to become due at any time in respect of or arising out of any Collateral;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral;
(g) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral;
(h) to defend any suit, action or proceeding brought against such
Grantor with respect to any Collateral;
(i) to settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or releases as
the Purchaser may deem appropriate;
(j) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Purchaser were the absolute owner thereof for all
purposes, and to do, at the Purchaser's option and such Grantor's expense, at
any time, or from time to time, all acts and things (including exercising all
rights and remedies of such Grantor pursuant to any leases of real property)
which the Purchaser deems necessary to protect, preserve or
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realize upon the Collateral and the Purchaser's security interests therein and
to effect the intent of this Agreement, all as fully and effectively as such
Grantor might do;
(k) to release its interest in, make exchanges or substitutions
for and/or surrender, all or any part of such Grantor's interest in all or any
part of the Collateral;
(l) to remove from such Grantor's place(s) of business all books,
records, ledger sheets, correspondence, invoices and documents relating to or
evidencing any of the Collateral (so long as the Purchaser shall supply copies
of all documents removed within a reasonable time after removal), or without
cost or expense to the Purchaser, to make such use of such Grantor's place(s) of
business as may be reasonably necessary to administer, control and/or collect
the Collateral;
(m) to repair, alter or supply goods, if any, necessary to
fulfill in whole or in part the purchase order of any account debtor;
(n) to endorse the name of such Grantor upon any items of payment
relating to the Collateral or upon any proof of claim in bankruptcy against any
account debtor;
(o) to receive and open all mail addressed to such Grantor and,
upon the occurrence of an Event of Default, notify the Post Office authorities
to change the address for the delivery of mail to such Grantor to such address
as the Purchaser may designate; and
(p) to file financing statements and continuation statements
covering the Collateral and execute the same on behalf of such Grantor.
9.2 Performance by Purchaser of the Secured Obligations. If any
Grantor fails to perform or comply with any of its agreements contained herein,
the Purchaser, at its option, but without any obligation so to do, may perform
or comply, or otherwise cause performance or compliance, with such agreement.
9.3 The Grantors' Reimbursement Obligations. The expenses of the
Purchaser incurred in connection with actions undertaken as provided in this
Section 9, together with interest thereon at the Default Rate from the date of
payment by the Purchaser to the date reimbursed by the Grantors, shall be
jointly and severally payable by the Grantors to the Purchaser on demand and
shall constitute part of the Secured Obligations.
9.4 Ratification; Power Coupled With An Interest. The Grantors
hereby ratify all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
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Section 10. Duty of the Purchaser. The Purchaser's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Purchaser deals with similar property for
its own account.
Neither the Purchaser nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Purchaser hereunder are conferred solely to enable the Purchaser to protect the
Purchaser's interests in the Collateral and shall not impose any duty upon the
Purchaser to exercise any such powers. The Purchaser shall be accountable only
for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
Section 11. Miscellaneous.
11.1 Notices. All notices, requests and demands to or upon the
Purchaser or any Grantor hereunder shall be made or delivered in the manner
provided in Section 14.5 of the Note Purchase Agreement.
11.2 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.3 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each Grantor and the Purchaser; provided
that any provision of this Agreement may be waived by the Purchaser in a letter
or agreement executed by the Purchaser or by facsimile transmission from the
Purchaser.
11.4 No Waiver by Course of Conduct. The Purchaser shall not by
any act (except by a written instrument pursuant to Section 11.3 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Purchaser, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Purchaser of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Purchaser would
otherwise have on any future occasion.
-21-
<PAGE> 22
11.5 Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
11.6 Integration. This Agreement, together with the Note Purchase
Agreement and the other Note Documents represent the entire agreement of the
parties with respect to the subject matter hereof and there are no promises or
representations by the Purchaser relative to the subject matter hereof not
reflected herein or therein.
11.7 Section Headings. The section and subsection headings used
in this Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
11.8 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Grantors and the Purchaser and their respective
successors and assigns; provided, however, that no Grantor shall have the right
to assign its duties hereunder without the prior written consent of the
Purchaser.
11.9 Termination; Release. After the Security Interest
Termination Date, this Agreement shall terminate and the Purchaser, at the
request and expense of the respective Grantor, will promptly execute and
deliver to such Grantor a proper instrument or instruments (including Uniform
Commercial Code termination statements on form UCC-3) acknowledging the
satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to such Grantor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of the Purchaser
and as has not theretofore been sold or otherwise applied or released pursuant
to this Agreement. As used in this Agreement, "Security Interest Termination
Date" shall mean the date upon which all Obligations have been indefeasibly
paid in full, no Notes are outstanding and the Termination Date has occurred.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same instrument.
11.11 ACKNOWLEDGMENTS. EACH GRANTOR HEREBY ACKNOWLEDGES THAT:
(a) IT HAS BEEN ADVISED BY COUNSEL IN THE NEGOTIATION, EXECUTION
AND DELIVERY OF THIS AGREEMENT;
(b) THE PURCHASER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP TO THE
GRANTORS, AND THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE ONE HAND, AND THE
GRANTORS, ON THE OTHER HAND, IS SOLELY THAT OF SECURED PARTY AND DEBTOR,
RESPECTIVELY; AND
(c) NO JOINT VENTURE EXISTS BETWEEN THE PURCHASER AND THE
GRANTORS.
11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
11.13 Dating. Although this Agreement is dated as of the date
first written above for convenience, this Agreement shall be effective on
September 23, 1998.
-22-
<PAGE> 23
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly executed and delivered by its duly authorized officers.
NOMURA HOLDING AMERICA INC.
By: /s/ Salvatore Gentile
---------------------------------
Name: Salvatore Gentile
Title: Attorney-in-fact
EASYRIDERS, INC.
By: /s/ William Prather
-----------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
<PAGE> 24
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
TERESI, INC.
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON
WHEELS
By: /s/ Joseph Teresi
-----------------------------
Name:
Title:
EASYRIDERS SUB II, INC.
By: /s/ William R. Nordstrom
-----------------------------
Name: William R. Nordstrom
Title: Secretary
<PAGE> 25
Annex A
to Pledge and Security Agreement
MATERIAL CONTRACTS
<PAGE> 26
Annex B
to Pledge and Security Agreement
<TABLE>
<CAPTION>
PLEDGED STOCK
-------------
Grantor Issuer Class of Stock(1/) Stock Certificate No. No. of Shares
------- ------ ------------------ --------------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
PLEDGED INDEBTEDNESS
--------------------
Initial
Principal Maturity
Grantor Issuer Amount Issue Date Date Interest Rate
- ------- ------ ------ ---------- ---- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- --------
(1/) Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 27
Annex C
to Pledge and Security Agreement
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
UNIFORM COMMERCIAL CODE FILINGS
<TABLE>
<CAPTION>
[STATE] [STATE]
Secretary [ ] [ ] Secretary of [ ]
Debtor Name of State County County State County
----------- -------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 28
APPENDIX I
PLEDGE SUPPLEMENT
This Pledge Supplement, dated September 23, (this "Pledge
Supplement"), is delivered pursuant to Section 7.2 of the Security Agreement
referred to below. The undersigned hereby agrees (i) that this Pledge Supplement
may be attached to the Pledge and Security Agreement dated as of September 23,
1998 (as from time to time amended, modified or supplemented, the "Security
Agreement"; the terms defined therein and not otherwise defined herein being
used as therein defined), made by Easyriders, Inc. and certain of its
Subsidiaries signatory thereto in favor of Nomura Holding America Inc., (ii)
that the shares, or interests, participations or other equivalents listed on
this Pledge Supplement shall be and become part of the Pledged Stock and Stock
Collateral referred to in the Security Agreement and shall secure all the
Secured Obligations and (iii) that the notes and Instruments listed on this
Pledge Supplement shall become part of the Pledged Indebtedness and Indebtedness
Collateral referred to in the Security Agreement and shall secure all of the
Secured Obligations.
The undersigned agrees that the shares, or interests,
participations or other equivalents listed on the attached Schedule shall for
all purposes constitute Pledged Stock and Stock Collateral and shall be subject
to the security interest created by the Security Agreement and (b) that the
notes and Instruments listed on this Pledge Supplement shall become part of the
Pledged Indebtedness and Indebtedness Collateral referred to in the Security
Agreement and shall secure all of the Secured Obligations.
The undersigned hereby certifies that the representations and
warranties set forth in Section 7.1 of the Security Agreement of the undersigned
are true and correct as to the Collateral listed herein on and as of the date
hereof.
[NAME OF GRANTOR]
By:_________________________________________
Name:
Title:
<PAGE> 29
Schedule to Pledge Supplement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION OF PLEDGED STOCK
----------------------------
Issuer Class of Stock(*/) Stock Certificate No. No. of Shares
- ------ ------------------ --------------------- -------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
PLEDGED INDEBTEDNESS
--------------------
Initial
Principal Maturity
Grantor Issuer Amount Issue Date Date Interest Rate
- ------- ------ ------ ---------- ---- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- --------
(*/) Stock is assumed to be common stock unless otherwise indicated.
I-2
<PAGE> 30
APPENDIX II
COUNTERPART TO PLEDGE AND SECURITY AGREEMENT
This counterpart, dated September 23, is delivered pursuant to
Section 4.5(d) of that certain Pledge and Security Agreement dated as of
September 23, 1998 (as from time to time amended, modified or supplemented,
the "Security Agreement"; the terms defined therein and not otherwise defined
herein being used as therein defined), made by Easyriders, Inc. and certain of
its Subsidiaries signatory thereto in favor of Nomura Holding America Inc. The
undersigned hereby agrees (i) that this counterpart may be attached to the
Security Agreement, and (ii) that the undersigned shall be a Grantor under the
Security Agreement and shall comply with all the terms and conditions of the
Security Agreement as if it were an original signatory thereto.
[NAME OF ADDITIONAL GRANTOR]
By:_________________________________________
Name:
Title:
<PAGE> 31
ACKNOWLEDGMENT AND CONSENT
The undersigned, [NAME OF ISSUER], hereby acknowledges receipt of
a copy of the Pledge and Security Agreement dated as of September 23, 1998 (as
from time to time amended, modified or supplemented in accordance with the terms
thereof, the "Security Agreement"), made and entered into by and among
Easyriders, Inc. and certain of its Subsidiaries signatory thereto and Nomura
Holding America Inc. (the "Purchaser"). The undersigned agrees for the benefit
of the Purchaser as follows:
1. The undersigned will be bound by the terms of the Security
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Purchaser promptly in writing
of the occurrence of any of the events described in paragraph 7.2 of the
Security Agreement.
3. The terms of paragraph 8.7(c) of the Security Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be required
of it under or pursuant to or arising out of Section 8.7 of the Security
Agreement.
[NAME OF ISSUER]
By:________________________________________
Name:
Title:
Date:
II-2
<PAGE> 1
EXHIBIT 10.5.4
EXHIBIT E TO NOTE AND WARRANT PURCHASE AGREEMENT
(Form of Intellectual Property Security Agreement)
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of
September 23, 1998 (as from time to time amended, modified or supplemented in
accordance with the terms hereof, this "Agreement"), is made and entered into by
and among EACH SIGNATORY HERETO (each individually, together with its successors
and assigns, a "Grantor", and collectively, the "Grantors" ), as debtors, and
NOMURA HOLDING AMERICA INC., a Delaware corporation (together with its
successors, assigns and transferees, the "Purchaser"), as secured party.
W I T N E S S E T H:
WHEREAS, pursuant to the Note and Warrant Purchase Agreement
dated as of the date hereof (as from time to time amended, modified or
supplemented in accordance with the terms thereof, the "Note Purchase
Agreement"), by and among Easyriders, Inc., a Delaware corporation (the
"Parent"), Easyriders Sub II, Inc. (to be merged with and into Paisano
Publications, Inc.), a California corporation (the "Company") and the Purchaser,
the Purchaser has agreed to purchase the Notes of the Company referred to in the
Note Purchase Agreement upon the terms and subject to the conditions set forth
therein;
WHEREAS, the Grantors (other than the Company) have executed and
delivered to the Purchaser a Guarantee dated as of the date hereof (as from time
to time amended, modified or supplemented in accordance with the terms thereof,
the "Guarantee"), pursuant to which such Grantors have guaranteed the
Obligations of the Company under, and as defined in, the Note Purchase
Agreement;
WHEREAS, the Grantors have also executed and delivered to the
Purchaser a Pledge and Security Agreement dated as of the date hereof (as from
time to time amended, modified or supplemented in accordance with the terms
thereof, the "Security Agreement"), pursuant to which the Grantors have pledged
and granted to the Purchaser a security interest in all of their personal
property (other than their intellectual property) as collateral security for the
Secured Obligations (as defined below); and
WHEREAS, it is a condition precedent to the obligations of the
Purchaser to purchase, and to continue to purchase, the Notes and to extend
credit thereunder and under the Note Purchase Agreement that the Grantors shall
have executed and delivered
<PAGE> 2
this Agreement to pledge and grant to the Purchaser a security interest in all
of the Grantors' intellectual property as collateral security for the Secured
Obligations;
NOW, THEREFORE, in consideration of the premises set forth above
and to induce the Purchaser to purchase, and to continue to purchase, the Notes
and to extend credit thereunder and under the Note Purchase Agreement, the
Grantors hereby agree with the Purchaser as follows:
Section 1. Defined Terms.
1.1. Definitions. Unless otherwise defined herein, terms defined
(or defined by reference) in the Note Purchase Agreement, as applicable, and
used herein shall have the meanings given to them in such other agreement.
1.2. Other Definitions. The following terms shall have the
following meanings:
"Agreement" has the meaning specified in the Preamble.
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral" has the meaning specified in Section 2 of this
Agreement.
"Copyrights" has the meaning specified in Section 2.1(c) of this
Agreement.
"License Agreements" means all license agreements entered into by
each Grantor, whether as licensor or licensee, providing for the license of
trademarks, patents, copyrights, technology and related or similar rights, as
the same may be renewed, extended or modified, and all rights of the Grantors in
connection with any of the foregoing and in connection with any agreement
related thereto.
"Patents" has the meaning specified in Section 2.1(b) of this
Agreement.
"Proceeds" means all "proceeds" and "products" as defined in the
Code and includes, without limitation and whether or not the following
constitute proceeds under the Code, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to each Grantor from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to each Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Body (or any
Person acting under color of Governmental Body), and (iii) any claims by each
Grantor against third parties for infringement of the trademarks, patents or
copyrights belonging to such Grantor and any royalties from licenses to third
parties thereof, and (iv) any and all other amounts from time to time paid or
payable to each Grantor upon the sale, exchange, collection or other disposition
of, or under or in connection with, any part of the Collateral.
-2-
<PAGE> 3
"Secured Obligations" means, collectively, (i) in the case of the
Company, all of its Obligations under the Note Purchase Agreement and (ii) in
the case of the other Grantors, all of their obligations under the Guarantee.
"Trademarks" has the meaning specified in Section 2.1(a) of this
Agreement.
1.3. Miscellaneous Definitional Provisions. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and section and paragraph references are to this Agreement
unless otherwise specified.
1.4. Singular and Plural Form. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.
1.5. Annexes. All references to Annexes to this Agreement include
such Annexes as amended, modified or supplemented pursuant to the terms of this
Agreement.
Section 2. Grant of Security Interest.
2.1. Collateral. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, the Grantors jointly and
severally hereby grant to the Purchaser, a security interest in all of the
following property now owned or at any time hereafter acquired or created by the
Grantors or in which the Grantors now have or at any time in the future may
acquire or create any right, title or interest (collectively, the "Collateral"):
(a) trademarks, trade names, trade styles, service marks, logos,
emblems, prints and labels, all elements of package or trade dress of goods and
services, and all general intangibles of like nature, together with the goodwill
of each Grantor's business connected with the use thereof and symbolized
thereby, and all applications, registrations and recordings thereof, including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States, or in any office of the Secretary of State (or equivalent) of any
state thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, including, but not limited to, those
described in Annex A (as from time to time amended, modified or supplemented in
accordance with the terms hereof) attached hereto and made a part hereof,
together with all extensions, renewals and corrections thereof and all licenses
thereof or pertaining thereto, including, without limitation, the License
Agreements with respect thereto (all of the foregoing assets encompassed by this
subparagraph (a) being hereinafter collectively referred to as the
"Trademarks");
(b) letters patent and applications therefor, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and
-3-
<PAGE> 4
recordings in the United States Patent and Trademark Office, or in any similar
office or agency of the United States, or any state thereof, or in any similar
office or agency of any country or political subdivision thereof throughout the
world, including, but not limited to, those described in Annex B (as from time
to time amended, modified or supplemented in accordance with the terms hereof)
attached hereto and made a part hereof, together with all re-examinations,
reissues, continuations, continuations-in-part, divisions, improvements and
extensions thereof and all licenses and claims for infringement thereof or
pertaining thereto including, without limitation, the License Agreements with
respect thereto, and the rights to make, use and sell, and all other rights with
respect to, the inventions disclosed or claimed therein, all inventions,
designs, proprietary or technical information, know-how, other data or
information, software, databases, all embodiments or fixations thereof and
related documentation, and all other trade secret rights not described above
(all of the foregoing assets encompassed by this subparagraph (b) being
hereinafter collectively referred to as the "Patents");
(c) copyrights in works of authorship of any kind, and all
applications, registrations and recordings thereof in the Office of the United
States Register of Copyrights, Library of Congress, or in any similar office or
agency of any country or political subdivision thereof throughout the world,
together with all extensions, renewals and corrections thereof and all licenses
and claims for infringement thereof or pertaining thereto, including, without
limitation, the License Agreements with respect thereto (all of the foregoing
assets encompassed by this subparagraph (c) hereinafter collectively referred to
as the "Copyrights");
(d) all customer lists and other records of each Grantor relating
to the distribution of products bearing the Trademarks, Patents and Copyrights;
and
(e) to the extent not otherwise included, all Proceeds of any and
all of the foregoing, including, without limitation, the Proceeds from any
claims by each Grantor against third parties for infringement of the Trademarks,
Patents or Copyrights and any royalties from licenses of the Trademarks, Patents
or Copyrights.
Section 3. Perfection. Prior to or concurrently with the delivery and
execution of this Agreement, each Grantor shall file or execute and deliver for
filing such financing statements, assignments for security and other documents
in such offices and take such other actions as may be required by the Purchaser
under Section 5.1 hereof or as the Purchaser may otherwise reasonably request to
perfect the security interests granted by this Agreement. Each Grantor shall
further take such other action (including the timely filing of continuation
statements or other similar documents) in order to continue the perfection of
the security interests granted under this Agreement in such offices as may be
necessary or as the Purchaser shall request to continue the perfection of such
interests, including, without limitation, any such action as may be required or
requested pursuant to Section 5.2 or 5.9 hereof.
Section 4. Representations and Warranties. The Grantors, jointly and
severally, hereby represent and warrant that:
-4-
<PAGE> 5
4.1. Title to Trademarks. Each Grantor has the sole legal and
equitable title and ownership of each of the Trademarks set forth on Annex A
hereto under such Grantor's name for the goods and services with which the
Trademarks are used, and any registrations thereof are valid and subsisting and
in full force and effect.
4.2. Use of Trademarks. Each Grantor (either itself or through
its licensees) will continue to use its Trademarks on each and every trademark
class of goods applicable to its current lines of goods as reflected in its
current catalogs, brochures and price lists in order to maintain its Trademarks
in full force and effect, in the ordinary course of business, free from any
claim of abandonment for nonuse and each Grantor will not (and will not permit
any licensee thereof to) do any act or omit to do any act whereby such Trademark
may become invalidated; provided, however, that any Grantor may choose to
abandon such Trademark or take any action or refuse or omit to take any action
whereby such Trademark may be abandoned if, in such Grantor's reasonable
business judgment, to do so is in the best business interests of such Grantor's
business. Prior to the intentional abandonment of any such Trademark by a
Grantor, such Grantor agrees to notify the Purchaser in writing.
4.3. Title to Patents. Each Grantor has the sole beneficial
ownership of each of the Patents set forth on Annex B hereto under the Grantor's
name and such patents are valid and subsisting and in full force and effect and
have not been claimed or adjudged invalid or unenforceable in whole or in part.
Each Grantor shall diligently prosecute any patent application now pending or
acquired or made by it during the term of this Agreement, shall make
applications on unpatented but patentable inventions, and shall preserve and
maintain all rights of any kind in such Patents, which, in each case, such
Grantor believes in its reasonable business judgment is in the best business
interests of such Grantor. None of such Patents have been abandoned or, to the
knowledge of the Grantors, dedicated, and no Grantor will do any act, or omit to
do any act, nor permit any licensee thereof to do any act, whereby any such
Patent may become abandoned or dedicated and shall notify the Purchaser
immediately if it knows of any reason why or has reason to know that any such
Patent may become abandoned or dedicated; provided, however, that any Grantor
may choose to abandon or dedicate any Patent, if, in the Grantor's reasonable
business judgment, to do so is in the best business interests of such Grantor's
business. Prior to the intentional abandonment or dedication of any such Patent
by a Grantor, such Grantor agrees to notify the Purchaser in writing.
4.4. Title to Copyrights. Each Grantor has the sole, full and
clear title to each of the Copyrights set forth under such Grantor's name on
Annex C hereto and any registrations thereof are valid and subsisting and in
full force and effect. Each Grantor (either itself or through its licensees)
will place appropriate notice of copyright on all copies embodying such
copyrighted works which are hereafter publicly distributed and no Grantor will
(and will not permit any licensee thereof to) do any act or omit to do any act
whereby any such Copyright may become invalidated or dedicated to the public
domain; provided, however, that any Grantor may choose to abandon or dedicate
any such Copyright or permit the same to become abandoned, dedicated or
invalidated if, in such Grantor's reasonable business judgment, to do so is in
the best business interests of such Grantor's business. Prior to the intentional
abandonment, dedication or invalidation of any Copyright by a Grantor, such
Grantor agrees to notify the Purchaser in writing.
-5-
<PAGE> 6
4.5. Perfected First Priority Liens. The security interests granted
by the Grantors pursuant to this Agreement (a) upon completion of the filings
and other actions specified in Section 5 hereof (and any necessary filings under
the Uniform Commercial Code contemplated by the Security Agreement) will
constitute perfected security interests in the Collateral located in the United
States of America in favor of the Purchaser, (b) are prior, to the extent such
Liens in such Collateral can be perfected by filing or possession, to all other
Liens on the Collateral in existence on the date hereof, and (c) are enforceable
as such against all creditors of and purchasers from the Grantors.
4.6. Other Agreements; No Other Liens. The Grantors have not entered
into any oral or written agreements which would prevent the Grantors from
complying with the terms hereof. Except for the security interest granted to the
Purchaser pursuant to this Agreement, and except as contemplated by Section 4.5
hereof, the Grantors own each item of the Collateral free and clear of any and
all Liens. No security agreement, financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Purchaser pursuant
to this Agreement or the other Security Documents.
4.7. No Other Trademarks or Patents. As of the date of this
Agreement the Grantors have no registered Trademarks or Patents other than those
described in Annexes A and B hereto.
Section 5. Covenants. The Grantors, jointly and severally, covenant and
agree with the Purchaser, that from and after the date of this Agreement until
this Agreement is terminated and the security interests created hereby are
released:
5.1. Perfection of Security Interest. Each Grantor will promptly
perform all acts and execute all grants of security in forms suitable for
recording with the United States Patent and Trademark Office and the United
States Register of Copyrights, substantially in the form of Appendices I, II and
III hereto, and make all other filings and registrations requested by the
Purchaser at any time to evidence, perfect, maintain, record or enforce the
Purchaser's interest in Collateral or otherwise in furtherance of the provisions
of this Agreement; provided, however, that no Grantor shall be required to
execute Appendix I with respect to a trademark or service mark application
based on intent-to-use until such time as an amendment to allege use or
statement of use is filed and accepted by the United States Patent and
Trademark Office and such mark is actually used in commerce.
5.2. Acquisition of New Rights to Trademarks, Patents, and
Copyrights. In the event that any Grantor, either itself or through any
Subsidiary, affiliate, agent, employee, licensee or designee, shall adopt,
acquire or obtain rights to or enter into any License Agreement (other than any
License Agreement for the use of computer software or other works of authorship
which are generally available at commercially reasonable prices) in connection
with any Trademark, Patent or Copyright or work for which a trademark, patent or
copyright application has been or is expected to be filed, or become entitled to
the benefit of any Trademark, Patent or Copyright, (a) such Grantor shall inform
the Purchaser of any such event or action in quarterly reports which it shall
deliver to the Purchaser pursuant to Section 7(o) of the Note Purchase Agreement
and (b) such Grantor shall execute and deliver (or cause its Subsidiary to
execute and deliver, as the case may be) such grants of security substantially
in the form of Appendix I, II, or III hereto, as the case may be, or any and all
other assignments,
-6-
<PAGE> 7
registrations, filings, agreements, instruments, documents and papers as are
necessary or appropriate or as the Purchaser may request to evidence the
Purchaser's interest in such Collateral; provided, however, that no Grantor will
adopt, acquire or obtain rights or enter into any such License Agreement in
connection with any Trademark, Patent or Copyright or work for which a
trademark, patent or copyright application has been or is expected to be filed,
which prohibits or restricts the pledge, transfer, assignment or hypothecation
of such rights or such License Agreement without the Purchaser's written
consent; provided further, however, that no Grantor shall be required to execute
Appendix I with respect to a trademark or service mark application based on
intent-to-use until such time as an amendment to allege use or statement of use
is filed and accepted by the United States Patent and Trademark Office and such
mark is actually used in commerce. At the time of each quarterly report pursuant
to this paragraph, the Grantors will also deliver to the Purchaser supplemental
annexes to the Annexes hereto to include any future Trademark, Patent or
Copyright registrations or applications which may be acquired or made by the
Grantors.
5.3. No Conveyance of Rights in Collateral. Except to the extent
that the Purchaser, upon prior written notice from the Grantors, shall consent,
or to the extent permitted by the Note Purchase Agreement, the Grantors will not
assign, sell, lease, transfer, hypothecate, grant, incur, permit or suffer to
exist a Lien upon, grant an exclusive license, or otherwise dispose of any of
the Collateral pledged by the Grantors, and nothing in this Agreement shall be
deemed a consent by the Purchaser to any such action except as expressly
permitted herein. The Grantors shall maintain the security interest created by
the Grantors under this Agreement and will defend the Collateral pledged by the
Grantors against and take such other action as is necessary to remove any Lien
on the Collateral other than a Permitted Lien.
5.4. Maintenance of Rights in Collateral. The Grantors will take all
necessary steps in any proceeding before the United States Patent and Trademark
Office, the United States Register of Copyrights, Library of Congress, or
similar office or agency of the United States or any office of the Secretary of
State (or equivalent) of any state or province thereof, to obtain and maintain
each application and registration of the Collateral pledged by the Grantors,
including, without limitation, filing of renewals, extensions, affidavits of use
and incontestability, and opposition, interference and cancellation proceedings
(except to the extent that dedication, abandonment or invalidation is permitted
under this Agreement). Each Grantor shall notify the Purchaser promptly in
writing if any application or registration relating to any Collateral owned by
it may become abandoned or dedicated or subject to an adverse final
determination in any proceeding in the United States Patent and Trademark
Office, the United States Register of Copyrights, Library of Congress, or in any
similar office or agency of any country or political subdivision thereof
throughout the world or in any court regarding such Grantor's ownership of such
Patent or Trademark, its right to register same, or to keep or maintain the
validity of same.
5.5. Infringement or Misappropriation of Rights in Collateral. In
the event that any Copyright, Patent or Trademark is infringed, misappropriated,
diluted or otherwise being impaired by a third party, Grantor shall notify
Purchaser promptly after it learns thereof and shall, unless Grantor shall
reasonably determine that any such action would be of negligible economic value
or not have a Material Economic Affect, promptly sue for infringement,
misappropriation
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<PAGE> 8
violation of this Agreement, abandon any such Trademark, Patent or Copyright of
such Grantor, and such Grantor shall take such other actions reasonably required
to protect such Trademark, Patent or Copyright as such Grantor shall deem
appropriate in its reasonable business judgment under the circumstances. Upon
and during the continuance of an Event of Default, the Purchaser shall have the
right, but in no way shall be obligated, to bring suit in its own name to
enforce the Trademarks, Patents and Copyrights and any licenses thereunder, in
which event such Grantor shall, at the request of the Purchaser, do any and all
lawful acts reasonably requested by the Purchaser and execute any and all
documents reasonably required by the Purchaser to aid such enforcement, and such
Grantor shall, upon demand, promptly reimburse and indemnify the Purchaser for
all costs and expenses incurred in such enforcement.
5.6. Marking of Records; Inspection. Each Grantor shall maintain at
its own cost and expense complete and accurate records of the Collateral owned
by it, including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Each Grantor will mark its books and records pertaining to the
Collateral to evidence this Agreement and the security interests created hereby.
The Purchaser shall have a security interest in all of the Grantor's books and
records pertaining to the Collateral and, upon the occurrence and during the
continuation of any Event of Default, the Grantors shall deliver and turn over
any such books and records (or true and complete copies thereof to the Purchaser
at any time on demand. Each Grantor shall allow any representative of the
Purchaser to inspect such books and records at any time during reasonable
business hours on reasonable notice and will provide photocopies thereof at such
Grantor's expense to the Purchaser upon request of the Purchaser.
5.7. Payment of Taxes; etc. Each Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral owned by it as and to the extent provided in Section 9.2 of
the Note Purchase Agreement.
5.8. Changes in Locations, Name, etc. Except as provided in Section
10.16 of the Note Purchase Agreement, no Grantor will (a) change the location of
its chief executive offices from that specified in the other Security Documents
to which it is a party; or (b) change its name, identity or corporate structure
to such an extent that any financing statement or other document filed in
connection with this Agreement would become seriously misleading.
5.9. Maintenance of Perfected Security Interest; Further Assurances.
At any time and from time to time, upon the written request of the Purchaser,
and at the sole expense of each Grantor, such Grantor will promptly and duly
execute, deliver, file and record such further instruments and documents
(including, without limitation, any financing statements and amendments thereto,
continuation statements and notices under the Uniform Commercial Code in effect
in any jurisdiction with respect to the security interests created hereby) and
take such further action as the Purchaser may reasonably request for the purpose
of effectuating the transactions contemplated by the Note Purchase Agreement and
obtaining and preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, causing any or all
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<PAGE> 9
of the Collateral to be transferred of record into the name of the Purchaser or
nominee following the occurrence and during the continuance of an Event of
Default; provided that in the absence of such request by the Purchaser, no
Grantor shall be relieved of its obligations under Section 3 of this Agreement.
Section 6. Remedies. At any time after and during the continuation of an
Event of Default, the Purchaser shall have the following rights and remedies,
all such rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively or concurrently, without (except as provided herein)
notice to, or consent by, the Grantors:
6.1. Enforcement of Rights. The Purchaser may (without assuming any
obligations or liability thereunder) enforce (and shall have the exclusive right
to enforce) against any licensee or sublicensee all rights and remedies of the
Grantors in, to and under any one or more License Agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
the Grantors hereby release the Purchaser from, and agree to hold the Purchaser
free and harmless from and against any claims arising out of, any action taken,
or omitted to be taken with respect to any such License Agreement other than
those arising out of the gross negligence or willful misconduct of the
Purchaser.
6.2. Power to Dispose of Collateral. The Purchaser may, upon ten
(10) days' prior notice to the Grantors, (a) assign, sell, or otherwise dispose
of the Collateral or any of it, either with or without special or other
conditions or stipulations, and do all other acts and things for completing the
assignment, sale or disposition which the Purchaser shall, in its sole
discretion, deem appropriate or proper and the Purchaser shall have the power to
buy all or any part of the Collateral and (b) prohibit the Grantors from making
any use of the Trademarks or any mark similar thereto or the Patents or
Copyrights for any purpose.
6.3. Power to License Collateral. The Purchaser may, upon ten (10)
days' prior notice to the Grantors, require the Grantors to license any of the
Trademarks, Patents or Copyrights, which are not subject to an exclusive
license, for such term or terms, on such conditions, and in such manner, as the
Purchaser shall in its sole discretion determine; provided, however, that the
licensee shall be an entity in a business substantially similar to the business
engaged in by the Grantors on the date hereof.
6.4. Execution of Instruments. In addition to the foregoing, in
order to implement the assignment, sale, license or other disposal of any of the
Collateral pursuant to Sections 6.1, 6.2(a) and 6.3 hereof, the Purchaser may
execute and deliver on behalf of the Grantors one or more instruments of
assignment, sale, license or other disposition of the Collateral. Each Grantor
agrees to pay when due all expenses and costs incurred in any such transfer of
the Collateral owned by it, including any taxes and reasonable attorneys' fees.
The Purchaser may apply the proceeds actually received from any such license,
assignment, sale or other disposition in payment of the Secured Obligations.
Nothing herein contained shall be construed as requiring the Purchaser to take
any such action at any time.
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<PAGE> 10
6.5. Proceeds to be Turned Over to the Purchaser. If an Event of
Default shall occur and be continuing, then upon the Purchaser's request all
Proceeds received by any Grantor consisting of cash, checks and other near-cash
items shall be held by such Grantor in trust for the Purchaser, segregated from
other funds of such Grantor, and shall, forthwith upon receipt by such Grantor,
be turned over to the Purchaser in the exact form received by such Grantor (duly
endorsed by such Grantor to the Purchaser, if required) and held by the
Purchaser in the Collateral Account maintained by the Purchaser pursuant to the
Security Agreement.
6.6. Application of Proceeds. All Proceeds while held by the
Purchaser in such Collateral Accounts (or by any Grantor in trust for the
Purchaser) shall continue to be held as collateral security for all the Secured
Obligations and shall not constitute payment thereof until applied as provided
in the Security Agreement.
6.7. Code Remedies. (a) If an Event of Default shall occur and be
continuing, the Purchaser may exercise, in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Code and such additional rights
and remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted to
exercise all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Purchaser was the sole and absolute owner thereof (and the
Grantors, jointly and severally, agree to take all such action as may be
necessary or appropriate to give effect to such right). Without limiting the
generality of the foregoing, after the occurrence and during the continuance of
an Event of Default, the Purchaser, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to the Grantors or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived to the extent allowed by law), may in such circumstances forthwith
collect, receive, appropriate, realize upon, sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Purchaser or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Purchaser may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned. The Purchaser shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Grantors,
which right or equity is hereby waived or released. Each Grantor further agrees,
at the Purchaser's request, to assemble the Collateral and make it available to
the Purchaser at places which the Purchaser shall reasonably select, whether at
such Grantor's premises or elsewhere.
(b) The Purchaser shall apply the net Proceeds of any
collection, recovery, receipt, appropriation, realization or sale of Collateral,
after
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<PAGE> 11
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Purchaser hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Secured Obligations, in such order as the Purchaser
may elect consistent with the terms of the Note Purchase Agreement, and only
after such application and after the payment by the Purchaser of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Purchaser account for the surplus, if any, to
the Grantors. To the extent permitted by applicable law, the Grantors waive all
claims, damages and demands it may acquire against the Purchaser arising out of
the exercise by it of any rights hereunder. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or other
disposition.
6.8. Deficiency. The Grantors shall remain jointly and severally
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Secured Obligations of the Grantors
and the costs, fees and expenses of disposing of the Collateral of the Grantors.
Section 7. Purchaser's Appointment as Attorney-in-Fact; Purchaser's
Performance of the Grantors' Secured Obligations.
7.1. Powers. Effective upon and during the continuance of an Event
of Default, each Grantor hereby irrevocably constitutes and appoints the
Purchaser and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Grantor and in the name of such Grantor or in its
own name, from time to time in the Purchaser's discretion, for the purpose of
carrying out the terms of this Agreement and to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Purchaser the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do the following:
(a) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral;
(b) to execute, in connection with any sale provided for in Sections
6.2 or 6.7 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(c) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Purchaser or as the Purchaser shall direct;
(d) to ask or demand for, collect, receive payment of and receipt
for, any and all moneys, cash and non-cash Proceeds, claims and other amounts
due or to become due at any time in respect of or arising out of any Collateral;
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<PAGE> 12
(e) to sign and endorse any assignments, verifications, notices and
other documents in connection with any of the Collateral;
(f) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction or before any
administrative agency to collect the Collateral or any part thereof and to
enforce any other right in respect of such Collateral;
(g) to defend any suit, action or proceeding brought against any
Grantor with respect to any Collateral;
(h) to settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or releases as
the Purchaser may deem appropriate;
(i) generally, to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Purchaser were the absolute owner thereof for all purposes, and to
do, at the Purchaser's option and such Grantor's expense, at any time, or from
time to time, all acts and things which the Purchaser deems necessary to
protect, preserve or realize upon the Collateral and the Purchaser's security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do;
(j) to release its interest in, make exchanges or substitutions for
and/or surrender, all or any part of such Grantor's interest in all or any part
of the Collateral;
(k) to remove from such Grantor's place(s) of business all books,
records, ledger sheets, correspondence, invoices and documents relating to or
evidencing any of the Collateral (so long as the Purchaser shall supply copies
of all documents removed within a reasonable time after removal), or without
cost or expense to the Purchaser to make such use of such Grantor's place(s) of
business as may be reasonably necessary to administer, control and/or collect
the Collateral;
(l) to endorse the name of such Grantor upon any items of payment
relating to the Collateral or upon any proof of claim in bankruptcy against any
account debtor; and
(m) to file financing statements and continuation statements
covering the Collateral and execute the same on behalf of such Grantor.
7.2. Performance by the Purchaser of the Secured Obligations. If any
Grantor fails to perform or comply with any of its agreements contained herein,
the Purchaser, at its option, but without any obligation so to do, may perform
or comply, or otherwise cause performance or compliance, with such agreement.
7.3. The Grantors' Reimbursement Obligation. The expenses of the
Purchaser incurred in connection with actions undertaken as provided in this
Section 7, together with interest thereon at the interest rate then applicable
to amounts overdue
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<PAGE> 13
under the Notes from the date of payment by the Purchaser to the date reimbursed
by the Grantors, shall be jointly and severally payable by the Grantors to the
Purchaser on demand and shall constitute part of the Secured Obligations.
7.4. Ratification; Power Coupled With An Interest. The Grantors
hereby ratify all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in or granted
pursuant to this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
7.5. Execution of Power of Attorney. Concurrently with the execution
and delivery hereof, the Grantors are executing and delivering to the Purchaser,
in the form of Appendix IV hereto, three (3) originals of a Power of Attorney
for the implementation of any assignment, sale or other disposition of the
Trademarks, Patents or Copyrights or any of them pursuant to Sections 6.1, 6.2
and 6.3 hereof. All powers of attorney granted hereunder shall be deemed in
addition to any powers of attorney granted under any other Security Document.
Section 8. Duty of the Purchaser. The Purchaser's sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Purchaser deals with similar property for its own
account.
Neither the Purchaser nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Purchaser hereunder are conferred solely to enable the Purchaser to protect the
Purchaser's interests in the Collateral and shall not impose any duty upon the
Purchaser to exercise any such powers. The Purchaser shall be accountable only
for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.
Section 9. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, the Grantors authorize the Purchaser to file financing statements with
respect to the Collateral without the signature of the Grantors in such form and
in such filing offices as the Purchaser reasonably determines appropriate to
perfect the security interests of the Purchaser under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction. The Purchaser will provide
the Grantors with a copy of each such filing filed by the Purchaser pursuant to
this Section 9; provided that the failure to furnish the Grantors with any such
copy shall not relieve the Grantors of any of their obligations hereunder or
subject the Purchaser to any liability.
Section 10. Miscellaneous.
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<PAGE> 14
10.1. Notices. All notices, requests and demands to or upon the
Purchaser or the Grantors hereunder shall be made or delivered in the manner
provided in the Guarantee.
10.2. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.3. Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Grantors and the Purchaser; provided that any
provision of this Agreement may be waived by the Purchaser in a letter or
agreement executed by the Purchaser or by facsimile transmission from the
Purchaser.
10.4. No Waiver by Course of Conduct. The Purchaser shall not by any
act (except by a written instrument pursuant to Section 10.3 hereof) delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Purchaser, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Purchaser of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Purchaser would
otherwise have on any future occasion.
10.5. Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
10.6. Integration. This Agreement, together with the Note Purchase
Agreement and the other Note Documents represent the entire agreement of the
parties with respect to the subject matter hereof and there are no promises or
representations by the Purchaser relative to the subject matter hereof not
reflected herein or therein.
10.7. Section Headings. The section and subsection headings used in
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
10.8. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each Grantor and the Purchaser and their respective
successors and assigns; provided, however, that no Grantor shall have the right
to assign its duties hereunder without the prior written consent of the
Purchaser.
10.9. Additional Grantors. The initial Grantors hereunder shall be
the Parent and those Subsidiaries of the Parent as are signatories hereto on the
date hereof.
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<PAGE> 15
From time to time subsequent to the date hereof, additional Subsidiaries of the
Parent may become parties hereto, as additional Grantors (each, an "Additional
Grantor"), by executing a counterpart of this Agreement substantially in the
form of Appendix V attached hereto. Upon delivery of any such counterpart to the
Purchaser, notice of which is hereby waived by the Grantors, each Additional
Grantor shall be a Grantor and shall be as fully a party hereto as if such
Additional Grantor were an original signatory hereto. Each Grantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Grantor hereunder nor by any
election of the Purchaser not to cause any Subsidiary of the Parent to become an
Additional Grantor hereunder. This Agreement shall be fully effective as to any
Grantor that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder. Each Additional
Grantor shall execute the filings specified in Section 5 hereof and such other
filings, registrations or instruments as the Purchaser may reasonably request,
in order to perfect the security interests granted or purported to granted
hereunder.
10.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same instrument.
10.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.12. ACKNOWLEDGMENTS. EACH GRANTOR HEREBY ACKNOWLEDGES THAT:
(a) IT HAS BEEN ADVISED BY COUNSEL IN THE NEGOTIATION, EXECUTION AND
DELIVERY OF THIS AGREEMENT;
(b) THE PURCHASER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP TO ANY
GRANTOR, AND THE RELATIONSHIP BETWEEN THE PURCHASER, ON THE ONE HAND, AND THE
GRANTORS, ON THE OTHER HAND, IS SOLELY THAT OF SECURED PARTY AND DEBTOR,
RESPECTIVELY; AND
(c) NO JOINT VENTURE EXISTS BETWEEN THE PURCHASER AND THE GRANTORS.
10.13. Dating. Although this Agreement is dated as of the date first
written above for convenience, this Agreement shall be effective on September
[__], 1998.
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<PAGE> 16
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly executed and delivered by its authorized officer as of the
date first written above.
NOMURA HOLDING AMERICA INC.
By: /s/ Salvatore Gentile
------------------------------------
Name: Salvatore Gentile
Title: Attorney-in-Fact
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
<PAGE> 17
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
<PAGE> 18
ANNEX A
TRADEMARKS
<PAGE> 19
ANNEX B
PATENTS
<PAGE> 20
ANNEX C
COPYRIGHTS
<PAGE> 21
APPENDIX I
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
THIS ASSIGNMENT FOR SECURITY dated as of September 23, 1998 (this
"Assignment"), is made by EACH SIGNATORY HERETO (each, together with its
successors and assigns, a "Grantor" and collectively, the "Grantors").
W I T N E S S E T H:
WHEREAS, the Grantors have adopted, used, are using or intend to use
the trademarks listed on Annex A to the Agreement referred to below (a copy of
which Annex A is attached hereto), which trademarks are registered or the
subject of pending applications for registration in the United States Patent and
Trademark Office (the "Trademarks"); and
WHEREAS, the Grantors have entered into a Intellectual Property
Security Agreement dated as of September 23, 1998 (as from time to time
amended, modified or supplemented in accordance with the terms thereof, the
"Agreement"; capitalized terms used herein without definition have the meanings
assigned to those terms in the Agreement), in favor of Nomura Holding America
Inc. (the "Purchaser"), in order to secure the prompt and complete payment,
observance and performance of the Secured Obligations (as defined in the
Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor does hereby assign
unto the Purchaser and grant to the Purchaser a security interest in, and
mortgage on, all right, title, and interest of such Grantor in and to the
Trademarks, and the applications and registrations thereof, together with the
goodwill of the business connected with the use of and symbolized by the
Trademarks, and all Proceeds (as defined in the Agreement) thereof, including,
without limitation, any and all royalties for any licenses thereof (the
"Trademark Collateral"), to secure the prompt and complete payment, performance
and observance of the Secured Obligations. Each Grantor does hereby further
acknowledge and affirm that the rights and remedies of the Purchaser with
respect to the assignment of and security interest in the Trademark Collateral
made and granted hereby are more fully set forth in the Agreement, the terms and
provisions of which are hereby incorporated herein by reference as if fully set
forth herein.
THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 22
IN WITNESS WHEREOF, each Grantor has caused this Assignment to be
duly executed by its authorized officer as of the date first written above.
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-2-
<PAGE> 23
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-3-
<PAGE> 24
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this __ day of September, 1998 before me personally appeared the
above-named ______, to me known, who being by me duly sworn according to law, on
his/her oath stated that he/she is the ___________ of [NAME OF GRANTOR] and
acknowledged that he/she signed, sealed and delivered the foregoing instrument
as the free and voluntary act and deed of said corporation.
Notary Public
My Commission Expires:
- ---------------------
-4-
<PAGE> 25
APPENDIX II
ASSIGNMENT FOR SECURITY
(PATENTS)
THIS ASSIGNMENT FOR SECURITY dated as of September 23, 1998 (this
"Assignment"), is made by EACH SIGNATORY HERETO (each, together with its
successors and assigns, a "Grantor", and collectively, the "Grantors").
W I T N E S S E T H:
WHEREAS, the Grantors own the letters patent, and applications for
letters patent, of the United States more particularly described on Annex B to
the Agreement referred to below, a copy of which Annex B is attached hereto (the
"Patents"); and
WHEREAS, the Grantors have entered into a Intellectual Property
Security Agreement dated as of September 23, 1998 (as from time to time
amended, modified or supplemented in accordance with the terms thereof, the
"Agreement"; capitalized terms used herein without definition have the meanings
assigned to those terms in the Agreement), in favor of Nomura Holding Company
Inc. (the "Purchaser"),in order to secure the prompt and complete payment,
observance and performance of the Secured Obligations (as defined in the
Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor does hereby assign
unto the Purchaser and grant to the Purchaser a security interest in, and
mortgage on, all right, title and interest of such Grantor in and to the
Patents, together with any application, issue, re-examination, reissue,
continuation, continuation-in-part, division, improvement or extension thereof,
and all Proceeds (as defined in the Agreement) thereof, including, without
limitation, any and all causes of action for infringement thereof for the full
term of the Patents and any and all royalties for any licenses thereof (the
"Patent Collateral"), to secure the prompt and complete payment, performance and
observance of the Secured Obligations. Each Grantor does hereby further
acknowledge and affirm that the rights and remedies of the Purchaser with
respect to the assignment of and security interest in the Patent Collateral made
and granted hereby are more fully set forth in the Agreement, the terms and
provisions of which are hereby incorporated herein by reference as if fully set
forth herein.
THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 26
IN WITNESS WHEREOF, each Grantor has caused this Assignment to be
duly executed by its authorized officer as of the date first written above.
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-2-
<PAGE> 27
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-3-
<PAGE> 28
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this __ day of September, 1998 before me personally appeared the
above-named __________, to me known, who being by me duly sworn according to
law, on his/her oath stated that he/she is the _________ of [NAME OF GRANTOR]
and acknowledged that he/she signed, sealed and delivered the foregoing
instrument as the free and voluntary act and deed of said corporation.
Notary Public
My Commission Expires:
- ---------------------
-4-
<PAGE> 29
APPENDIX III
ASSIGNMENT FOR SECURITY
(COPYRIGHTS)
THIS ASSIGNMENT FOR SECURITY dated as of September [__], 1998 (this
"Assignment"), is made by EACH SIGNATORY HERETO (each, together with its
successors and assigns, a "Grantor", and collectively, the "Grantors").
W I T N E S S E T H:
WHEREAS, the Grantors own those certain works, and their respective
copyrights, listed on Annex C to the Agreement referred to below, a copy of
which Annex C is attached to this Assignment (hereinafter referred to as the
"Works"); and
WHEREAS, the Grantors have entered into a Intellectual Property
Security Agreement dated as of September [__], 1998 (as from time to time
amended, modified or supplemented in accordance with the terms thereof, the
"Agreement"; capitalized terms used herein without definition have the meanings
assigned to those terms in the Agreement), in favor of Nomura Holding America
Inc. (the "Purchaser"), in order to secure the prompt and complete payment,
observance and performance of the Secured Obligations (as defined in the
Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor does hereby assign
and grant to the Purchaser a security interest in, and mortgage on, all right,
title and interest of such Grantor in and to the Works, including, without
limitation, all reproduction and allied rights necessary for production,
distribution and exploitation of said Works throughout the world in perpetuity,
and all copyrights therein and all renewals and extensions thereof, and all
translations, adaptations and other versions of the Works now made or hereafter
created. Each Grantor does hereby acknowledge that it has entered into the
Agreement in favor of the Purchaser in order to secure the prompt and complete
payment, observance and performance of the Secured Obligations and does hereby
affirm that the rights and remedies of the Purchaser with respect to the
assignment of and security interest in the Works made and granted hereby are
more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 30
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed by its authorized officer as of the date first written above.
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-2-
<PAGE> 31
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-3-
<PAGE> 32
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this __ day of September, 1998 before me personally appeared the
above-named _____________, to me known, who being by me duly sworn according to
law, on his/her oath stated that he/she is the of [NAME OF GRANTOR] and
acknowledged that he/she signed, sealed and delivered the foregoing instrument
as the free and voluntary act and deed of said corporation.
Notary Public
My Commission Expires:
- ---------------------
-4-
<PAGE> 33
APPENDIX IV
POWER OF ATTORNEY
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, that EACH SIGNATORY HERETO (each,
together with its successors and assigns, a "Grantor", and collectively, the
"Grantors"), hereby appoint and constitute Nomura Holding America Inc. (the
"Purchaser"), its true and lawful attorney, with full power of substitution, and
with full power and authority to perform the following acts on behalf of such
Grantor:
1. for the purpose of assigning, selling or otherwise disposing of
all right, title and interest of such Grantor in and to any letters patent or
patent applications of the United States or any other country or political
subdivision thereof throughout the world, and all registrations, recordings,
reissues, continuations, continuations-in-part, divisions, improvements, and
extensions thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
2. for the purpose of assigning, selling or otherwise disposing of
all right, title and interest of such Grantor in and to any trademarks, trade
names, trade styles and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
3. for the purpose of assigning, selling or otherwise disposing of
all right, title and interest of such Grantor in and to any works of authorship
capable of copyright protection and all copyright registrations, recordings,
extensions and renewals thereof, and all pending applications therefor, and for
the purpose of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and deliver any and
all agreements, documents, instruments of assignment or other papers necessary
or advisable to effect such purpose; and
4. to execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes described
above as the Purchaser may in its sole discretion determine.
<PAGE> 34
This Power of Attorney is made pursuant to a Intellectual Property
Security Agreement dated as of September 23, 1998 (as from time to time
amended, modified, or supplemented in accordance with the terms hereof, the
"Agreement"; capitalized terms used herein without definition herein have the
meanings assigned to those terms in the Agreement), between the Grantors and the
Purchaser, and takes effect solely for the purposes of Section 7 of the
Agreement and is subject to the conditions thereof and may not be revoked until
the prompt and complete payment, observance and performance of all Secured
Obligations shall have been made, the Agreement has been terminated and all
Collateral has been released pursuant to the terms of the Agreement. This Power
of Attorney is not exercisable by the Purchaser at any time other than after and
during the continuance of an Event of Default (as defined in the Note Purchase
Agreement).
-2-
<PAGE> 35
IN WITNESS WHEREOF, this Power of Attorney has been duly executed
and delivered by the Grantors as of this 23rd day of September, 1998.
EASYRIDERS, INC.
By: /s/ William Prather
------------------------------------
Name:
Title:
PAISANO PUBLICATIONS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS OF COLUMBUS, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
EASYRIDERS FRANCHISING, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-3-
<PAGE> 36
TERESI, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
BROS CLUB, INC.
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
ASSOCIATED RODEO RIDERS ON WHEELS
By: /s/ Joseph Teresi
------------------------------------
Name:
Title:
-4-
<PAGE> 37
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this __ day of September, 1998 before me personally appeared the
above-named _______________, to me known, who being by me duly sworn according
to law, on his/her oath stated that he/she is the of [NAME OF GRANTOR] and
acknowledged that he/she signed, sealed and delivered the foregoing instrument
as the free and voluntary act and deed of said corporation.
Notary Public
My Commission Expires:
- ---------------------
-5-
<PAGE> 38
APPENDIX V
COUNTERPART TO INTELLECTUAL PROPERTY SECURITY AGREEMENT
This counterpart, dated September 23, 1998, is delivered
pursuant to Section 10.9 of that certain Intellectual Property Security
Agreement dated as of September 23, 1998 (as from time to time amended,
modified or supplemented, the "Intellectual Property Security Agreement"; the
terms defined therein and not otherwise defined herein being used as therein
defined), made by the Easyriders, Inc. and certain of its Subsidiaries signatory
thereto in favor of Nomura Holding America Inc. The undersigned hereby agrees
(i) that this counterpart may be attached to the Intellectual Property Security
Agreement, and (ii) that the undersigned will comply with all the terms and
conditions of the Intellectual Property Security Agreement as if it were an
original signatory thereto.
[NAME OF ADDITIONAL GRANTOR]
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.5.5
EXHIBIT F-1 TO NOTE AND WARRANT PURCHASE AGREEMENT
(Form of Warrant)
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT AND LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
EASYRIDERS, INC.
Expires September 23, 2005
New York, New York
September 23, 1998
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, EASYRIDERS, INC., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that
NOMURA HOLDING AMERICA INC.
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, 355,920 shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at 5:00 P.M., Eastern Time, on September 23, 2005 (such
period being the "Term").
<PAGE> 2
2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check, (ii) by surrender to the Company for cancellation of (x) first, a
Revolving Note or Revolving Notes and (y) after such time as no Revolving Notes
remain outstanding, a Term Note or Term Notes (in respect of any such Notes the
Holder shall be the sole legal and beneficial owner) to the extent of a portion
of the principal amount thereof or (at the election of the Holder) accrued and
unpaid interest thereon which is equal in the aggregate to the aggregate Warrant
Price of the shares of Warrant Stock being purchased upon such exercise (and, if
Holder makes such election, for such purposes, all interest accrued on such
Notes to the date of such exercise shall first be applied to such payment before
any of the principal amount thereof shall be so surrendered and applied), or
(iii) by surrender to the Issuer for cancellation of a portion of this Warrant
representing that number of unissued shares of Warrant Stock which is equal to
the quotient obtained by dividing (A) the product obtained by multiplying the
Warrant Price by the number of shares of Warrant Stock being purchased upon such
exercise by (B) the difference obtained by subtracting the Warrant Price from
the Current Market Price per share of Warrant Stock as of the date of such
exercise, or (iv) by a combination of the foregoing methods of payment selected
by the Holder of this Warrant. In any case where the consideration payable upon
such exercise is being paid in whole or in part pursuant to the provisions of
clause (ii) or clause (iii) of this Section 2(b), such exercise shall be
accompanied by written notice from the Holder of this Warrant specifying the
manner of payment thereof, and in the case of an application of clause (ii),
stating the respective amounts of principal and interest of the Notes to be
applied to such payment, and in the case of an application of clause (iii),
containing a calculation showing the number of shares of Warrant Stock with
respect to which rights are being surrendered thereunder and the net number of
shares to be issued after giving effect to such surrender. If, pursuant to
clause (ii) above, less than the entire unpaid principal amount of any Note
shall be applied toward payment of the consideration payable upon any exercise
of this Warrant, the Holder thereof shall surrender the Note and the Issuer
shall issue a new Note (dated the date of the Note being surrendered)
representing the balance of the unpaid principal amount of the Note so
surrendered, payable to such Holder or as such Holder may otherwise direct.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Business Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have
-2-
<PAGE> 3
been exercised (less any amount thereof which shall have been cancelled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof within such time.
(d) Transferability of Warrant. Subject to the provisions of Section
2(e) hereof, this Warrant may be transferred on the books of the Issuer by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant at the principal office of the Issuer, properly endorsed (by the Holder
executing an assignment in the form attached hereto) and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
for the purchase of the same aggregate number of shares of Warrant Stock, each
new Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Closing Date and
shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT AND LAWS.
(iii) The restrictions imposed by this Section 2(e) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, or (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer (it being understood
that in-house counsel to the Holder shall be deemed to be acceptable
counsel), addressed to the Issuer to the effect that such restrictions
are no longer required to ensure compliance with the Securities Act.
Whenever such restrictions shall cease and terminate as to any such
securities, the Holder thereof shall be entitled to receive from the
Issuer (or its transfer agent and registrar), without expense (other
than applicable transfer taxes, if any), new Warrants (or, in the case
of shares of Warrant Stock, new stock
-3-
<PAGE> 4
certificates) of like tenor not bearing the applicable legends required
by paragraph (ii) above relating to the Securities Act and state
securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge
in writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.
3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Reservation. If any shares of the Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange,
and will maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities
exchange by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against impairment. Without limiting the generality of the foregoing, the
Issuer will (i) not permit the par value, if any, of its Common Stock to exceed
the then effective Warrant Price, (ii) not amend or modify any provision of the
Certificate of Incorporation or by-laws of the Issuer in any manner that would
adversely affect in any way the powers, preferences or relative participating,
optional or other special rights of the Common Stock or which would
-4-
<PAGE> 5
adversely affect the rights of the Holders of the Warrants, (iii) take all such
action as may be reasonably necessary in order that the Issuer may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
(it being understood and agreed that if the holder of such Warrant is Nomura
Holding America Inc., then a written agreement of indemnity given by Nomura
Holding America Inc. alone shall be satisfactory to the Issuer and no further
security shall be required) or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Issuer will make and deliver, in
lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same number of shares of Common
Stock.
(e) Rights and Obligations under the Registration Rights Agreement.
This Warrant is entitled to the benefits and subject to the terms of the
Registration Rights Agreement dated as of September 23, 1998 between the Issuer
and the Holders (as amended from time to time, the "Registration Rights
Agreement"). The Issuer shall keep or cause to be kept a copy of the
Registration Rights Agreement, and any amendments thereto, at its chief
executive office and shall furnish, without charge, copies thereof to the Holder
upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale. (i) In case the Issuer after the Closing Date shall do any of
the following (each a "Triggering Event") (a) consolidate with or merge into any
other Person and the Issuer shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) permit any other Person to consolidate
with or merge into the Issuer and the Issuer shall be the continuing or
surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately prior to the consummation of such Triggering Event in lieu of
the Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had
-5-
<PAGE> 6
exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in Section 4 hereof or
(y) to sell this Warrant (or, at such Holder's election, a portion hereof) to
the Person continuing after or surviving such Triggering Event, or to the Issuer
(if Issuer is the continuing or surviving Person) at a sales price equal to the
amount of cash, property and/or Securities to which a holder of the number of
shares of Common Stock which would otherwise have been delivered upon the
exercise of this Warrant would have been entitled upon the effective date or
closing of any such Triggering Event (the "Event Consideration"), less the
amount or portion of such Event Consideration having a fair value equal to the
aggregate Warrant Price applicable to this Warrant or the portion hereof so
sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (b) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this Section
4(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this paragraph (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this Section 4(a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's
cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant
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<PAGE> 7
Price shall be proportionately increased (as at the effective date of such
combination or, if the Issuer shall take a record of Holders of its Common Stock
for the purpose of so combining, as at the applicable record date, whichever is
earlier) to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying
the Warrant Price in effect immediately prior to such record date (or
if no such record is taken, then immediately prior to such payment or
other distribution), by a fraction (1) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (2) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that
the Issuer paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Issuer issued
fractional shares in connection with said dividends); or
(ii) Liquidating Dividends, etc. Make a distribution of its
property to the Holders of its Common Stock as a dividend in
liquidation or partial liquidation or by way of return of capital other
than as a dividend payable out of funds legally available for dividends
under the laws of the State of Delaware, the Holder of this Warrant
shall, upon exercise (including without limitation payment of the
Warrant Price), be entitled to receive, in addition to the number of
shares of Warrant Stock receivable thereupon, and without payment of
any additional consideration therefor, a sum equal to the amount of
such property as would have been payable to such Holder had such Holder
been the Holder of record of such Warrant Stock on the record date for
such distribution or if no such record is taken, on the date of such
distribution; and appropriate provision therefor shall be made a part
of any such distribution, or
(iii) Other Dividends. Make a distribution of cash or property
to the Holders of its Common Stock (other than as described in clause
(i) or (ii) of this Section 4(c)), the Issuer shall give the Holder of
this Warrant notice no less than 30 days prior to the record date for
such distribution or if no such record is taken, the date of such
distribution, which notice shall describe the nature of the proposed
distribution.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at
any time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Current
Market Price then in effect or (at any time after September 23, 1999) less than
the Warrant Price then in effect, or at any time without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price
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<PAGE> 8
(rounded to the nearest cent) determined by multiplying the Warrant Price then
in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the Current Market Price then in effect or (at any
time after September 23, 1999), if greater, the Warrant Price then in
effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (y) no adjustment was required pursuant to
subsection (e) of this Section 4.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Current Market Price then in effect or (at any time after September 23, 1999)
less than the Warrant Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent
is amended or adjusted, and such price as so amended shall be less than the
Current Market Price or (at any time after September 23, 1999) less than the
Warrant Price, in each case in effect at the time of such amendment, then the
Warrant Price upon each such issuance or amendment shall be adjusted as provided
in the first sentence of subsection (d) of this Section 4 on the basis that (1)
the maximum number of Additional Shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued (whether or
not such Common Stock Equivalents are actually then exercisable, convertible or
exchangeable in whole or in part) as of the earlier of (A) the date on which the
Issuer shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent,
and (2) the aggregate consideration for such maximum number of Additional Shares
of Common Stock shall be deemed to be the minimum consideration received or
receivable by the Issuer for the issuance of such Additional Shares of Common
Stock pursuant to such Common Stock Equivalent. No adjustment of the Warrant
Price shall be made under this subsection (e) upon the issuance of any
Convertible Security which is issued pursuant to the exercise of any warrants or
other subscription or purchase rights therefor, if any adjustment shall
previously have been made in the Warrant Price then in effect upon the issuance
of such warrants or other rights pursuant to this subsection (e). If no
adjustment is required under this subsection (e) upon issuance of any Common
Stock Equivalent or once an adjustment is made under
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<PAGE> 9
this subsection (e) based upon the Current Market Price in effect on the date of
such adjustment, no further adjustment shall be made under this subsection (e)
based solely upon a change in the Current Market Price after such date.
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Current Market Price then in
effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Current Market Price; and
(ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Current Market Price
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received
by the Issuer shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received by
the Issuer therefor, or if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by the Issuer for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions, or expenses paid or incurred by
the Issuer for or in connection with the underwriting thereof or
otherwise in connection with the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of
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<PAGE> 10
any Additional Shares of Common Stock or Common Stock Equivalents in
payment or satisfaction of any dividend upon any class of Capital Stock
of the Issuer other than Common Stock, the Issuer shall be deemed to
have received for such Additional Shares of Common Stock or Common
Stock Equivalents a consideration equal to the amount of such dividend
so paid or satisfied. In any case in which the consideration to be
received or paid shall be other than cash, the Board shall notify the
Holder of this Warrant of its determination of the fair market value of
such consideration prior to payment or accepting receipt thereof. If,
within thirty days after receipt of said notice, the Majority Holders
shall notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be made by an Independent Appraiser selected by the
Majority Holders with the approval of the Board (which approval shall
not be unreasonably withheld), whose fees and expenses shall be paid by
the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with
the issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common
Stock at any time outstanding shall (a) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (b) shall be deemed to include
all shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of Indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Closing Date
hereof the Issuer shall take any action affecting its Common Stock, other than
an action described in any of the foregoing subsections (a) through (g) of this
Section 4, inclusive, and the failure to make any adjustment would not fairly
protect the purchase rights represented by this Warrant in accordance with the
essential intent and principle of this Section 4, then the Warrant Price shall
be adjusted in such manner and at such time as the Board may in good faith
determine to be equitable in the circumstances.
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<PAGE> 11
(i) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to a "big six" national
accounting firm selected by the Holder, provided that the Issuer shall have ten
days after receipt of notice from such Holder of its selection of such firm to
object thereto, in which case such Holder shall select another such firm and the
Issuer shall have no such right of objection. The firm selected by the Holder of
this Warrant as provided in the preceding sentence shall be instructed to
deliver a written opinion as to such matters to the Issuer and such Holder
within thirty days after submission to it of such dispute. Such opinion shall be
final and binding on the parties hereto. The fees and expenses of such
accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Current Market Price then
in effect.
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Closing Date, and all shares of
Other Common, if any, issued by the Issuer after the Closing Date,
except (i) Warrant Stock, (ii) any shares of Common Stock issuable upon
exercise of the Outstanding Common Stock Equivalents (other than those
issued pursuant to the Issuer's 1998 Executive Incentive Compensation
Plan) provided that the number of shares excluded by reason of this
clause (ii) shall be limited to 1,897,907 and (iii) any shares of
Common Stock
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<PAGE> 12
issuable upon exercise of the Common Stock Equivalents issued pursuant
to the Issuer's 1998 Executive Incentive Compensation Plan, provided
that the number of shares excluded by reason of this clause (iii) shall
be limited to 2,800,000.
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" means any day except a Saturday, a Sunday or a
legal holiday in New York City.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock and any "phantom" stock rights,
(ii) all partnership interests (whether general or limited) in any
Person which is a partnership, (iii) all membership interests or
limited liability company interests in any limited liability company,
and (iv) all equity or ownership interests in any Person of any other
type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Closing Date as
hereafter from time to time amended, modified, supplemented or restated
in accordance with the terms hereof and thereof and pursuant to
applicable law.
"Closing Date" means September 23, 1998.
"Common Stock" means the Common Stock, no par value, of the
Issuer and any other Capital Stock into which any such stock may
hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Company" means Paisano Publications, Inc., a Delaware
corporation and wholly-owned Subsidiary of the Issuer.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Current Market Price" as in effect on any day means the
average of the daily market prices of the Common Stock for the period
of 30 consecutive trading days ending three trading days preceding such
date. The market price for each such day shall be the last sale price
on such day as reported on the New York Stock Exchange Consolidated
Tape, or, if the Common Stock is not listed on the New York Stock
Exchange, Inc. or reported on such Consolidated Tape, then the last
sale price on such day on the principal domestic stock exchange on
which such Stock is then listed or admitted to trading, or, if no sale
takes place on such day on such exchange, the average of the closing
bid and asked prices on such day as officially quoted on such exchange,
or, if the Common Stock is not then listed or admitted to trading on
any
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<PAGE> 13
domestic stock exchange but is quoted in the Nasdaq Stock Markets
National Market System ("NMS/NASDAQ") of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), then
the Current Market Price for each such trading day shall be the last
sale price on such day as quoted by NMS/NASDAQ, or, if no sale takes
place on such day or if the Common Stock is neither listed or admitted
to trading on any domestic stock exchange nor quoted on such
NMS/NASDAQ, then the Current Market Price for each such trading day
shall be the average of the reported closing bid and asked price
quotations on such day in the over-the-counter market, as reported by
NASDAQ, or, if not so reported, as furnished by the National Quotation
Bureau, Inc., or if such firm at the time is not engaged in the
business of reporting such prices, as furnished by any similar firm
then engaged in such business as selected by the Issuer, or if there is
no such firm, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Issuer with the written
approval of the Majority Holders. If at any time the Common Stock is
not listed on any domestic exchange or quoted in the domestic
over-the-counter market, the Current Market Price shall be deemed to be
an amount determined in good faith by the Board and agreed upon in
writing by the Majority Holders within fifteen days of notice by the
Board to the Holders of its determination of the Current Market Price.
If no agreement as to Current Market Price is so reached, the Current
Market Price shall be the fair market value per share of Common Stock
as determined by an Independent Appraiser selected by the Majority
Holders and consented to by the Issuer (which consent shall not be
unreasonably withheld), whose fees and expenses shall be paid by the
Issuer. The determination of fair market value by such Appraiser shall
be based upon the fair market value of the Issuer determined on a going
concern basis as between a willing buyer and a willing seller and
taking into account all relevant factors determinative of value, and
shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be
given to any restrictions on transfer of the Common Stock imposed by
agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute at the time in effect.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Indebtedness" has the meaning provided in the Note Agreement.
"Independent Appraiser" means a nationally recognized
investment banking firm or other nationally recognized firm that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means Easyriders, Inc., a Delaware corporation, and
its successors.
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<PAGE> 14
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Notes" means the notes of the Company issued pursuant to the
Note Agreement.
"Note Agreement" means the Note and Warrant Purchase
Agreement, dated as of September 23, 1998 among the Issuer, the
Company and Nomura Holding America Inc., as purchaser, as such
agreement may from time to time be amended, modified or supplemented in
accordance with its terms.
"Other Common" means any Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Outstanding Common Stock Equivalents" means the Common Stock
Equivalents outstanding on the Closing Date and listed on Schedule 1
hereto.
"Person" means an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government organization or
an agency or political subdivision thereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security.
"Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Note Agreement, including, without limitation, this Warrant, and any
other warrants of like tenor issued in substitution or exchange for any
thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof
or of any of such other Warrants.
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<PAGE> 15
"Warrant Price" means initially $3.00 and such other prices as
shall result from the adjustments specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
to such number made or required to be made under the terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Information. The Issuer shall deliver to the Holder hereof and to
each holder of shares of Warrant Stock (i) if the Issue is subject to reporting
requirements under the Exchange Act, copies of all regular and periodic reports
and registration statements (other than on Form S-8 or similar form) which the
Issuer may file with the SEC or any securities exchange, or (ii) in all other
circumstances, the documents and other information required under paragraphs
(a), (b)(i), (c)(i), (e), (f), and (g) of Section 7 of the Note Agreement within
the applicable time period specified therein and regardless of whether or not
the Note Agreement is then in effect or the Term has expired.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
11. Notices. All notices and other communications provided for
hereunder shall be in writing and delivered by hand or sent by first class mail
or sent by telecopy (with such telecopy to be confirmed promptly in writing sent
by first class mail), and if to the Holder of this Warrant or of Warrant Stock
issued pursuant hereto, addressed to such Holder at its last known address or
telecopy number appearing on the books of the Issuer maintained for such
purposes, and if to the Issuer, addressed to:
Easyriders, Inc
567 San Nicholas Drive
Suite 400
Newport Beach, California 92660
Attention: President
Telecopy No.: (714) 718-4630
or to such other address or addresses or telecopy number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. All such communications shall be deemed to have been given or
made when so delivered by hand or sent by telecopy, or three business days after
being so mailed.
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<PAGE> 16
12. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
13. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock
14. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
15. Integration. This Warrant and the other Warrants issued pursuant to
the Note Agreement replace all prior agreements, supersede all prior
negotiations and constitute the entire agreement of the parties with respect to
the transactions contemplated herein. References to the Note Agreement herein
shall, to the extent that the Notes and other obligations thereunder have been
repaid and such Note Agreement has terminated, mean the Note Agreement as in
effect immediately prior to its termination.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
EASYRIDERS, INC.
By: /s/ William Prather
-------------------------------
Its President
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<PAGE> 17
EXERCISE FORM
EASYRIDERS, INC.
The undersigned _________________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ______ shares of Common Stock of EASYRIDERS,
INC. covered by the within Warrant.
Dated: _____________ Signature ___________________________________________
Address _______________________________
_______________________________
ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto
_______________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _______________, attorney, to transfer the
said Warrant on the books of the within named corporation.
Dated: _____________ Signature ___________________________________________
Address _______________________________
_______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
_________________ the right to purchase ________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint _____________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _____________ Signature ___________________________________________
Address _______________________________
_______________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-____ cancelled (or transferred or exchanged) this ___ day
of__________, 19_, shares of Common Stock issued therefor in the name of
___________________, Warrant No. W-____ issued for _____ shares of Common Stock
in the name of_______________________
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<PAGE> 18
Schedule 1
OUTSTANDING COMMON STOCK EQUIVALENTS
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<PAGE> 1
EXHIBIT 10.5.6
EXHIBIT F-2 TO NOTE AND WARRANT PURCHASE AGREEMENT
(Form of Registration Rights Agreement)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
September 23, 1998, is made by and between EASYRIDERS, INC., a Delaware
corporation (together with its successors, the "Company"), and Nomura Holding
America Inc., a Delaware corporation (together with its successors and assigns,
"Nomura").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Note and Warrant Purchase Agreement
dated as of even date herewith (the "Note Agreement"), Paisano Publications,
Inc., a California corporation, has agreed to issue and sell to Nomura the Notes
(capitalized terms used but not otherwise defined herein shall have the
respective meanings given to such terms in Article I hereof) and the Company has
agreed to issue and sell to Nomura the Warrants to purchase shares of its Common
Stock;
WHEREAS, it is a condition precedent to the purchase of such securities
by Nomura that the Company and Nomura enter into this Agreement; and
WHEREAS, the Company and Nomura deem it to be in their respective best
interests to enter into this Agreement to provide certain rights to Nomura in
connection with the Warrants;
NOW, THEREFORE, to implement the foregoing and in consideration of the
mutual terms, conditions and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings given to such terms in the
Note Agreement. The following terms shall have the following meanings:
"Common Stock" means the Company's Common Stock, no par value per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute then in effect.
"Majority Holders" means on any date the holders of a majority of the
Registrable Securities on such date.
<PAGE> 2
"managing underwriter" means, with respect to any Underwritten Offering,
the investment banker (or investment bankers) selected by the Company that shall
manage the offering.
"Public Offering" means any primary or secondary public offering of Common
Stock pursuant to an effective registration statement under the Securities Act,
other than pursuant to a registration statement on Form S-4 or Form S-8 or any
successor or similar form.
"Registrable Securities" shall mean (a) all shares of Common Stock issued
or issuable upon the exercise of any Warrant and (b) any securities issued or
issuable by the Company with respect to shares of Common Stock referred to in
the foregoing clause (a) by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares, reclassification,
merger, consolidation or other reorganization of the Company; provided, however,
that as to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144, (iii) they shall have been otherwise
transferred or disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding. For the purposes of
Article II hereof, the holder of any Warrant shall be deemed to be a holder of
the Registrable Securities issuable upon exercise, exchange or conversion of
such Warrant, and such Registrable Securities shall be deemed to be issued and
outstanding.
"Registration Expenses" shall mean any and all expenses incident to the
Company's performance of or compliance with Article II hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, listing fees, fees and disbursements of legal counsel for
the Company, reasonable fees and disbursements of one legal counsel for the
holders of Registrable Securities, Blue Sky fees and expenses (including the
reasonable fees and disbursements of underwriters' counsel in connection with
Blue Sky qualifications and filings), fees and expenses of the transfer agent
and registrar for the Registrable Securities, and the fees and expenses of any
special audits and/or "cold comfort" letters required by or incident to such
performance and compliance, but excluding underwriting discounts and commissions
and applicable transfer and documentary stamp taxes, if any, which shall be
borne by the seller of the securities in all cases.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time.
"SEC" means the United States Securities and Exchange Commission, and any
successor agency or governmental body.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
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<PAGE> 3
"Stock" means any capital stock of the Company or other securities
convertible into or exchangeable therefor, including warrants, options or other
rights to acquire capital stock or any interest therein.
"Underwritten Offering" means any public offering of securities
distributed by means of a firm commitment underwriting.
Section 1.2. Other Definitional Provisions. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms, and words of the masculine gender shall mean and include
correlative words of the feminine and neuter genders. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision.
References herein to any Section or subsection are to the corresponding Section
or subsection to this Agreement unless otherwise specified. Any headings
preceding the texts of the several Sections and subsections of this Agreement
are solely for convenience of reference and shall not constitute a part of this
Agreement nor in any way define, limit or extend the scope or otherwise affect
the meaning thereof.
ARTICLE II.
REGISTRATION RIGHTS
2.1. Piggyback Registration Rights. (a) If the Company at any time
proposes to register under the Securities Act any shares of its Common Stock now
or hereafter authorized, other than a registration on Form S-4 or S-8 or any
successor form, whether for sale for its own account or for the account of any
selling stockholder, on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give written notice to all the holders of Registrable Securities promptly, and
in any event no later than 20 days (10 days if the registration is a Form S-3)
before the initial filing with the SEC of a registration statement, of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (i) whether or not such registration will be in
connection with an underwritten offering of securities and, if so, the identity
of the managing underwriter and whether such offering will be pursuant to a
"best efforts" or "firm commitment" underwriting, (ii) the price at which such
securities are reasonably expected to be sold to the public, and (iii) the
amount of the underwriting discount reasonably expected to be incurred in
connection therewith). Upon the written request of any such holder delivered to
the Company within 10 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will
(subject to the provisions of Section 2.1(c) hereof) include in such
registration all of the Registrable Securities that the Company has been so
requested to register; provided, however, that if, at any time after giving such
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with
such registration, the Company may at its election give written notice of such
determination to each holder of Registrable Securities who made a request as
hereinabove provided and thereupon the Company shall be
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<PAGE> 4
relieved of its registration obligations (but not from its obligation to pay
Registration Expenses in connection therewith).
(b) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 2.1
shall be paid by the Company.
(c) If a registration pursuant to this Section 2.1 involves an
Underwritten Offering and the managing underwriter advises the Company that, in
its opinion, the number of securities proposed to be included in such offering
exceeds the number of securities which can be sold therein without adversely
affecting the marketability of the offering, then the Company will promptly so
advise each holder of Registrable Securities that has requested registration,
and will include in such registration: first, authorized but unissued or
treasury shares of Common Stock which the Company desires to include in such
registration; and second, Registrable Securities requested to be included
therein and other outstanding shares of Common Stock requested to be included in
such registration ("Other Securities"), allocated pro rata among the holders of
Registrable Securities and Other Securities based on the number of Registrable
Securities with respect to which each such holder has requested registration, in
each case until the aggregate number of securities included in such registration
is equal to the number thereof that, in the opinion of such managing
underwriter, can be sold without adversely affecting the marketability thereof.
2.2. Registration Procedures. (a) Whenever any holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to Section 2.1 hereof (subject to the applicable terms and conditions contained
therein), the Company will use its best efforts to effect the registration of
such securities under the Securities Act and the sale thereof in accordance with
the intended method of disposition thereof, and in connection therewith the
Company will, as expeditiously as possible:
(i) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and cause such registration
statement to become and remain effective until the earlier of (A) six
months or, if such registration statement relates to an Underwritten
Offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in connection
with sales of Registrable Securities by an underwriter or dealer, or (B)
such shorter period as is required to complete the distribution of all of
the securities covered by such registration statement (but in any event
not before the expiration of any longer period required under the
Securities Act);
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement;
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<PAGE> 5
(iii) prior to filing with the SEC any such registration statement,
prospectus, or amendment or supplement thereto, furnish copies thereof to
counsel for the sellers of Registrable Securities under such registration
statement, which documents will be subject to review by such counsel;
(iv) furnish to each seller of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included
in such registration statement (including each preliminary prospectus) and
such other documents as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(v) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller in such
jurisdictions, except that the Company shall not be required (A) to
qualify to do business as a foreign corporation in any jurisdiction where,
but for the requirements of this Section 2.2(a), it is not then so
qualified, (B) to subject itself to taxation in any such jurisdiction, or
(C) to take any action which would subject it to service of process in any
such jurisdiction where it is not then so subject;
(vi) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered or qualified with
or approved by such other governmental agencies or authorities (including,
without limitation, state securities commissions) as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vii) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, if
the Company becomes aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and, at the request of any such
seller, deliver a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing;
(viii) cause all Registrable Securities covered by the registration
statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
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<PAGE> 6
(ix) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities (including
participating in "road shows" and engaging in other customary marketing
efforts);
(xi) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(xii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
security holders, in each case as soon as practicable but in no event
later than 45 days after the close of the period covered thereby (or 90
days in case the period covered corresponds to a fiscal year of the
Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act;
(xiii) immediately notify each seller of Registrable Securities
covered by such registration statement in the event of the issuance of any
stop order suspending the effectiveness of a registration statement, or of
any order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Securities included in
such registration statement for sale in any jurisdiction, and use its best
efforts promptly to obtain the withdrawal of such order;
(xiv) obtain and furnish a "cold comfort" letter, dated the
effective date of such registration statement (and, if such registration
involves an Underwritten Offering, dated the date of the closing under the
underwriting agreement), signed by the Company's independent public
accountants and addressed to the holders of the Registrable Securities, in
customary form and covering such matters as are customarily covered by
comfort letters by independent public accountants in such public offerings
and such other financial matters as the holders of a majority of the
Registrable Securities being sold may reasonably request; and
(xv) furnish a legal opinion of the Company's counsel, dated the
effective date of such registration statement (and, if such registration
involves an Underwritten Offering, dated the date of the closing under the
underwriting agreement) and addressed to the holders of the Registrable
Securities, with respect to the registration statement, each amendment and
supplement thereto, the prospectus included therein (including the
preliminary prospectus) and other
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<PAGE> 7
documents relating thereto, in customary form and covering such matters as
are customarily covered by legal opinions of issuers' counsel in such
public offerings.
(b) It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 2.2 in respect of
Registrable Securities that the holders requesting registration thereof shall
furnish to the Company such information regarding the Registrable Securities
held by such holder and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action taken by the Company; provided, however, that the failure of any holder
of Registrable Securities to furnish such information shall not affect the
obligations of the Company pursuant to this Section 2.2 with respect to any
holder of Registrable Securities who furnishes such information to the Company.
Notwithstanding any provision to the contrary contained herein, no holder of
Registrable Securities shall be required to furnish any information or make any
representations or warranties to the Company or the underwriters other than
representations and warranties contained in a writing furnished by such holder
expressly for use in the registration statement to be filed in connection with
such registration solely with regard to such holder's identity, its ownership of
securities of the Company, the class and number of such securities it intends to
include in such offering, its intended method of distribution, other information
pertinent to such holder in its capacity as a selling holder, and any other
information with respect to such holder required by law to be disclosed in such
registration statement.
(c) If a registration pursuant to Section 2.1 involves an
Underwritten Offering:
(i) The right of any holder of Registrable Securities to
such registration shall be conditioned upon such holder's participation in
such underwriting and the inclusion of such holder's Registrable
Securities in the underwriting to the extent provided herein. The holders
of Registrable Securities to be distributed by the underwriters thereof
shall be parties to the underwriting agreement between the Company and
such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable Securities. No such holder
of Registrable Securities shall be required to make any representations or
warranties to, or agree to any indemnities or contribution provisions
with, the Company or the underwriters other than representations,
warranties, indemnities and contribution provisions with respect to
information required to be furnished by such holder in writing pursuant to
subsection (b) of this Section 2.2.
(ii) Each holder of Registrable Securities included in such
registration agrees not to sell, grant any option to purchase, acquire any
option to sell, make any short sale of or otherwise dispose of or reduce
its investment risk in any securities of the Company (other than as part
of such Underwritten Offering), without the consent of the managing
underwriter, for a period of 30 days in all cases (or such lesser or
greater number as the managing underwriter shall designate) after the
effective date of such registration. At the request of the
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<PAGE> 8
managing underwriter, each such holder of Registrable Securities shall
execute a separate agreement with such managing underwriter to the
foregoing effect.
(iii) The Company agrees, if so required by the managing
underwriter, not to effect any sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as
the case may be, (other than as part of such Underwritten Offering) for a
period of 30 days in all other cases after the effective date of such
registration, except in connection with a stock option plan, stock
purchase plan, dividend reinvestment plan, savings or similar plan.
(iv) Any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the
effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration.
2.3. Sale of Registrable Securities. In the case of any offering subject
to the provisions of Section 2.1 hereof, in lieu of the holders of any
Registrable Securities including such Registrable Securities in any registration
statement filed in connection therewith and/or exercising any Warrant,
simultaneously with the sale of any securities subject to such registration
statement by the Company to the underwriters of such offering (or, in the case
of a best efforts offering, to the public), each such holder may at its
option sell its Registrable Securities and Warrant to the Company to the extent
such Registrable Securities could have been included in such registration
statement pursuant to Section 2.1, and to the extent that a number of shares
equal to such Registrable Securities are actually purchased from the Company by
the underwriters or the public, as the case may be, in connection with such
offering, with the price per share being the same as the net price per share
received by the Company from such underwriters or the public, as the case may
be, pursuant to such offering.
2.4. Indemnification. (a) In the event of any registration of any
securities under the Securities Act pursuant to Section 2.1 hereof, the Company
will, and it hereby agrees to, indemnify and hold harmless, to the extent
permitted by law, each seller of any Registrable Securities covered by such
registration statement, its directors, officers, general and limited partners,
employees, agents and representatives (and directors and officers thereof and,
if such seller is a portfolio or investment fund, its investment advisors or
agents), each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such seller
or any such underwriter within the meaning of Section 15 of the Securities Act,
as follows:
(i) against any and all loss, liability, claim, damage, attorneys'
fee or expense whatsoever arising out of or based upon an untrue statement
or alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement (a
"Settlement
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<PAGE> 9
Payment") of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense (other than any Settlement
Payment) reasonably incurred by them in connection with investigating,
preparing or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under clauses (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such seller or underwriter
expressly for use in the preparation of any registration statement (or any
amendment thereto) or any preliminary prospectus or prospectus (or any amendment
or supplement thereto); and provided, further, that the Company will not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities (or, if such offering and sale are not effected by or
through an underwriter, then such seller) or any other Person, if any, who
controls such underwriter (or seller, as the case may be) within the meaning of
Section 15 of the Securities Act, under the indemnity agreement in this Section
2.4(a) with respect to any preliminary prospectus or final prospectus or final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, claim, damage or liability of such underwriter or controlling
Person results from the fact that such underwriter (or seller, as the case may
be) sold Registrable Securities to a Person to whom there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever
is most recent, if the Company has previously furnished copies thereof to such
underwriter (or seller, as the case may be). Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, general or limited partner, investment
advisor or agent, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 hereof that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 2.4(a) hereof) the Company, the underwriters, if
any, each Person who controls the Company or any such underwriter (within the
meaning of Section 15 of the Securities Act) and their respective officers,
directors, partners, employees, agents and representatives, with respect to any
statement in or omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on
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<PAGE> 10
behalf of such seller specifically for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company, the underwriters, or any
such director, officer, partner, employee, agent, representative or controlling
Person and shall survive the transfer of such securities by such seller. The
obligations of the Company and such seller pursuant to this Section 2.4 are to
be several and not joint; provided, however, that, with respect to each claim
pursuant to this Section 2.4, the Company shall be liable for the full amount of
such claim, and each such seller's liability under this Section 2.4 shall be
limited to an amount equal to the net proceeds (after deducting the
underwriters' discount and expenses) received by such seller from the sale of
Registrable Securities by it pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in this Section 2.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 2.4, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
(d) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnities (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority.
2.5. Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by Section 2.4 hereof is
for any reason not available, the parties required to indemnify by the terms
thereof shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
the Company, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances.
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The Company, each such seller and the underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the initial public offering
price of the Registrable Securities. For purposes of this Section 2.5, each
Person, if any, who controls an underwriter within the meaning of Section 15 of
the Securities Act shall have the same rights to contribution as such
underwriter, and each director and each officer of the Company who signed the
registration statement, and each Person, if any, who controls the Company or a
seller of Registrable Securities shall have the same rights to contribution as
the Company or a seller of Registrable Securities, as the case may be.
Notwithstanding the foregoing, no seller of Registrable Securities shall be
required to contribute any amount in excess of the amount such seller would have
been required to pay to an indemnified party if the indemnity under Section 2.4
hereof were available.
2.6. Current Public Information. At all times after the Company has filed
a registration statement with the SEC pursuant to the requirements of either the
Securities Act or the Exchange Act, and as long as any Warrant shall remain
outstanding or the holders thereof shall hold any Registrable Securities, the
Company will file all reports required to be filed by it under the Securities
Act and the Exchange Act and the rules and regulations adopted by the SEC
thereunder, and will take such further action as any holder or holders of
Registrable Securities may reasonably request, all to the extent required to
enable such holders to sell Registrable Securities pursuant to Rule 144 under
the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the SEC.
2.7. Survival. The provisions of Sections 2.1 through 2.6 hereof,
inclusive, shall survive the exercise of the Warrants with respect to all Shares
issued upon exercise thereof. Without limiting the generality of the foregoing,
in the event that any Warrant shall expire after being exercised in part, the
provisions of such Sections shall survive such expiration with respect to all
Shares issued upon the exercise thereof prior to such expiration.
2.8. Other Registration Rights. (a) The Company represents and warrants to
Nomura that, other than as provided herein or as set forth on Schedule 2.8
hereto, there are no agreements, understandings or commitments, oral or written,
between the Company and the holders of any of its securities pursuant to which
such holders have a right to require the Company to register or qualify any of
its securities under the Securities Act or any applicable state securities laws.
(b) Except for the rights granted herein and the rights described in
Section 2.8(a) above, without the prior written consent of the Majority Holders,
the Company will not grant to any Person registration rights superior to those
granted to the holders of the Registrable Securities hereunder.
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ARTICLE III.
MISCELLANEOUS
Section 3.1. Term of Agreement. This Agreement shall terminate (i) upon
written consent to such termination by each of the Company and the Majority
Holders, and (ii) on September 23, 2005.
Section 3.2. Notices. Any notice, request, instruction or other document
required or permitted to be given hereunder by any party hereto to another party
hereto will be in writing and will be given to such party by certified mail at
its address set forth below:
If to Nomura:
Nomura Holding America Inc.
2 World Financial Center, Building B
New York, NY 10281-1198
Attention: Howard Gellis, or his
authorized representative
Telecopy No.: (212) 667-1029
with a copy to:
Nomura Holding America Inc.
2 World Financial Center, Building B
New York, NY 10281-1198
Attention: Legal Department
Telecopy No.: (212) 667-1024
If to Company:
Easyriders, Inc.
567 San Nicholas Drive, Suite 400
Newport Beach, California 92660
Attention: Secretary
Telecopy No.: (714) 718-4630
or, in the case of any transferee of any holder of Registrable Securities, to
the address of such transferee specified by it upon notice given in accordance
with the terms hereof, or to such other address as the party to whom notice is
to be given may provide in a written notice to the party giving such notice, a
copy of which written notice will be on file with the Secretary of the Company.
Each such notice, request or other communication will be effective (a) if given
by certified mail, 96 hours after such communication is deposited in the mails
with certified postage prepaid addressed as aforesaid, (b) one Business Day
after being furnished to a nationally recognized overnight courier for next
Business Day delivery, and (c) on the date sent if sent by electronic facsimile
transmission, receipt confirmed.
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<PAGE> 13
Section 3.3. Specific Performance. In addition to any other remedy
provided at law or equity, the parties hereto shall be entitled to specific
performance of this Agreement.
Section 3.4. Assignment. This Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties hereto;
provided that the Company may not assign its obligations hereunder without the
prior written consent of the Majority Holders; provided further that if any
transferee of any holder of Registrable Securities shall acquire any Registrable
Securities in any manner, whether by operation of law or otherwise, such
transferee by taking and holding such Registrable Securities, shall be entitled
to the benefits of and be deemed to be bound by this Agreement.
Section 3.5. Choice of Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the law of the
State of New York. Each party hereto hereby submits to the jurisdiction of the
United States District Court and of any state court sitting in the State of New
York (and of the appropriate appellate courts) for the purposes of all legal
proceedings arising out of or relating to this Agreement and irrevocably waives,
to the fullest extent permitted by applicable law, any objection to venue laid
therein. Process in any such proceeding may be served on such party, and any
judgment thereon may be enforced against such party, anywhere in the world,
whether within or without the State of New York. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any matter directly or indirectly arising out
of or otherwise relating to this Agreement.
Section 3.6. Amendments; Waivers. (a) No failure or delay on the part of
any party in exercising any right, power or privilege hereunder will operate as
a waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided will be cumulative and not
exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed, by the Majority
Holders and to the extent the rights, duties or obligations of the Company are
modified or supplemented thereby, the Company.
Section 3.7. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions, or of such provision in any other jurisdiction,
shall not in any way be affected or impaired thereby.
Section 3.8. Entire Agreement. This Agreement and the other Transaction
Documents (as defined in the Note Agreement) contain the entire understanding of
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements, discussions and understandings among such parties with respect
to such subject matter.
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<PAGE> 14
Section 3.9. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby. Neither the Company nor any Holder shall
voluntarily undertake any course of action inconsistent with satisfaction of the
requirements applicable to them set forth in this Agreement and each shall
promptly do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable the obligations herein and
therein required to be performed by them.
Section 3.10. Dating. Although this Agreement is dated as of the date
first written above for convenience, this Agreement shall be effective on
September [ ], 1998.
Section 3.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same Agreement.
[Signature Page Follows]
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed and delivered by their duly authorized officers
as of the date first above written.
EASYRIDERS, INC.
By: /s/ William Prather
--------------------------------------
Name:
Title:
NOMURA HOLDING AMERICA INC
By: /s/ Salvatore Gentile
--------------------------------------
Name: Salvatore Gentile
Title: Attorney-in-Fact
